The Importance of Good Record Keeping

Each time you open your office and look around, you breathe in a deep sense of accomplishment.

This business is yours! Perhaps you have always dreamed of owning and running your own management rights operation and it has been a long, hard road to reach your goal.

You did your homework before buying your management rights. You conducted your own market research. Your complex is in a beautiful setting (much nicer than Darren and Sharon’s place up the road). Your rates are competitive and you offer the extra little touches that you hope your guests notice. Your bookings are full and the busy Christmas season is fast approaching.

Yet, this bright sense of accomplishment begins to fade slowly as you acknowledge those little nagging questions that seem to disturb your dream. “Why is my cash flow always a problem? How much real profit am I making?”

So, what’s really happening in your business? If you’re not exactly sure, then it’s time to return to the basics of good record keeping. Bluntly put, any business that fails to keep complete and accurate financial records places its long term success and longevity in doubt.

Here are three reasons why complete and accurate financial record keeping is crucial to the success of your business.

1. Good records are the key to help you operate more efficiently, opening the doors to allowing you to increase your profitability. This is because complete and accurate records enable you and your accountant to identify your business assets, liabilities, income and expenses, which when you benchmark your business against industry average, helps you pin point what needs to be worked on and what is driving your business.

2. Good records are essential the preparation of accurate financial statements. For most management rights operators, your bank will want to see these yearly as they present a complete picture of your business operation, which you will benefit from as well.

3. Good records are required by your accountant for the preparation of taxation documents. Poor record keeping may lead to costly errors in your income tax returns or other compliance documents that may lead to an audit.

So, the key to growing a successful business is information.

Think back to when you first enquired about owing and operating your management rights business. You invested a lot of time in gathering information about your finances, your potential customers, your competitors and your ability to succeed. You took this plus many other factors into consideration and developed a business plan, which you then took to your bank to get the loan to allow you to buy your business.

You demonstrated the appropriate business skills to your bank manager when you took your business plan and asked for the money you needed, why you needed it and how you would pay it back.

Why do you still have nagging questions?

In small business, the saying ‘success begets success’ may be true but it’s equally true that success often breeds failure. If a business grows rapidly, it may seem that you work frantically to simply meet demands, reducing the amount of quality time you spend on your record keeping. If you dislike completing paperwork, it is very important that you hire an experienced bookkeeper to perform this role. Alternatively, your accountant will know of an excellent bookkeeper they can recommend.

Your accountant can also help you build your business, thereby increasing your profit. While you may think your accountant’s fees are expensive, what dollar value does their advice add to your business if you follow their advice? More than likely it is far more than the fee charged.

Geoff Missen
The MBA Partnership

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