An audit trail is integral for business
deductions cannot possibly get repayments that they might be entitled to.
And this is but one major consequence of failing to keep accurate records.There may also be costly penalties for failure to file taxes appropriately.
But most often than not, businesses that do not have accurate data about their finances normally “fly blind” since they end up spending more resources than those coming in.
In short, it is a chaotic system that is likely to lead to problems with suppliers, payroll, utilities, and more.
Losing or misplacing an important document can cause a major deal to fall through. Something as small as an old employee contract can hold up a transaction; greatly reducing chances for success.
But detailed information helps to monitor the success or failure of a business.
Without a clear financial picture, it’s difficult to determine how a business is performing. Maintaining accurate financial information helps to spot early warning signs of flawed cashflows.This enables parties to act quickly and accordingly before the situation spirals out of control.
Detailed records also help to accurately evaluate the financial impact when making key business decisions such as hiring a new member of staff or enlisting the services of an external supplier. Bookkeeping is more than just a legal requirement: it can make or break a business.
Keeping receipts as small as fuel receipts can make a huge difference in your business.
Other people may take it for granted.
A good business leader should know how much every transaction means to the business. Critical records that need to be kept include invoices, receipts, payrolls, employee files (with contracts, leave forms et cetera), bank statements, cash book and petty cash vouchers. Businesses must also try to maintain financial records for a minimum of six years at the very least.
Keeping records comes back to the issue of internal controls.
Good internal controls and systems will ensure smooth flow of business transactions.
Records should be properly filed.
Poor filing can result in loosing information.
With technology, filing can now be done on various accounting packages. However, all documents should have a backup system.Incomplete records always give challenges to accountants.
Accountants work with information, and failure to produce information may result in inaccurate financial statements.
With incomplete records, fraud and costly errors can even go undetected. As a business leader, one should always consider the fact that employees are very observant creatures and are most likely to take advantage of any weaknesses in the system.
Unnecessary pilferage can be avoided by simply maintaining accurate financial records. Others may only think of records when they want to apply for bank loans.
This again may create problems, and obviously one can be tempted of falsify documents, which might not be a good idea altogether.
The shortest possible route to avoid record-keeping challenges is to engage a qualified accountant.
This can free the owner of additional responsibilities and affords them time to concentrate on growing their business.
A qualified accountant has the ability to analyse the business’s current performance and provide strategic advice on how best to improve profitability and growth.
While it is definitely not easy to do, book- and record-keeping should be a key component of business practices. ◆ Taurai Changwa is a member of the Institute of Chartered Accountants of Zimbabwe and an Estate Administrator. He has vast experience on tax, accounting, audit and corporate governance issues. He is a Director of Umar & Tach Advisory. He writes in his personal capacity and can be contacted at tauraichangwa1@gmail.com or whatsapp on 0772374784.