If you're not an accountant, financial recording might not be what you do best. As a result, it might be the last thing on your list of to-dos. More likely than not, you’d rather be spending your time working on your product or service.
However, accounting and financial recording is a key business process. Having accurate, timely and sufficient financial information is crucial to running a successful business. There are countless reasons to keep good financial records, here are some of them:
It is no secret that poor decisions are made with poor information. If you don’t have the appropriate records or financial information available, it makes it very difficult to make sound business decisions.
Tracking your business’ successes (or failures)
If you don’t keep track of your financial performance it is difficult to understand how well your business is performing. Are you making money? Are sales increasing, or decreasing? How is your new service line doing? If you’re not tracking the financial performance of your business, it becomes impossible to identify the risks and opportunities that your business is presented.
Accurate records can help translate into strong budgeting. All businesses small and large should have some sort of budget in place. Are you assuring that you will have sufficient cash flows in the future? Without an accurate picture of the past, how will you plan for the future?
Obtaining financing and capital
At some point in time your business may need to obtain additional financing. Whether this is from private investors or bank loans, they will want to see how your business is doing. Accurate and reliable financial information is a prerequisite to obtaining financing. Without reliable records, no one will be willing to lend or invest their money in your business.
Preparing your income tax return
Every year, you will have to file an income tax return, whether it is business income, partnership income or corporate income, you will need financial records to support your income tax return. If you are carrying on a business or engaged in a commercial activity in Canada, you are required by law to keep adequate records. Your records should provide enough details to determine your tax obligations and entitlements. Having sound financial records can make filing your tax return on time, painless (imagine that).
CRA record Keeping