In order to run your business, you’ll need to keep track of pretty much every transaction and interaction that the business is involved in. The more records you have, the better prepared you’ll be for whatever might happen in future. These sorts of records are especially important when it comes to the financial management of your business.

This guide will help you figure out what to record and the best way to record it. The topics we’ll be looking at in this article include:

  • What transactions should I record?
  • Journals and ledgers
  • The benefits of digital records

What transactions should I record?

Essentially, you should record everything official or money-related that happens to your business. This refers to an enormous number of events, but the primary ones should be sales, purchases, and payments. These transactions make up your cash flow — the movement of money into and out of the company.

You should record anything that you receive a receipt for. Although this mostly means tracking your purchases, you can also receive receipts for things like paying taxes or rent, so make sure you keep them somewhere safe for reference. 

You may have thrown away shopping receipts in the past, but you will want to treat receipts carefully when you’re operating a business. A good way to do this is with a receipt capture tool, which reminds you to take a photo of any physical receipt you receive for your records. Countingup is an example of financial software that uses this tool. 

Tax records should be particularly well kept, as submitting good quality tax records will help avoid audits. Not paying your taxes (or paying the incorrect amount) can have significant legal consequences, so avoid this by keeping good records. If you struggle with this specific part of accounting, you might want to think about hiring a professional accountant for taxes. The high-quality records they can provide may make the expense worth it.

Journals and ledgers

When you’re recording transactions, it can get confusing if everything gets put in one folder or one document. To avoid this, professional accountants separate transaction records into journals and ledgers.

You’ll use journals in day-to-day operations. You will most likely be entering transactions into a journal every day that you’re running your business. It’s wise to keep separate journals for different types of transactions. For example:

  • Sales
  • Purchases
  • Regular non-purchase payments (rent and utility bills, for instance)
  • Cash, cheque and card transactions (with each in a separate journal)
  • A miscellaneous journal for any transactions that don’t fall neatly into other categories

In the journals, you should keep an accurate record of the amounts exchanged, the dates and times of the transactions, and a copy of the receipts or invoices involved. Make sure you understand the difference between receipts and invoices before you add them to your records to avoid confusion in the future.

Although you might immediately think of journals as physical books, an accounting journal doesn’t necessarily have to be in writing. You can keep them on a computer in the form of spreadsheets or Word documents, which can make record-keeping much easier if many of your receipts or invoices are online.

Journals are great for day-to-day use, but they might become a bit dense if used for too long. Even when kept digitally, an Excel spreadsheet you use daily can grow to enormous size if you use it for several months. Instead of having to decipher an enormous accounting journal when you need to find an old transaction, you should transfer your journal records into a ledger at the end of every month.

With paper records, this would mean transcribing all the information by hand, but it’s much simpler with digital records. Simply create a ‘ledger’ folder on your device and move each journal’s records into that folder at the end of each month.

A ledger is more of a historical record than a journal. With ledgers, categorisation is critical, as a single ledger might have records from several different journals. It’s a good idea to keep track of which journal contained which record, and to separate sections of your ledger by month or year. 

The benefits of digital records

Although keeping your records on paper provides a very permanent copy of them, it’s enormously time-consuming and requires a lot of physical space to store them. Even if you’re less skilled with technology, it is very easy to learn how to reorganise files into different online folders. Many laptops, tablets and mobile devices can automatically sort your files for you, by date or by contents, which will also save you time.

One of the primary reasons to switch to digital files is that any other business you interact with will likely be keeping digital files. It will be far easier to keep track of your business transactions using a computer if other parties will be emailing invoices and receipts instead of sending paper copies. 

Sending digital records to other parties is also much faster than physical mail, and — most useful of all — you can download different types of software to help with your record-keeping and financial management. For example, Countingup is a financial management tool that can create invoices and reconcile them when they are paid automatically, and you can even download it onto your smartphone for ease of use.

Record business transactions with Countingup

Good records form the backbone of sound financial management. If you feel you need some help with financial record-keeping, consider trying financial management software. Good financial management software can track your spending, keep any business receipts you collect, and then categorise these records for easy access. Countingup is a great example of this kind of software.

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.