Record-keeping keeps your business out of trouble

AS a business owner, you are required to keep accurate financial records of all activities for your company. It may not be fun but keeping financial records is a legal requirement when you are running a business, whether you are a sole trader, partnership or large corporation. As a business, you must make sure you are tax compliant, which also means keeping record of every transaction you make.  In addition to keeping you out of trouble with the tax man, these records will help you analyse the profitability of your business and maintain a smooth relationship with your customers and suppliers. Keeping records can be tedious especially in a fast-paced environment but failing to do so can cost a business dearly. Tor Amarto runs a barbing salon and beer parlour in Makurdi. He records each sale in a manual ledger but explains that during very busy periods over the weekend, he started losing track, which allowed staff to start pilfering. ”I noticed that levels of beer were going down but cash was not rising and it was occurring mainly on Saturday nights,” he said. After noticing the trend, he engaged his cousin to issue receipts and record sales during busy periods and the problem was quickly corrected. Books He later discovered that when he was busy barbing hair, his staff were pocketing the proceeds of beer and food sales. Now, he records every sale in a book, and then transfers records each week onto an accounting App on his phone. The type of records needed differs with each business and there may be special needs apart from sales and expenses.  Fadi Mohammed who operates a car hire fleet in Abuja, keeps the record of the driver, the amount of fuel, the mileage and details of tyre replacements for each car. He cites record keeping as the secret behind his ability to keep costs low and maintain his regular customers. “I can calculate whether a job is worthwhile or not by comparing the costs of each journey. My drivers used to take many jobs outside of Abuja but I stopped it when I realised that short rides within the city were much better for my cars and for my profits,” he said. When he was audited for tax recently his accurate records helped him prove his actual income and prevented the tax authority from raising an estimated assessment, which would have been higher. Many entrepreneurs are so busy running their businesses that they overlook record keeping and it can cost them dearly. Tax compliance in Nigeria is becoming tighter and your ability to provide an accurate financial picture of your business will help you avoid fines and penalties as well as time spent dealing with the tax authorities.