The brain is said to be the best storage facility one can have; you won't need to learn new software, there is no danger of a system crash to cause the loss of all your data, but you can forget the simplest of things. This may prove a costly mistake for a business if you do not record every penny your business spends. Ben Kuboi, the managing director of MZF Investments Ltd, has an interesting experience about this.
"I hired an auditor recently. He said I had made Shs 1.8 million in losses in the last six months in one of my businesses. But how did this come about? Money got lost in the books," he says. Kuboi says he did not realize or suspect that the business was making losses that could amount to over Shs 1m because he disregarded the effect of small unaccounted expenses.
Kuboi's main challenge is poor book keeping, which entails recording revenues, expenditures, inventory, invoice dates, numbers, amounts, terms, dates and amounts paid or due, balances, and client information.
If you do not know how much money is going out, where it's going, and what money is coming in, you may end up in Kuboi's situation. Book keeping also helps to keep track of debts you owe and what others owe you. It not only makes managing the business easier, but also promotes transparency, which makes the tax authorities and other relevant regulators trust your operations and performance results.
You can keep these 'books' as paper records or as computer spreadsheets using simple bookkeeping software to keep track of income and expenditure.
Key Lesson: hire an accountant or do it yourself at your own peril. Kuboi says there is a temptation for some business people and accountants often take book keeping as a punishment. "But I cannot risk again because all along I thought the business was growing, the records showed there was stock, and losses were marginal but the auditor was able to identify weakness in my records,' he says.
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