Running a business involves managing multiple moving pieces daily. As a business owner, you need to ensure operations run as intended, handle administrative matters, deal with financial issues, and keep customers satisfied. Recordkeeping is the backbone for all these functions. Here are some reasons why recordkeeping is so essential for your business.
1) MANAGING SALES
You can have the best salespeople in the world, but if your business does not have a sound system to track sales, it will not be successful. You need to have records of orders submitted for processing. Your production departments should receive these and be able to provide an update on where the order is in the process. There should also be documentation of what materials and supplies are required to complete the job. After the order is completed, the proper paperwork should be sent to the shipping department to ensure the product is delivered. Finally, records must accurately track when the sale is completed.
You should also have records to track your customer database. This will include information on existing customers as well as new customers. You should have a lead management system for all potential new customers that shows who you need to contact for possible new business. Companies that do not track their customer base adequately and follow up on new leads risk losing potential sales.
2) TRACKING FINANCES
To make critical business decisions, you need to know the company’s financial picture. This makes accounting records very important. Your business must keep detailed records of income and expenditures to accurately prepare and file all federal, state, and local taxes.
In addition to correct tax preparation, income and expense records are crucial for reviewing the profitability of your business. You may also need financial statements to present to lenders, other creditors, and investors.
Your accounting records should include breakdowns of costs into categories to see which parts of your business cost the most to run. You can make operating decisions, such as investing in new capital or eliminating departments with the data.
3) COMPLYING WITH LAWS
Business records are also essential to ensure your company complies with all applicable laws. Your company may have registration requirements for certain operations.
The business might also need permits or applications to complete work or operate in a specific location. You have to file the initial paperwork, but you will also need to make sure that all filings are renewed as required.
Your company should maintain detailed records of all filings necessary with different government entities to ensure that the enterprise is in legal compliance.
4) HANDLING EMPLOYEE MATTERS
In addition to all the records you need related to the business’ finances and operations, you will need to keep detailed records regarding all your employees. If your employees have specific entry qualifications or require certifications, these all need to be documented in the employee file.
Information regarding pay rates, benefits packages used, and leave balances must be maintained to keep accurate track of your employees.
5) AVERTING FRAUD
A company involves many parts coming together as an enterprise. It isn’t easy to know what each piece is doing without proper recordkeeping. Without knowing where things stand, your business will be vulnerable to fraud.
Documentation shows what products and supplies are supposed to be in inventory and when they are used for production. Without adequately tracking inputs and finished goods, anyone could abscond with items and not get caught.
Office supplies are another area subject to employee theft. Your company should keep inventory records regarding its office supplies, use of the items, and new orders to avoid employees stealing these things.
Recordkeeping helps your business keep track of all facets of the operations. It also aids management in making critical decisions and helps the company maintain good legal standing. Records of all types are required to ensure that your business has all the documentation necessary to operate efficiently.