Is financial record-keeping really important to a business? The answer to this question is a profound yes. It does not matter what size a business is or its industry, each business owner must make an effort to maintain their records unless they want to face unfortunate consequences.
Increased Tax Liability
A lack of financial records can increase your tax liability. When a business submits a tax return, the IRS does not automatically accept the return as fact. The IRS will sometimes require a business to support the expense statement provided with their tax return with financial records. If your company has this type of request and you do not have the records to support the statements, the IRS can increase your tax liability and, therefore, the amount of money you have to pay.
Lost Business Contracts
When a business enters into a contract with another business, they want to be sure that their interests are protected. A large part of this process involves verifying the financial standing of the other business, which can only be completed through a records review. Unfortunately, if the company cannot verify your assets, they might not be comfortable entering into an agreement with you, which could mean that you will lose out on business. Not to mention, it can make your business look very unprofessional to other business owners.
Denied Vendor Credit
For some businesses, vendor credit programs are an excellent way to get access to equipment and supplies that you might not necessarily have the money for at the moment. With these programs, you have the opportunity to get what you need now and pay at a later date. However, how much credit a vendor offers you or if they will even extend credit at all generally depends on the documentation you provide. Much of this documentation involves financial records. If you can't prove what assets your company has, you might not be offered credit to support your business.
Get Professional Help
If your business needs assistance with record keeping, a certified public accountant can help. From helping you determine what information is important and how long you should keep records as well as preparing your records for review because of an audit or other event, an accountant can assist you with every aspect.
If your business is not managing your financial records as you should, it's important that you change this practice. Better record-keeping practices can enhance your business.
To learn more, contact a resource like John M Vlasac & Company.