As a business owner, you have a lot on your plate. From managing employees to meeting customer demands, it can be easy to overlook the importance of record keeping. However, keeping accurate records is crucial for the success and growth of your business. An Australian Bureau of Statistics study found that 60% of small businesses fail within their first three years of operation. This statistic highlights the importance of seeking professional services, such as bookkeeping in Sydney, to ensure your business is on the right track.
In this blog, we will explore 8 reasons why record keeping is essential for your business, backed by statistics to emphasize their importance. From financial management to legal compliance, this blog will highlight the benefits of maintaining organized and accurate records to help your business thrive.
1. Meeting The Legal Requirements
As a business owner, you are aware of the legal requirements to keep records. The government has made it mandatory for all businesses to keep certain documents to comply with legislation. For example, if you’re running an accounting and taxation service and have taxpayers’ clients, you need to keep their financial records for at least seven years after the end of each financial year. These documents could be used as evidence in court (for example, if someone wanted their money back).
The Internal Revenue Service (IRS) requires businesses to keep all records of employment taxes for at least four years. Failure to keep these records can result in hefty fines and legal consequences. According to a survey by the National Small Business Association, more than 40% of small business owners have been penalized by the IRS for payroll tax errors. Thus, meeting legal requirements is one of the most important reasons bookkeeping is essential for your business.
2. Keeping A Paper Trail
If you’re audited by the IRS or any other taxing authority and need proper records, it will be very difficult for them to verify your tax returns. They require receipts and invoices for everything purchased or sold during the year, which means if those documents are not readily available- or worse yet, never existed- the chances of getting into trouble increase dramatically.
Keeping a paper trail is also essential if there’s ever a legal battle over something related to your business (and there will be). If someone sues you for sustaining injuries while using one of your products or services, they’ll want documentation showing exactly how many people used them safely without incident before bringing suit against them. If these documents are missing then it becomes much harder for your business to win the case. Finally: keeping records helps with the taxes too!
3. Providing Proof Of Business Transactions
Record keeping is essential for business transactions. Records can be used to prove that a transaction occurred between who and at what time. This can be useful if questioned about the legitimacy of any business practices or transactions.
4. Prevent Fraud Or Theft
Record keeping is an essential part of running any business. It’s not just a way to keep track of your finances but can also help you prevent fraud or theft.
When it comes to record-keeping, the best thing you can do is keep records of transactions and business dealings so that they’re easy to access in case of any dispute. This means having receipts for everything from purchases made on behalf of your company (whether they were paid for by cash or credit card) down to other expenses like office supplies or travel costs incurred while on the job. You should also keep copies of any contracts signed by employees or contractors and invoices from suppliers providing goods or services for running your organization.