Record Keeping

By Sidney Kotzen, SCORE Accredited Business Counselor, SCORE NE Mass Chapter 411


To many, keeping financial records seems like a waste of time. You know how you’re doing so why bother? In reality, financial information is a tool that can have substantial significance in running your business more profitably. Simple and regular recording of your various business activities means good record keeping. Bigger firms can afford record keeping staff and outside accountants to report and analyze information produced. Start ups and small businesses, in most cases, cannot afford this luxury, but need it just as much as the big guys.


Small business owners must wear all hats. You have to be the CEO, the CFO, the operations manager, the HR manager and the salesman. Fortunately, in the finance area, there is excellent software, e.g., Quickbooks and others, that is relatively inexpensive to help you do your own record keeping. If it is not practical to do it yourself, there are available outside bookkeeping services for hire for as few or as many hours as you need at a relatively modest cost. It is important that the outside service of your choice is familiar with your chosen software and can instruct you on its usage and expected resulting records.

At a minimum, the following is needed for effective record keeping.

  • System: Appropriate to your type and size of business with the ability to grow. There are many choices. Guidance is available. The system can be manual or computerized.
  • Discipline: You must establish a fixed, regular routine of time allocated to record keeping. Stale information is useless and dangerous. This routine may be yours or from an outside service.
  • Action: Information should be timely and reviewed immediately in order to manage your business efficiently. There is no point in recording data if you don’t use it to help run the business more efficiently.


The primary goal is to produce monthly financial statements, if feasible, but no less than once a quarter. These financial statements are:

  • balance sheet: The balance sheet can tell you the health of your business and steps needed to keep the business thriving or problems to be resolved.
  • income and expense statement: The income and expense statement discloses trends, profitability, control of costs, and additional management data.and
  • cash flow statement: The cash flow statement shows how you are managing your cash, pressure points, future cash flow needs, and a great deal of other information.


If you are not familiar with these reports, you need to learn what they are and what they tell you. We often work closely with our clients to assist them in the learning process. You may find a course at a local community college or business program helpful or go the self taught route with a trip to the library or purchase one of the many books on financial statements in a local bookstore, e.g., Finance for Dummy’s, etc. Once you master these, there is literally no end to reports and statistics you can produce from good records. Every one of your records can be critical to your business success. You can create budgets to set goals and controls. Records can aid in price setting. Of course selling price is part science and part art. Many outside factors besides numbers must be considered.


Productivity and payroll costs are all subject to analysis. Records can lead to strong management of accounts receivable, accounts payable, inventories, and many other facets of your business. You can stop fraud, theft, and other losses through records. You can analyze profitability of individual products or individual segments of your business. There is really no limit to these types of analyses which can give you a leg up on managing your business because what you do not know can hurt you!

Another by-product of good computerized records is that you can produce, for your accountant's use, an annual file of all required data to prepare accurate and compliant tax returns. This technique saves your accountant considerable time and you the time related fees. For example delivering a mass of ill-defined raw data to your accountant is time consuming for her or him to put into good order. If you are knowledgeable, you can do your own tax return using available tax preparation software. You should not discount the added value of a trained professional doing your returns.


The message is simple. The only thing you get from running your business by the seat of your pants is a sore rear end. Business, no matter how small, needs to be run with all the insight you can generate. Numbers and financial reports that come from your records are the keys to making your business run better and the sooner you start the better off your business will be.