The Top Four Benefits of Keeping Good Financial Records
It may seem time consuming, but the benefits of staying on top of your finances can reap rewards for your business.
The need to maintain accurate and up-to-date financial records for your business may seem like a time consuming and unnecessary burden, but with a little thought and structure, the benefits of doing so can far outweigh simply speeding up the filing of the year end tax return.
There are some great ‘off the shelf’ accounting software packages out there to help you keep on top of your finances, many of which can be managed at your fingertips, from your mobile phone.
Benefits of staying on top of your finance records:
Trendspotting – After only a few months, these records can be used to spot trends in the income / expenditure of your business, improving your ability to make strategic decisions to benefit your bottom line. Some key questions you may be able to answer are:
- What are your best-selling products?
- What are your most profitable products?
- Do seasonal trading patterns offer opportunities to resource your business more efficiently?
Year on Year Health Checks – Measurement of business progress versus previous years or against budget allows you to monitor whether the financial health of your business is improving or declining, enabling you to take corrective action sooner rather than later.
Preparation for Growth – Being able to explain trends in the trading of your business will be looked upon favourably by lenders and is likely to improve your ability to secure financing for things like expansion and diversification.
Tracking of Assets – You will have a better handle on exactly where your money is and when. Being able to check on a glance what you’re making, owed and more will minimise disruption and enable you to make strategic decisions in a timely fashion (especially useful in the event of a change in market forces which might impact stock, sales and more).
- Fixed assets – monitor the ageing of assets, understand when maintenance may be required and whether the cost maintenance outweighs the cost of replacing a fixed asset
- Stock – minimising the risk of your business running out of your bestsellers, or conversely ordering too much volume of slow selling products.
- Debtors (monies owed to your business) – allows your business to monitor if customers are paying to terms and minimises the risk of non-payment of aged debts.