The importance of record keeping for SMEs
Record keeping is very important in all businesses. Small and medium sized businesses also need to ensure that they keep proper and accurate records of all business related activities.
Records vary from files about clients and projects, to staff and financial records. We will briefly look at some records small businesses should keep and why this is important. Please note that this is not an exhaustive list. Without the necessary staff to deliver service to your clients, your business will not succeed.
It therefore makes sense that small businesses should keep staff records to help manage employees. These records will include contracts of employment, performance records of employees, date on which they started working, etc. This information will be very useful for determining which of your staff consistently performs well and may be promoted. In addition to these internal benefits; proper employee record keeping is a requirement under the Labour Law.
Another important set of records in a business is your client files. These files have records of all transactions with respective clients. This information is useful in determining trends in the buying patterns of your clients which in turn enables you to design your products or services and selling experience around them. This information can also be used to determine who the most loyal and profitable customers are and perhaps what discounts/specials you can offer them.
It can also show what customized service will add value to your customer’s experience that might sway him/her to become a lifelong client of your business. Businesses also keep financial records. Though some small businesses discount the importance of proper financial record keeping because they do not see the need for it or lack the necessary skill to record the business’ transactions; it is vitally important to the survival of your business. Banks and other financial institutions will want to assess your business’ performance before they provide your business with a loan, overdraft or other facility.
This assessment is primarily based on your financial statements. By not keeping proper financial records in your business, you are sending a message to your banker and that message is “high risk”. Another use of financial records is for tax purposes. If your business should be paying tax and you are not paying it, you will incur penalties that may cripple your business’ operations. Proper financial record keeping can help with assessing which products in your business are popular, which are slow moving and where to provide discounts/specials.
Here are a few tips to make financial record keeping easier:
1. Keep record of all business related income and expenses
2. Keep all bank statements
3. Keep record of all creditors and debtors
4. Keep all yearly tax returns
5. Keep all invoices
6. Keep proof of all salaries paid
7. As the owner, draw a salary or record any funds you take out of the business
There are numerous accounting software programmes available that can make life easier when recording your business’ financial transactions, however, a basic understanding of bookkeeping is vital for the effective use of the software. In most instances, cost is also a hurdle in acquiring the software.
Many small businesses in Namibia still record transactions by hand or use Microsoft Excel, which may work well. The method of record keeping will often depend on the size of your business and the complexity of your transactions.
There are numerous short courses in bookkeeping offered by learning institutions that can greatly improve your bookkeeping skills and enable you to successfully manage your business’ finances. Keeping proper records of your business operations will therefore ensure that you stay on a measurable track and can lead to further growth in your business.