Accounting Record Keeping- A must for business

Organizations who do not keep a handful of effective record not only endanger it but it also opens itself to the risk of mismanagement. Most organizations have fallen into rack and ruins recently just because of the sole reason of maintaining improper records. For an organization to be effectively run, proper books must be kept.

When our yesterday is not known, there would be no way to measure the performance of our today and so absolutely no way to predict our tomorrow. One of the major reasons amidst others organizations keep record is for the evaluation of the past and present financial activities of such organization and also for the prediction of future outcomes of such business.

In keeping proper records, an organization would have more control over its financial operations. Needless to say that small enterprise is not exempted from the task of keeping records. Statistics has proven that organization that keeps proper records have a greater chance of survival than the organization that does not keep proper records.

As it’s well known, one of the main reasons organizations are set up or established is to make profit amidst other reasons. In meeting this goal of profitability it is pertinent for organization to keep track of all its financial activities in order to assess if the goal of profitability is attained or not.

The records to be kept by an organization is largely dependent on the type of organization and also on the of business activities it carries out. The books to be kept could range from simple petty cash book to trading account and then to several other financial statement.

Record keeping being the backbone of an organization allows you more control over your financial operations. Inability to keep proper financial records has often led to the untimely extinction of both small and large scale businesses. This has greatly accounted for the reason many organizations who probably think they still exist are neither surviving   can be said to have gone extinct. Such organizations are probably just on the fence and barely surviving.

This record to be kept by organization should be both simple and comprehensive enough to depict the true financial performance and position of such organization. The record should show the income, expenditure, cash inflow and cash outflow of such organization. By doing so an organization could exempt itself from several unnecessary expenditures such as overpaying of tax amidst others and also, errors and fraud could easily be detected.

Thanks to the emergence of technology, an organization need not keep record in handwritten ledgers anymore. Now, record keeping could be regarded as a computerized endeavor. There is several accounting software available now for any organization who seeks to keep track of its financial activities. This software includes: Quick book, sage, simply accounting, edge and so many others. The accounting software to be used would be dependent on the size of the organization.

STEPS TO KEEPING PROPER FINANCIAL RECORDS IN AN ORGANIZATION

• Gather all necessary information: the very first step to take in keeping proper record is to gather all necessary information. Not all information is necessary in keeping of records and so not all information are to be recorded. Every day lots and lots of business activities takes place in business organizations. These financial business activities ought to be recorded in their accurate books. Every purchases and sales should be recorded, alongside every cash inflow and cash outflow. One of the major reasons for keeping records is to keep track of all financial activities taking place in an organization in order to ascertain the profitability of such organization and so not a single important financial transaction should be left out without being recorded.
• INFORMATION SORTING: This information that has been recorded must be sorted out and similar information should be placed together. These information should be arranged in such a way that it should be easily understood and assimilated. In sorting this information, care must be taken to ensure that the information available is correct and comprehensive enough. Overestimation and under estimation of financial activities should be avoided in order to portray the real picture of such organization.
• RECORDING OF THE INFORMATION: Having captured the information and sorted it, this financial information must be recorded. Recording of information enhances the storage of such information. Most often than not, need arises in the course of our daily business activities to go back to previous financial records, one of the ways to make this possible is by recording such information. These recorded information if well stored could be revisited later to either make some analysis or some predictions or comparison in the nearest future. Here is one aspect that technology has played a great role. By the emergence of computer and accounting software, financial information could be effectively recorded with the aid of computer and could be stored for as long as need be.
• REVIEW THE INFORMATION: A Review should be done on this information that have been recorded. One of the ways of carrying out reviews on financial statement is by preparing report from such information.
• ANALYSIS OF THE INFORMATION: The financial information that has been gathered, sorted and reviewed should be analyzed. For effective analysis of information previous record should be used and comparison should be made in order to identify similarities and differences between records. Organizations want to know if previous performance outweighs present performance or if the reverse is the case, analyzing this information is a sure way of finding out.

Author:

Ogor Loveth Temitope

Industry Or