Jesper Frederiksen looks at the basics of record keeping for small businesses and what can be done to make the process easier.
Record keeping is integral for businesses of any size and doing it badly can lead to inconsistency, inaccuracy and even incur fines from HMRC.
Get the basics right
Record keeping is a legal requirement for every business and it’s necessary to retain your financial records for six years. This doesn’t need to be difficult when you plan for the essentials in advance. The bare essentials to maintain are a sales ledger, a cash book to record money as it enters and leaves your business, a wages book and a purchase ledger to monitor all outgoings. Of course, depending on your business sector and specific industry requirements this may differ slightly, but a variant of these should always be employed. You need to make sure that you keep copies of receipts, contracts and other documentation as it comes in or leaves the company. Missing receipts are a headache which no-one wants and which can easily be avoided with the correct processes in place.
Plan in advance and make sure all these areas are considered. Some small businesses may choose to employ an accountant or introduce accountancy software to handle finances, but nonetheless maintenance of all records and paperwork is vital, especially when you process it all yourself.
In this article I’ve outlined some other tips to keep on top of your records, streamline the processes and cut costs.
The paper chain
For all small businesses, regardless of location and product offering, record keeping is vital. Businesses require historical data referring to sales agreements, employment contracts and even office tenancy information to be easily available should it be required.
Thankfully, technology is removing the need for overflowing filing cabinets taking up office space. You need to reference an employment contract from five years ago? Document management software means you don’t have to pore through sheets and sheets of paper to get it. A click of a button or press on a screen can bring up historical data quickly and securely.
Quick off the mark
Small businesses have vast amounts of information to keep, from staff information to sales contracts. You need this information available for reference when filing tax forms or applying for grants and funding. SMBs need to keep their competitive edge by speeding up their business when these records need to be accounted for.
Having historical data readily available allows for rapid responses to these types of requests or applications. Speed of business can be a key differentiator for organisations, so small businesses need to be on top of all their business processes and documentation.
Business security, inside and out
Contracts often have to be sent out to customers, suppliers, partners and even potential employees, all external to the organisation. In an ideal business scenario, these contracts are signed and returned in a timely manner.
However, what happens when third parties fail to return them? Companies need to make sure they record all business processes, internally and externally. Small business require an always-on, secure repository of legal agreements and business contracts as part of their business management strategy.
At the early stages of development, effective management of cash flow and the supply chain is vital to maintain growth. Therefore, organisations must ensure they have oversight of all documentation, whether that is internal or external information. Original copies need to be kept for reference when third parties question a business transaction.
Lost in the wind
It’s the bane of a small business’ financial department: lost or not-in-good-order documents. Money and time is wasted when staff are chasing a lost or misplaced document. Paper is easily lost and susceptible to damage. Digital Transaction Management (DTM) technology on the other hand, allows for all documents to be sent, tracked and monitored digitally to avoid any such situation.
Digital Transaction Management will prove to be a smart investment in the long-term when teams are pulling their hair out with documents that are returned incomplete. Small businesses still relying on paper records are at greater risk of losing vital information, whether it’s through human error or natural disaster. Now is the perfect time to modernise before it gets worse.
The financial departments of small businesses are also running to tight budgets. Making savings where possible helps increase future budgets in areas which help your business grow. Record keeping is one area where savings can be made, especially should your business face a sudden influx of paperwork which historical filing systems can’t manage. When new business is brought through the door, new documentation and contracts follow. Document management systems can be thought of as an insurance premium: small, regular payments reap dividends when a system makes administration a breeze at a hectic time. The material costs of paper, postage and couriering all add up. Make the most of technology to make these process digital: the savings will add up in the long term. It even frees up office space – kiss goodbye to those filing cabinets.
There is an environmental impact here too; it’s not only money being saved, but physical paperwork as well. In avoiding vast amounts of paperwork and the environmental impact this incurs, small businesses have a real corporate social responsibility bonus point. In the early stages of a business’ development, there aren’t too many ways this can be enjoyed, so effective record keeping proves vital in more ways than one.
Security is a topic under scrutiny following some high profile breaches, but is an issue that SMBs need to monitor as well. Don’t leave that administrative passwords document lying on your desk for all to see. Keep your records secure with the right business processes and technology. Heads of departments need to ensure that the right people have access to the appropriate documents at the right time. Physical filing doesn’t provide this security. Get your head in the cloud and make the most of technology which allows complete security of your vital company information.
Record keeping doesn’t need to be a paperwork nightmare. It’s an essential business process, but one that small businesses can manage efficiently and securely when they have the right processes and technology in place. You never know when you might rely on historical information when its called upon. Keeping your records in order from day one is vital and will stand you in good stead in the long run as your business grows.
Jesper Frederiksen is VP EMEA at DocuSign.