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Business Financial Records Management

Provided by SME Solutions Center - Kenya

Know Your Numbers

As a business person, you need to keep accurate income records and expense records. These financial records will form the basis of your tax returns. If done correctly, your record keeping and tax return filing will be okay. This means that you need not retain a bookkeeper or accountant. Proper records will benefit you by helping you to: 

  • Set product prices
  • Detect problems in time
  • Properly manage cash flow
  • Efficiently access financial information
  • Organise and handle tax matters   

Detecting problems in time

Common problems include rising hardware and input expenses, defaulting debtors, and missing inventory. Proper records will alert you of such problems in time. You can then take prompt action, thereby averting detrimental effects on business.     

Knowing when to adjust prices downwards or upwards

Proper records will clearly lay out business transactions such as cost of goods sold, sales figures, and operating expense figures. Such items will enable you to effectively compute income, expense, and profit or loss figures. Based on such computations, you can push product prices up or down as required.      

 Maintaining acceptable cash flow levels

You need to be aware of whether or not your business has adequate monetary resources to cater for fiscal obligations such as settling creditor or worker accounts each month. Proper records will enable you to make cash flow projections. Such forecasts are crucial as they determine your solvency or insolvency. After examining the arising cash flow figures, you take necessary steps with the aim of reducing your expenses or increasing your income.         

Preparing requisite financial reports for the procurement of loans

Should you require loan facilities, you need to furnish your target lender with accurate and complete financial records for your business. These records will form the basis on which the lender evaluates the fiscal soundness of your business.    

Fast generation of accurate tax returns    

Legally, you are required to periodically (monthly or yearly) file tax returns with relevant government tax authorities. Proper records will ensure that you will not over- or under-estimate your tax obligations. Accurate records could prove useful in case you are required to provide solid backing for your tax returns figures.       

The key business aspects that you need to be conversant with include:

  • The various accounting methods, their merits, downsides, and suitability of each to your business
  • Relevant accounting principles
  • Accounting basics   
  • Bookkeeping essentials
  • Key forecasting  elements  

Bookkeeping and accounting tasks for your business should be rather easy especially if you correctly document expenditure and income records. These financial records have other important functions. Proper records facilitate easy and accurate filing of your tax returns. They also enable you to detect potentially disastrous problems in time. To avert problems, you could reduce or hike product prices. You benefit from proper records by being able to easily prepare reports for perusal by prospective lenders. In-house, proper records enable you to organise cash flow levels as desired. To keep proper records, you need to be conversant with various business elements such as accounting and bookkeeping basics, key accounting methods, as well as forecasting essentials.               

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