The Importance of Financial Records for Small Businesses
As a small business owner, it is difficult to make time for administrative tasks that do not directly result in a sale, but it is critically important to maintain basic financial records. This is a lesson learned by many small businesses that have missed out on grants, loans, and other financial assistance — particularly during the pandemic — because they did not have the information required to demonstrate eligibility.
The Three Most Critical Financial Records That Businesses Need
The three financial records all businesses should maintain include an income statement, also called a profit and loss statement, which shows income and expenses for a given period; a balance sheet, the record of your assets, liabilities, and equity; and a cash flow statement, which shows how much money is coming in and out of your business. These records are central to understanding the health of your business by giving you information to make better decisions, identify problems, and help with planning and budgeting for the future.
Once you have a record, you can start comparing weeks, months, and years to identify trends and opportunities. They are also helpful, and often necessary, to be considered for bank loans, credit lines, and financial assistance like grants. Good records will also make tax season less burdensome and may help you identify what should be taxed and not, potentially saving you money.
It may seem daunting to begin, but there are lots of tools and options out there to get you started. Not all businesses are in a position to hire a bookkeeper or accountant, but there are firms that can get you started and teach you how to maintain your records on QuickBooks, or another record-keeping program. Once set up, these programs can also easily integrate all your invoicing and many other functions that will ultimately save you time and, likely, money.
Assistance with learning how to start your financial record-keeping and learning programs like QuickBooks, often at no cost, is available from local partners, including the U.S. Small Business Administration, El Paso Community College’s Small Business Development Center, local Community Development Financial Institutions, and many other nonprofit organizations. You can find links to these resources and more at the Financial & Business Assistance and Business Resources tabs on EPBusinessStrong.org.
We know one of the most limited resources for small business owners is time, but we strongly encourage you to make sure you invest the time to set up your business’s financial records for a long-term successful future.
Marybeth Stevens is CEO of the Better Business Bureau of El Paso. You can reach her at [email protected].