As your business grows, it often becomes increasingly difficult to keep track of everything that is changing but this is no excuse for keeping bad records. Not only will this hinder your ability to increase the value of your small business and grow further in the future, it could also get you in trouble with the authorities.
Yet keeping accurate records is more than just a protection against damaging your company, it’s also a way to boost its value, both now and in the future. It might be hard to think about this now but there may come a time when you want to sell your business so that you can move onto other projects, retire or simply enjoy some time away. When this day comes, know that your business will be worth roughly 2.5 times its yearly revenue. By simply being able to present accurate revenue figures to investors, you are increasing your chances of being able to command an asking price that reflects the true value of your company.
Accurate records go even further in helping you maximize the value of your business. For example, they help demonstrate full compliance with all the necessary tax codes and regulations. A company will be devalued quickly if it’s discovered that it owes lots of money in back taxes, or if there are some regulatory issues that will result in fines or other expenses.
The need to keep accurate records is also expanding beyond traditional accounting. With the General Data Protection Regulation (GDPR) set to go into effect later this year, it’s becoming increasingly necessary to keep records of how you handle and store people’s data. A lackluster approach that cannot be documented will hurt the value of your business in the long run.
Furthermore, keeping good business records also simply makes sense for the growth and health of your company. “You don’t know where you’re going until you know where you’ve been.” It’s cliché, but it’s true. Being able to look back at how you’ve performed in the past gives you the chance to benchmark your progress. It will help you identify areas where you’ve had success and provide a path to avoid repeating mistakes.
Good business decisions are usually driven by good data, so to make sure that you are putting your company in the best position to grow and succeed in the future, it’s important to have solid numbers about what you’ve already done. Accurate records are good practice, no matter what. It might be a challenge to implement these processes, especially if you are growing quickly but you’ll be thankful you did once you see how this can impact the value of your business both now and in the future.
Read How to Manage Receipts as a Small Business Owner to ensure you comply with HMRC!
About the Guest Author: Jock is an online business broker and founder of Digitalexits.com. He has seen firsthand business owner disappointment as their company is devalued based on their inability to produce accurate records. To prevent this from happening, he is a big advocate of investing in and maintaining quality records-keeping practices.
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