Why You Have To Maintain Financial Records

Spreadsheet Document Information Financial Startup Concept

We have all heard the term transparency being tossed around not only in the world of politics and governance but also in the world of business. Transparency in businesses refers to making everything public from your entire business process, handling, financial records, profits, spending, and tax revenue and so on. This transparency is needed to make sure that businesses are running their operations honestly and are not cheating the government or the people that happen to buy from them.

Maintaining financial records, officially known as bookkeeping is a very important process in all of this. Your financial records include everything from your ledgers to your profit, your income tax records, and spending, financial statements and so on. All of these things need to be included and organized in your financial record, usually following a timeline.

Maintaining a financial record is very important for a number of different reasons, and these reasons can include:

  • Avoid having any discrepancies in your record that might raise questions amongst different government regulatory bodies, prompting a possible audit.
  • In case an audit actually does start, you are able to streamline and quicken the pace of the process because you have everything already collected and organized in one place.
  • Being prepared for tax season beforehand, and actually being eligible for possible tax deductions.
  • Understanding your business’s finances very clearly since everything is in front. You can use the financial record to help calculate the trajectory of your business and see which areas might possibly be creating problems for said trajectory.
  • When you can see the ratio between your business’s spending and your business’s income, you can then see whether or not there is a balance or a problem, and regardless of the ratio between the two, once you see the numbers, you can set a reasonably honest budget for your business which is very important.