Why should I keep records?

https://www.irs.gov/businesses/small-businesses-self-employed/why-should-i-keep-records

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Monitor the progress of your business

You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success. 

 

Prepare your financial statements

You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. 

• An income statement shows the income and expenses of the business for a given period of time.

• A balance sheet shows the assets, liabilities, and your equity in the business on a given date. 

 

Identify sources of your income

You will receive money or property from many sources. Your records can identify the sources of your income. You need this information to separate business from non-business receipts and taxable from nontaxable income. 

 

Keep track of your deductible expenses

Unless you record them when they occur, you may forget expenses when you prepare your tax return.

 

Keep track of your basis in property

Your basis is the amount of your investment in property for tax purposes. You will use the basis to figure the gain or loss on the sale, exchange, or other disposition of property, as well as deductions for depreciation, amortization, depletion, and casualty losses.

 

Prepare your tax return

You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business and prepare your financial statement. 

 

Support items reported on your tax returns

You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination. 

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​7 reasons why good record keeping is important for startups and Small & Medium Enterprises (SMEs) 

SOURCE: https://www.navisteps.com/blog/7-reasons-why-good-record-keeping-is-important-for-startups-and-smes

1. Prevent fraud or theft

Having a fraud prevention process by keeping detailed records of your business expenses and transactions is essential for your company - be it as a startup, small and medium enterprise (SME) or large enterprise. Having an overview of your business cash flow can allow you to understand how much cash is coming in and out of your business and produce an accurate financial statement for accounting and auditing purposes.

 

2. Pay your taxes

With documentation and good record keeping practices, you can pay your taxes accurately, on time, and save on penalties!

In Singapore, if a tax payment is not received before the due date, a 5% late payment penalty will be imposed. Additional penalties of 1% per month may be imposed if the tax remains unpaid 60 days after the imposition of the 5% penalty. The 1% additional penalty will be imposed for each completed month that the tax remains unpaid, up to a maximum of 12% of the unpaid tax.

As a startup or SME business owner, every dollar counts and it is important to stay prudent on such financial matters.

 

3. Comply with laws

Good record-keeping practices are essential because it helps companies comply with various laws in various countries. Companies should establish good accounting and expense management systems to drive good record keeping practices and retrieve or file records easily.

Increasingly, accounting and expense management systems have partnered or integrated with each other to ensure seamless data synchronization and provide accounting-friendly solutions that are affordable and user-friendly for startups and SMEs. 

 

4. Manage your cash flow

Cash is king when it comes to the financial management of a growing company. As evidently portrayed through COVID-19, maintaining a healthy cash flow that can sustain against pandemics and other unforeseen circumstances is very important if you want your company to survive in the long run.

This is where record keeping comes in. It helps you to identify and understand where your dollars are coming in and going out from and have an accurate projection of the health of your company’s finances. 

 

5. Make business decisions

Every dollar within a startup and SME is very precious and should be well-spent. Understanding where your dollars are coming from and headed to is crucial in helping you better understand and make data-driven business decisions.

Expense management software is a digital cloud solution that can help you breakdown your business expenses and retrieve insights on your business spending. As a startup or SME owner, you would want to save as much time and money as possible and focus on other important business tasks to drive profitability and growth.

 

6. Save time and costs 

When you need to file reports and conduct financial year end closing, a good record keeping system can allow you to save time and money as you do not have to panic and go through a last-minute rush to meet deadlines or hire someone last minute to handle it.

Digitising your documents can reduce the hassle and ensure you stay compliant with regulations and deadlines. By putting your documents and records online, you can increase operational efficiency, reduce transportation and storage costs, search records faster and easily access records from multiple digital devices. 

Otherwise, you can also consider hiring a corporate secretary. It is possible for startups and SMEs to do so as there are affordable corporate secretary services available in the market that can be less expensive than hiring an additional headcount! 

 

7. Prevent loopholes and oversight

Record keeping can help to justify and explain why the company management made certain decisions. Cash flow problems are also found to be one of the leading causes of failure for businesses and having consolidating records will enable businesses to make better decisions. With your business survival at stake, the possibility of having loopholes and oversight cannot be ignored by business owners and precautions should be taken. 

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Generally Accepted Record-Keeping Principles

SOURCE: https://www.library.wisc.edu/archives/records-management/program-overview/records-management-policy-and-guidelines/generally-accepted-record-keeping-principles/

 

These are the “Principles” of good management of Records.

1. Accountability

2. Transparency

3. Integrity

4. Protection

5. Compliance

6. Accessibility

7. Retention

8. Disposition

​ISO 15489: Records management is a globally recognized requirement. In 2001, the International Organization for Standardization (ISO) issued ISO 15489, a standard for developing a records management program.

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What Should be Included in a Disposition Schedule?

SOURCE: https://didlakeimaging.com/learn/common-records-retention-policies-and-schedules/

• There are quite a few moving parts for what should be included in your organization’s records retention or disposition schedule.

• The schedule should describe your records and specify how long and where they are kept through their life cycle.

• Note the format in which they are stored, and describe the process of their destruction or archival.

• Group identical and related records together into a records series (also known as an item on the schedule).

• Files and records united together can help streamline the implementation of your schedule.

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Description of Documents

When describing documents in your schedule, include information about the organization, its services, and programs. Your policy should also mention the function or purpose behind programs and services, along with activities and legislation behind them.

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Descriptions of Items on the Schedule

Once your documents are grouped into items on the schedule (or records series), provide descriptive information on its use, format, security, and accessibility needs. You will also need to note each item’s significance to government programs, legality, and privacy requirements.

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Record Series Date Ranges

Record series will need a date range assigned to each item and a designated time for how long each record series should be kept in active or semi-active phases within the organization. These dates should be guided by business rules for records closure that determine the completion of the active phase and mark the file as completed or closed. Be sure to note each rule that guides disposition in your schedule.

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Disposal Instructions

The final description needed for items on your schedule are to note how long record series are kept in inactive phases and how the final deposition will be completed via destruction or preservation.