Accounting records must be maintained by any business entity. They must provide a clear view of financial standing. They can also be used for a range of other reasons, such as for loan applications or assessment by potential investors.
There are a range of reasons to keep good accounting records, such as:
Makes it easier to monitor the progress of business
Accounting records that are accurately managed make it easy for all people involved in the company to see areas that need improvement and which ones are good. It can also be a good indicator of when the business is facing trouble.
Makes documenting financial statements simpler
If you have developed a good system for keeping a record of how money is spent and how much is coming in, then this makes it easier to compile financial statements.
Helps with preparing tax returns, which may lead to tax saving
If all accounting records are organised in a systematic way, then tax season will become a breeze. Tax planning also becomes much easier.
Shortens the length of time for audits
If auditors need to do an audit, then having accounting records in place with facilitate a faster process.
Complies with the law
Any business entity has to keep up to date with all regulatory requirements. By maintaining good accounting records, a business will ensure that it is fully compliant. This way there is no chance of being fined either.
Keeps stakeholders informed about the financial position of the organisation
A thorough assessment of accounting records means that everyone with an interest in the organisation will have a clear understanding of where the company stands financially.
Good accounting makes it easier to retrieve vital documents when they are needed.
Enables saving of money
Instead of having to spend too much money on a bookkeeper or accountant, if your books are in order, you can spend a reasonable amount.
Makes it easier to get a bank loan
When applying for business finance, a financial institution will assess financial records.
Makes it easier to operate the business
By knowing exactly where the business stands financially, then it becomes easier to plan ahead and to fix what isn’t working.
Monitors actual cash flow and keep credit under control
By keeping track of how much is being spent and how much is coming in, a business can operate more efficiently.