Businesses should maintain complete and accurate financial records for the following reasons:
1. A business’ purpose to make money or profits in order to remain operating. If records are missing, incomplete or incorrect there is no way for the business to assess there profit or loss or be accountable and have understanding of their income vs expenses.
2. It is the review of data in relation to financial records allow the business to measure all aspects of business if complete and accurate, they can then focus and target marketing and development accordingly. Business use this quantitative date to assess many facets of te business and make plans for change or improvement.
3. Investors in a business need to have a solid overview of what exactly they are investing and in and what the expected rate of return might be. Without complete and accurate records, investors would not take an request of investment seriously as it is an indicative sign that the business cannot manage money effectively.
4. In Australia there are legislative requirements about the collection, accuracy and retention of financial documents and records, they may be called upon from the Australian Tax Office for example in supporting evidence of GST audit assessments.
Obtaining, Reporting ; Documenting financial information in a timely manner enables to recall and assess information in real time in order to ascertain the business current position and also to make business decisions about the future. Information included in a businesses financial records should include information on revenues and expenditures, cash flow, labor costs, tax records, supplier quotes, expenses, and assets.