Record keeping is defined as 'practice of maintaining the records of an organization from the time they are created up to their eventual disposal. This may include classifying, storing, securing, and destruction (or in some cases, archival preservation) of records.' It refers to keeping a track of all the transactions, monetary and non-monetary, that take place in a given period within a business organization. Record management is a super-set of the term 'keeping business records'. The subject of record management includes records like birth certificates, medical records, and other data.
However, business record keeping refers to maintaining a track of capital invested and borrowed, reserves made and used, liabilities incurred, both current and deferred, and outstanding payments. On the asset side, the business record keeping is directed towards evaluating fixed assets, current assets, preliminary expenses, and shareholder's equity.
Keeping business records for big firms has a set of guidelines, rules, and regulations. The issue arises when the records are not maintained properly, which is often a cause of individual differences, negligence, or some fraudulent activity. Double-Entry and Single-Entry, are the two methods used for the purpose of maintaining the accounts of the business. These systems have been set and designed in a way that they ensure efficient documentation of any organization's financial transaction.
Other than accounting records, a business may have other records such as Articles of Association, Memorandum of Association, shareholder's records, debenture records and other such records. A small business firm may have letter of incorporation, employee register and payroll register. It is important that all these records are maintained for taxation purposes, legal purposes, analyzing business strategies, and future planning.
Record Keeping For Small Business
As a matter of fact and experience, record keeping for small businesses is rather cumbersome. Especially in the case of a sole proprietorship, the owner and the management is not necessarily different. Moreover, as a sole proprietor may not have the know-how about record keeping, management gets rather difficult. Here are some tips to help with the record keeping for small business. Let's take a look at some of the constituents of business records.
Gross receipts is the total income your business earns. The documents that validate gross receipts are cash registers, bank deposit slips, invoices, bills received, and credit sale slips.
Purchases refer to the raw material and any other item that you buy for production. The documents that will support the purchases that you've made are purchase book, invoices, check books, bank statements, bills payable, and credit purchase slips.
An asset is a property that you buy for your firm. It may be a machinery, furniture, computers, and such other things that are need to build the office infrastructure. It is important to maintain a record for the same as it helps in evaluating the worth of business and its goodwill. The documents that will support the assets you have, are its receipt, the date when it was purchased, depreciation accounted for, and its usage.
Liabilities are the aspects of a business, that have to be paid off. No matter when you pay them off, it is necessary that you note down how, when, where and why it was paid. The documents that will help you maintain liabilities are bill of exchange and invoices.
Electronic Record Keeping
With the advent of technology, maintaining records has become very easy. Electronic medium has eliminated all the paperwork and required filing. Right from employee attendance register to balance sheets can be made and maintained electronically. There are many record keeping software that make the work of retrieving the data and calculations extremely easy. This fastens record keeping, making the business firm efficient in nature.
Understand the nature of your business and then appoint people to maintain business records. In the long run, business record keeping become important lessons in history. These lessons help you understand your company's potential and give you an opportunity to derive your future strategies from.