Mastermind Leaders hosted a Tax Tips Seminar. During that session, MSMEs got an opportunity to hear directly from representatives of the Board of Inland Revenue about expectations, obligations, and responsibilities of business owners. The most important take-away was the importance of keeping accurate records.
“Financial records show the life of your business.”
Financial records are important because they help you determine the life of your business. How much are you making? How much are you spending? How much are you paying in taxes? There are more than a few MSMEs dreading tax season every year…with some even trying to avoid it because their books are in disarray. The thing is, it really doesn’t have to be that way. In fact, in three easy to implement steps, you can significantly reduce your bookkeeping related anxiety, and improve your awareness of your business. Here’s what to do.
STEP 1: Designate a place to store all receipts and invoices.
This could be as simple as two storage boxes in a safe place, clearly labelled Income and Expenditure. Every day, as soon as you get back to your desk or office, place all receipts and invoices in the appropriate box. Short notes about cash payments should be included. Just write those on a slip of paper – amount, date, what the money was spent on – and drop that in the designated box as well.
Step 2: Set aside 30 minutes every morning to sort through receipts from the previous day.
Note income and expenditure, and file any associated paperwork, like invoices and receipts. Filing could be as simple as putting the paperwork into an envelope marked with the month and type of document. For example – January Expenditure. Account for all money that left the business by using cash vouchers for any cash transactions. Look for the slips of paper you noted the cash expenses on, then write out a voucher with full details. On the vouchers, note what the money was paid for, who paid it, the date, and authorization for the expenditure (which is the business owner’s signature). You can purchase cash voucher booklets at most stationery stores.
If you’re a small organization with a few employees, or just you alone, this system would work well to keep you on track. If you have an assistant, this is something you can designate. Use an Excel spread sheet to note the information, but also print any electronic receipts and invoices to keep a hard copy. Your Excel spread sheet should have the following columns – Date, Amount, Details. Keep the income and expenditure spreadsheets separate for the moment.
Step 3: Set aside 2 hours on the first Monday of every month to sort through the previous month’s financial records.
Again, these records should have already been organized, so putting them together in a month collection should be a relatively easy task. All hard copies of invoices and receipts should be put into a large envelope and labelled with the month and year they belong to. So, your January Expenditure and January Income envelopes go into a larger envelope labelled ‘January 2019’. Print a copy of the Excel spreadsheets for January and include them in the envelope. Keep the envelope in a safe place where you can find it easily. Do this every month.
The key here is to keep both an electronic and hard copy of records. Now, at the end of every three months, bring in an accountant to review and prepare official records. With your documentation categorized, it should be easy work for an accountant to keep you up to date.
It’s not as time consuming as you might think, and once you set up a schedule and stick to it, you’ll see how much peace of mind you’ll get from being able to see the pulse of your business at a glance, and you’ll be you’re sorted where statutory obligations are concerned.
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Shelley-Ann Edwards-Barran is a writer, editor, writing coach, speaker, and advocate for better writing instruction. She is the CEO of WERD Coach Ltd., a company dedicated to helping writers at many levels – children, academics, authors.