Are you into self-employment or freelancing? Or you are planning to launch a new startup? Do you know why record keeping is important for startups, self-employed, and freelancers?
For those launching a new startup, your main focus will be on how to get your new business off the ground.
Also, raising capital is likely to be high on your list of priorities. This means you will probably be neglecting the more vital aspects of business finance and bookkeeping.
The importance of record keeping
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It takes a lot to build and run a successful business. As a matter of fact, it’s not just about launching the startup, it’s also about getting your finances right from the start.
This is very important, especially, if you are aiming to take the business to the next level. However, having access to capital is not that easy nowadays.
You will have to arm yourself with the right financial information to get people to invest in your ideas, and this is why record keeping, bookkeeping, and accounting is important.
There are so many great finance apps out there that can help you become a smart money manager. However, it’s important to seek professional help if you really don’t know where to start with accounting.
You can hire an accountant to keep track of your finances and perform the many accounting jobs and tasks that building a successful business requires. Below some of the reasons why record keeping is important when you are running a small business.
#1]. Keeping records for goverment
All businesses are required to keep accurate records for some government departments such as Inland Revenue. If you are based in the UK, failure to keep records means you could face a fine of thousands of pounds from HMRC.
If you’re self-employed, keeping your business records is required. You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year. HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.
#2]. Keeping records is good for investors
Another good thing about keeping records is the fact that it will help you attract the right investors. People wanting to invest in your startup will surely like to see some records of your business operation.
They would want to see how well the startup is doing and where their investment can potentially improve. The exact records you need to keep largely depends on the type and size of business that you run.
However, you’ll have to keep accurate records of takings and expenses, bank statements, invoices, receipts, PAYE, and more.
#3]. It helps you manage better
As a business owner, being able to keep records of your incomes and outgoings will help you manage better. Also, it will help you keep tight control of your business finances and manage your cash flow.
Even if you are self-employed, great tools like QuickBooks is a must-have accounting tool that can help you take the control of your business finances.
It helps you create and send professional invoices quickly on the go. Also, you can get paid faster by enabling online payments and easily manage your taxes.
#4]. It helps you attract lenders
You may require some kind of funding to be able to grow and take your business to the next level. As a business owner, keeping records will not only help you attract lenders, it will also help you convince them to lend.
In short, keeping records can help you find funding for growth more easily. This is because it can help a prospective lender understand that you are in a financially viable proposition.
Keeping your records in order
So how do you keep my books in order? As a matter of fact, recordkeeping doesn’t require much. You can use business accounts tools such as QuickBooks. Also, you can use basic spreadsheet tools or keep records on paper if you prefer.
Furthermore, you can do your startup bookkeeping yourself. However, this will largely depend on the size of your business. In most cases, it’s advisable to outsource your bookkeeping to an accountant if you have the resources.