How important are financial records for a small business?

How important are financial records for a small business?

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You should keep a set of books for your business from the word go so that you know how much of your money (or that of your family, friends or financiers) has been used to finance the set-up and operations of the business. This will dictate the owner’s equity on the balance sheet as well as retained earnings.

Keeping track of business expenses and income also helps to track if a business is profitable, and if it’s not, what potential causes of the losses may be.

It’s difficult to do this if personal expenses are mixed up with business expenses. This is also important from a tax perspective.

Keeping financial records means that you have balance sheets, income statements and cash flow statements that enable you to track where your business has come from, where it is now, and where it is likely to be in the near future. This is critical for sensible and realistic planning for growth.

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