If you find that keeping track of paperwork is difficult or simply don't something that you want to have to deal with, then hire someone to perform this necessary task. Although you must pay for these services, keep in mind that keeping good financial records can save you money and increase your profits, more than likely covering the professional fees.

Good records help you to see what is really happening in your business, where your money is going, why cash flow might be a problem, how much profit you are actually making, etc. If you're not sure about any of these things, you will want to focus on your record keeping for a while.

A business cannot survive on luck alone, so take proactive measures to make sure that your business has good records that can be used to make solid projections for future success. Here are some of the reasons that complete and accurate financial keeping is crucial to your business's success.

1. Good records help increase profitability by providing the financial data to help you operate more efficiently.


2. Accurate and complete records enable you to identify all your business assets, liabilities, income and expenses. This information can then be compared to appropriate industry averages to help you determine what phases of your business operations are strong and which ones are weak.


3. Good records are necessary in order to prepare current financial statements like your Income Statement/ Profit and Loss Statement, your Cash-flow Projection, and your Balance Sheet, all of which may be required by your banker and will be necessary if you ever seek additional funds.


4. Good records are also beneficial when the time comes to file taxes. If you have kept meticulous records, you will not over- or underpay, you will have documentation in the case of an Internal Revenue Service audit, and can help you to maximize your deductions.

The following checklist highlights the type of information your financial records should provide you to contribute to your success:

• Current income and projected income
• Amount of cash that is tied up in accounts receivable and for how long
• Amount of cash that is tied up in inventory and how long it takes to turn it
• Amount of cash do you have on hand
• How much money you owe for merchandise, rent, utilities and equipment
• What are your expenses, including payroll, payroll taxes, merchandise, advertising, equipment and facilities maintenance, and benefit plans for yourself and employees (such as health insurance, retirement, etc.)
• Which of your product lines, departments or services are making a profit, which are breaking even, and which are financial drains
• What your gross profit is
• What your net profit is
• Determine how all of the financial data listed above compares with your last years results, your last quarter's results and look at that next to your projections in your business plan. Also consider how all of your financial data compares with that of your competitors and others in the industry.

As you review your financial information, you may discover that some things need some work. However, rest assured that it is never too late to correct problems related to poor record keeping. Although it may take a bit of time and effort to go through your company checkbook, take inventory and review bank statements, it will be well worth it to catch up on your paperwork.