Types of Records that Small Business Owners needs to Keep and Importance

Types of record that small business owners needs to keep

To be successful as a small business owner, the first day that you start your business should be the first day you will start keeping records of the daily financial activities in your business. Most businesses have gone under because they fail to take requisite steps that helps the business to progress. Yes, you might be good in some aspects of your business but you need to adhere to the wherewithal so that your business will stand the taste of time. Testimonies abound about people or business owners who toll this part are rejoicing because the benefits of following the right part were reaped by them. Accurate record keeping helped them in achieving this success story.

One of the important recording tool for a small business is the source document. A source document joins together all the documents that is used in recording transactions before such transaction is being transferred to any permanent document for reference purposes. It is a document used in capturing transactions immediately they occur. The source document helps small businesses to get a quick overview of the financial activities in the organization.

It is also worthy of note that the information captured in the source document will be posted to subsidiary book before they are transferred into a permanent place called ledger. These subsidiary books are very vital and they are used in order to prevent so many information from entering the ledger. Subsidiary book on the other hand is a book into which transactions are recorded on a daily basis from the source document. Transfers are made at suitable periodic interval from the subsidiary book to the relevant account in the ledger. Here, I will be explaining the types of source Documents and Subsidiary Books important for small businesses.

Types of Records that Small Business Owners Needs to Keep

A. Source Documents

1. Invoices

This document contains dates, list of descriptions of items bought or purchased. You must treat this document with utmost importance because of its functions. It serves as a guide on how you can sale your products and also shows the items bought with their respective prices. You can track sales on your shop through these invoices. This document should be kept safe because if a third party gets access to it, fraud or looting can easily go without being noticed. This will inturn lead to decline and mismanagement which can negatively affect the business.

2. Delivery Note

This is a note that shows the list and prices of goods delivered to a particular customer. It also contains their quantities and prices as well as date. It is important to issue delivery note and also ensure that duplicate copy of it is retained. This note serves as an evidence against double claim of items from customer. When proper note about goods delivered to customers are not kept, it then means that more goods can erroneously be supplied to the same customer.

3. Goods Received Note

When goods are received from a customer, it should be documented. This documentation will reveal what is being received, the amount and prices of the items, in addition to the name of the supplier. This is very important because documented transaction is worth more than a transaction that is being recorded in the memory which can be forgotten at anytime. This type of source document is important to avoid disorderliness in the business environment. Try as much as possible to make sure that this document is accurate.

4. Credit Note and Debit Note

These are very important in the running of a business. Both works together in many cases when there is discrepancy, shortage or defect in the amount of goods purchased or sold. Keeping a blind eye to these abnormalities in goods supplied or sold can cause the business owner to be paying more than the worth of goods demanded from the supplier and vice-visa.

5. Bank Statements

This is important for keeping the list of all financial transactions carried out in a bank account on a monthly basis. Here, you will find deposits, withdrawals, charges, opening and closing balance including interests earned.

These types of source Documents mentioned above can ruin the effort of the business owner if proper attention is not given to them.

It is also important you know some examples of subsidiary books that will also be beneficial to your business. Here are they;

B. Subsidiary Books

1. Sales Day Book

This is used to record credit sales so that you can track your payment from the customers. Though sales in credit is not totally bad, try to strike a balance so that the business can continue to function very well. Moreover, recording these sales serves as a reference tool.

2. Purchases Day Book

It is important you have this document where purchases made on credit is recorded on a daily basis. Purchase on credit is also a credit facility to the business which when properly managed can help the business to grow. Adequate recording of the daily purchase help you to know the supplier or producer who is due to collect money from you without having unnecessary claims from supplier.

3. Return Inward Day Book

This is where goods returned from customers are recorded on a daily basis. Failure to record these returns implies loss in the business because as these goods are returned from customers, it is recorded and returned back to the supplier. This is mostly due to defects in the product.

4. Return Outward Day Book

This is where returns to supplier due to defects are recorded on a daily basis. It enables the buyer to obtain a refund on the amount paid for the goods or another set of goods to be given in place of the defect ones.

5. Cash Book

This record system is very important as it enables the recording of receipts and payments of money. All receipts and payment on a daily basis is made on this.

In a business, accurate record keeping is important because it helps you to keep your business under check as well as track the errors and success of the business. Having a good record in place ensures the continuity, growth and stability of your business. I believe you find this article “types of Records that Small Business Owners Needs to keep” helpful.

Also Read; What to do if your small business is failing

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