It is necessary for entrepreneurs to understand the need for record keeping. Once record keeping practices are in place, entrepreneurs will be able to focus more of their attention on growing their business, and less time on paperwork.

Record keeping is a process were all income and expenses incurred or accrued in the business are systematically gathered or put in place for references and decision making..

Record keeping helps entrepreneurs to be able to work on smooth process.

Excerpt:

It is necessary for entrepreneurs to understand the need for record keeping. Once record keeping practices are in place, entrepreneurs will be able to focus more of their attention on growing their business, and less time on paperwork.

Record keeping is a process were all income and expenses incurred or accrued in the business are systematically gathered or put in place for references and decision making..

Record keeping helps entrepreneurs to be able to work on smooth process.

So, what kinds of records do an entrepreneur need to keep?

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Any small business must keep the following two types of common records:
1. Income: As an entrepreneur, you must keep a record of all income (profits and losses) the business generates. This aspect should be kept in a spreadsheet (if using an Excel Microsoft office on your PC) or a separate income book, that is properly designed in detailing how much the income was, what date it was logged and who the client was (there are also many accounting tools out there that make this process a lot easier). You would also be wise to keep a record of all the invoices, you’ve sent your customers, as proof of business. It’s wise to separate your invoices into separate folders for your different customers, and update these each time you complete a piece of work.

2. Receipts: You need to keep a copy of all your receipts, so you can accurately claim expenses on your annual tax return. This includes all bills related to your property, spending on equipment, goods or even lunch when you’re meeting clients to discuss business. By keeping a record of all your income and receipts, you know that, once it comes to paying your tax, you will be able to easily access all the information you need.

Good records will help you do the following:
1. View business progress: By keeping records of income, you can view the business’s financial health over time.

Hopefully, you’ll be able to plot a continual upward chart of income and profits – but it will also tell you if there are any problems.

3. Identify sources of income: The greater the variety of services you offer, and the more customers you have, it can be hard to work out where money actually comes from. For instance, if you have 20 products and 60 customers, it can be difficult to think strategically and decide which products or services bring you most value – and which customers are the most important.

However, if you keep consistent records, you might decide that 10 of your products bring so little income that you may as well stop offering them, and focus instead on the higher paying work.

4. Remember deductible expenses: for instance, you may have bought a table for the office 11 months ago or the lunch you had with a new client last June; Many business owners short-change themselves by forgetting to state all the expenses they could claim on their tax return. Keeping all your records makes it less likely you’ll forget, so you can claim the tax back on expenses.

5. Prove your finances to banks or investor.

6. If you go to a bank for a loan, they will expect to see proof of your cash flow and financial stability. Records help you prove that your
business is financially sound.

7. Prepare your tax returns.

8. Support items reported on your tax returns.

9. Enable you to know the amount of debts owed by your debtors, etc.

Many entrepreneurs use some form of accounting software to log all their transactions, and this helps them work out their tax bills.

It is necessary to get the right form of record keeping for your business. Whatever approach you choose, you also need to keep other documents – such as invoices – in a central place, and most firms now opt for a customer relationship manager (CRM) where they can accurately track  all information they hold on customers, and all the services those customers paid for.

Alright, now questions or comments can begin to roll in..

Question:

1. Can you please share with us the place of taxation in business and how it is done?
At what point can begin the record keeping process in the business?
Are there any disadvantages of this record keeping e.g tax?
If one is not knowledgeable in the record keeping process, how can one do it at a minimal cost to the business?

Tax is simply known, is a compulsory levy on taxable individuals and businesses.

Once your business is registered, you generate your Tax Identification Number, that will enable you to file for annual tax liabilities.

For VAT, there's need for VAT application, to be able to file in for monthly VAT returns.

When a business fails to file in for monthly VAT, there be penalty charged on the business.

Once, your business has a TIN with the Federal or State Inland Revenue, don't fail to do annual filing for tax liabilities and monthly VAT returns for Vat-able goods

Once you start a business, it's necessary to keep records of all expenses and income

2: How can you do these things if you don't have a good knowledge of tax?

There are manual method of record keeping, which doesn't attract any cost.

For start up businesses is advisable to start with the manual method. Then once the business start growing, you migrate to technology bases, like using some accounting software such as quickbook.

There's a disadvantage for not keeping proper book keeping records.

3: Is it advisable to wait till your business is doing well before you register it especially because of taxes? When your business can hardly take care of itself such that you spend all incomes back on the business....

You need to keep accurate records in order to claim expenses on your annual tax returns.

There simple steps on this:

Firstly, identify with the tax office closer to you. Get a tax consultant if your business is big.

Or for startups, get an accountant to educate on tax processes, or you get a tax officer in the tax office you've identified with, to educate on tax matters.

My professional advice is this, once you've registered your company or business with CAC, you should generate your TIN immediately (that's register with the tax office).

So that,your business will be recognized and you won't need to have issues when there is need for bidding of contracts or handling big business deals.

Even if you don't make profits at all, it is allowed to file in for Nil tax value (that's on tax liabilities). This includes monthly VAT as well.

There are considerations given to businesses that are not making profits, when it comes to filing of annual tax liabilities.

For monthly VAT, you remit 5% of income accrued to your business in that month.

If there are no sales or services rendered that will bring in income for that month, you file Nil value.

Still in this aspect, if there is total lose accruing at the end of the accounting period, the only education tax will be paid on the accessible profit for that year.

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