To run a profitable firm, owners must keep accurate records of financial transactions. Record keeping of transactions in an organized manner is important to all businesses.

Whether you are starting out or have been operating for a while. Keeping accurate accounting records helps you gauge the performance of your business. It will assist in identifying any future problems before they grow out of control.

Also, maintaining accurate accounting records will help you follow tax regulations.

record keeping


What is record keeping?

Record keeping is the process of recording information about a company’s financial transactions. It is a key process for an accounting department to keep good accounting information. The information recorded can be both financial and non-financial information.

Financial information recorded includes the names of the owners of the business. It further includes transaction amounts and dates.

While non-financial information recorded includes details about the business operations. Its resources used in the operation, and the results of the operation.


Importance of accounting record keeping in business

Accurate and detailed financial records are important for every business. It provides the information you need to run your company. You will be able to establish accurate budgets. If you don’t keep accurate accounting records, your business may lose out on money from customers.

This means less money in your pocket and the risk of bankruptcy. Also, it also makes it harder to get credit and lowers your chances of future growth.

Accurate accounting records will also help you know how much money you have coming in. You will know how much is going out so you can plan for future expenses and better manage your cash flow. This will protect you from unexpected expenses and keep your business operating smoothly.


Types of records required to be maintained by a business

Accounts and records. These records show the daily financial transactions of a business. They include the amount, date, type, purpose, and owner of every transaction.

Accounts comprise basic financial information including the various kind of business operations. The sums, the dates, as well as the financial activities of the company for a given period.

Bills. Bills are documents that detail previous financial transactions. They are issued by financial institutions like banks and credit card firms. They include information like the name of the business. It further includes the date, the amount, and the purpose of each transaction.

Audits. Audits are conducted by external auditors to check the reliability of financial records. They check the accuracy of accounts and bills to ensure they are not falsified or inaccurate.


How to track financial transactions and other business activities in accounting?

If you don’t have the right system in place, record keeping can be difficult to set up and maintain. You don’t have to be an expert to set up an accounting system that keeps track of your financial transactions.

All you need are some basic business tools and a little bit of patience. You can use a spreadsheet or any accounting software. Some good accounting software is Quickbooks or Xero to track your business finances. You can also use dedicated accounting software if you want an all-in-one solution.

This helps you track financial transactions and other important business information. Including payroll, inventory, and sales figures. You can use a cloud-based accounting solution to access your data from any device.


Benefits of keeping and maintaining accurate accounting records

Accurate accounting records will help you run your business more smoothly. It will further reduce operational inefficiencies, and save money. You’ll know exactly where every Rand spent is going. It will help you avoid wasting resources and make better decisions.

Accurate accounting records will help you keep better track of your cash flow. You won’t be surprised by unexpected expenses, and you can plan for them better. You can more accurately forecast your expenses.

With this, you can predict how much money you’ll have coming in and going out each month. You’ll know exactly what your business owes and what you owe others. You can follow federal and state regulations.


Disadvantages of keeping inaccurate accounting records

Inaccurate accounting records will cause you to lose money. Spend more than you earn. This will result in you running your business without knowing how much money is coming in and going out.

A weak accounting system can result in taxes being underpaid. It can also result in credit being granted without being deserved. This could result in bankruptcy.

If you don’t keep accurate records, it will be much harder to track your expenses. Which will make it difficult to know how much cash you have left over at the end of each month.

You’ll also have a more challenging time complying with federal and state regulations. An inaccurate accounting system will also make it tough to manage your cash flow. And, if it is more difficult to manage cash flow it will be more difficult to assess future expenses.

To illustrate the disadvantages, please read this article. SARS was in correspondence with this business for over 6 years. In all the back and forth the business could not provide SARS with the relevant documentation. SARS ultimately issued a hefty fine and penalty.


Final Words

We hope you are now better informed about the importance of record keeping. Also, the importance of tracking financial transactions and other business activities in accounting.

Remember, it’s important to keep accurate accounting records for your business. You will be more knowledgeable about where to spend less money. You will be more aware of the SARS tax rules and regulations. And most importantly, you will save money.

Now that you know what record keeping is and why it’s important for business owners. It’s time to take action. You can start tracking your financial transactions today.

If you need more help, please feel free to contact us. We can help you set up an accurate accounting system for your business in no time.