Six tips for sustainable record keeping
Finacial records are about the most important records for Small and Medium Enterprises. But many SMEs neglect this aspect of the business at the expense of profitability and sustainability. Some SME owners sometimes think they could save money by doing this job themselves or employing inexperienced hands to do it. But, at the end of the day, the negatives always outweigh the positives. For an SME to thrive, especially in a harsh operating environment like Nigeria’s, owners need to pay serious attention to record keeping and accounting.
Here are six tips:
Separate personal accounts from business accounts
Experts say that what appears to be the most difficult problem for small businesses is being able to keep personal spendings away from company’s books. Once a business has been established, the owner or owners must separate their personal finances from the running of the business, so that the indices can be well calculated for the business in terms of profit and loss.
You must establish a business bank account to separate business activities and expenses from personal ones, while also tracking business income and expenses.
De-emphasise the use of cash
Use of cash for operations without proper documentation prevents business owners from keeping proper financial records. It is advisable to use debit/credit cards or cheques for proper accountability. Using cash allows for theft and write-offs since there may be no documented proof. Experts advise that if you must use cash, you can withdraw from the ATM, but ensure that vouchers are filled for every cash transaction.
Spend time weekly on keeping records up to date
Don’t wait till the end of the month to assess your financial records and monitor cash flow. It may be more cumbersome that way. Ensure that you set aside a specific period every week to check your books, review income and expenses, and assess business performance with a view to controlling your cash flow. Once a business falls into a cash flow problem, that problem may be difficult to solve.
Get the perfect accounting software
Purchase the best accounting software for your kind of business on the advice of your accountant. Online software is usually recommended so that business owners can access their files wherever there is Internet connection. Your accountant can also easily access your files, though there must be back-end controls in the event of the exit of the accountant from your company. It is true that an online device will continuously back up your files, but you must make it a point of duty to always keep hard copies. Experts will train you on how to keep updating the software.
Ensure you meet your tax obligations
There is nothing wrong in asking a tax advisor to put you through legal and illegal taxes, especially in a country like Nigeria. Once these are determined, ensure you meet your tax obligations and regular filing requirements, to keep penalties at bay. Paying tax penalties, when it can be avoided, affects the growth of small businesses.
For businesses that have employees on their payroll, it is advisable to enroll for Pay As You Earn (PAYE), and remit on a monthly basis.
Your accounting documents must be complete
In line with legal record requirements, businesses must keep records for accounting purposes and to show/explain every business transaction. Every money received and expended by the company, on a day-to-day basis, must be accounted for.
Every business must be able to make the following documents available on request: invoices and receipts, bank statements, tax return documents, yearly financial reports, records of payments made to employees, including payroll deductions from source, submitted on behalf of employees, and asset register, among others.
