The Problem of Record-Keeping

THE PROBLEM OF FINANCIAL RECORD-KEEPING IN SMALL BUSINESSES According to Dictionary.com, record-keeping is the maintenance of a history of one’s activities by entering data in ledgers or journals and putting documents in files. “Taking time to organize a good system can be tedious and time consuming, but it only takes one visit by a tax auditor or a turndown for a loan by a bank to convince any business owner that an organized system would be useful.” (http://www.smallbusinessnotes.com/operating/finmgmt/recordkeeping.html) Successful business is based on sound record keeping practices. An appropriate record-keeping system can determine the survival or failure of a new business, and for those already in business good recordkeeping systems can increase the chances of staying in business and the opportunity to earn larger profits. Without good records it is impossible to determine the financial condition or profitability of a business. Even though record-keeping is important to the success of a business, new and existing businesses often neglect to keep accurate and up-to-date records. This is often due to ignorance of record-keeping procedures and the lack of resources to employ the services of a professional who can carry out these duties. The necessity of record-keeping will be highlighted as well as the specific problems associated with lax record-keeping procedures and their implications. Solutions will also be offered for these problems.

WHY RECORD-KEEPING IS IMPORTANT Complete and accurate record-keeping is crucial to the business success for a number of reasons: * Good records provide the financial data that helps the business to operate more efficiently, thus increasing its profitability. * They provide you the basis for all the reports a business needs to make to governmental agencies, banks, and potential funders, plus they provide you with an overall picture of how your business is doing and where it is headed. Financial statements are a way to