In the life of a contractor, you will come in contact with various clients, suppliers, technicians, workers, sub-contractors and other third parties. And with this constant interaction comes a significant pile of records, such as invoices, quotations, transaction records, refund requests, pricing updates, etc. Besides this, you’ll be expected to keep track of employee records from their age, experience level, and skillset among other things. Maintaining these records can seem like a hectic task, but as you’ll see through this article, good record keeping will lead you to a much safer and more sustainable way to run your operations.
Tax Purposes
This one is sort of a no-brainer: Keeping good records of all financial transactions is essential for preparing tax returns. By analysing account statements and tallying it with various expense reports, you’ll be better
prepared for random audits and you’ll have the paperwork to back up claims. Remember, tax claims can be built only on the basis of clear and concise documentation. If you were to fail to produce the right evidence to prove a certain claim, there would be little chance of a fair outcome.
Loan Applications
If you were to consider taking a loan or selling your business, a compiled set of paperwork helps smooth the whole process as any potential lender or buyer would definitely require a thorough check of your business’s financial dealings. Large banks are bound to have a laundry list of requirements that need to be met before a loan application can even be submitted, so make sure you have all your paperwork in place.
Identify Sources of Income
Keeping a track of your income sources is important for two reasons. First, all your customers will not be equal when it comes to being a source of income. The old 80/20 rule states that 80% of your income is from the top 20% of your customer base. By identifying this 20% and marketing to them more effectively, you can strengthen your relationship with your most valuable clients. This also lets you identify customers that are not as profitable, so you can spend less time on them until they become more profitable.
Growing Your Business
Many growing businesses have underestimated the power of data and have failed to capitalise on the insights that can be gained from analysing records. For example, good records can help you make accurate estimates and pitch for projects to help expand your business. Besides this, keeping a record of customer grievances and feedback can help you fine-tune your operations to make it more customer friendly.
Documentation is the foundation on which all proposals and estimates can be calculated. Disputes and claims also can be settled only after generating the appropriate evidence. Thus, it is advisable to take a step back and evaluate your record keeping. If you’re a small-to-medium size business, consider using software solutions to optimize your operations with minimal employees.
