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Starting up a business is the most challenging thing to many young entrepreneurs, the problem of setting up an office, outsourcing for human resource and paying revenues are hard to come by. Many businesses do fall at the initial stages. According to business consultants, the problem could be blamed on mismanagement which includes among others poor accounting. In a business language, accounting is the recording, classifying, reporting and analyzing the financial data of any venture.
Reports indicate that lack of accountability may also create loopholes for fraudulent activities in the financial department. Many individuals after purchasing items meant for the office use, fail to maintain the records. This could be seen by careless disposal of receipts in dustbins.
However receipts either personal or for business should be properly documented to help in knowing your expenditure and chat a way forward.
Proper documentation will help in sealing any fraudulent temptation. And besides the proprietor is able to track the progress of the business, prepare financial statement, and in monitoring the tax returns.
A walk into local supermarkets, one would notice the over flow of various dust bins with the receipts. Always after purchasing an item what most people do is to discard the receipts.
It is advisable though that entrepreneurs should keep proper records and it should include the evidence of expenditure and income, details pertaining the depositing of money both the cash and wage books.
The main purpose of such records is to pave way for easy auditing according to the set standards. It is worth noting that in most parts of the developing economies only large companies would comply to international auditing standards. Small and Medium Enterprises only audits for tax purposes or when needs to access credit.
Lack of sufficient funds to hire the services of accountants by the SME's leads to poor bookkeeping and lack of managerial expertise which makes the work of auditors to such businesses a hell.
It is advisable for small businesses to outsource for the services of accounting firms to assist in book keeping and offer necessary advice on business management. Well documented transaction could also be embraced by using new technologies. The cash register helps in processing sale
Such gadgets should perform functions not limited to adding and subtracting items, provide tax table and print receipts. The importance of accounting is to assist in acquiring loans from financial institutions “most banks will only accept businesses that are properly documented.
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