In our series in financial management, we are talking about Recordkeeping this week. Recordkeeping comes in many different forms; people keep diaries to record their day, people keep a record of the statistics for their favourite football team, people record the rainfall on a daily basis. Each of these records serves the same purpose – to summarise information in a way that helps us to make decisions.

The same applies to financial recordkeeping in a business. Whether it is recording cash payments in one of those old-fashioned ledger books, importing bank statements into an accounting system, or typing in the details of your slips on a spreadsheet, the purpose remains, to make sense of the noise and create order from the chaos.

A recordkeeping system in your business takes all the details (payments, invoices, slips) and summarises them in the way that is useful. Typically similar items are grouped together, say, payments in a spreadsheet. These are then categorised in some way – payments for entertainment, groceries, stationery, rental, salaries, etc. In this way, we can use this information to draw out some conclusion, such as, how much are we actually spending on entertainment, how much has the spending on office consumables increased over the last 3 months, how much does leave cost the company?

The objectives of a good financial recordkeeping system are:

– To include all transactions

– To use consistent categories to be able to compare similar transactions over time

– To produce summarised information in the same format as the plan or budget

– To be a data source that is useful and relevant

– To be up-to-date on a regular basis, so the information is useful for timely decision making

Nowadays, a lot of the legwork of a recordkeeping system is automated in an accounting package. A number of accounting packages are cloud-based and inexpensive, taking the hassle out of updating a spreadsheet at the last minute.

If you are undecided or have not yet considered a financial package for your business, then please contact us for some recommendations.

Next week, we’ll look at the output from all this recordkeeping, the financial reports, where it finally starts to actually help you run your business.