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Before your banker will loan you the one million naira/dollars, he will want to know if you are trustworthy with the money. One of the ways the banker will feel comfortable lending you that much money, is if you have clean professional financial records, in the form of a financial statement.
Most people cannot qualify for large loans because they have poor records. Many pay higher than necessary interest rates simply because they have poor financial records.
In order for a person to have clean and rich financial records, he or she needs to be financial literate. The basis of financial literacy is to have a clear financial statement and it is what your banker will want to see if he or she is to lend you substantial amount of money.
Even if you do not have a business, your personal life is a business and all real business has financial statement. That is why you should always have a clean financial planning and record keeping. If you do not know how to keep financial recording, try and ask an expert, a (book keeper) to teach you. It is advisable for you to sit down with a professional bookkeeper and go over your numbers each and every month. Repetition is how we learn, and by repeatedly you establish a good habit, this will enable you gain more insight into your spending patterns and take control of over your financial life.
MEANING OF BOOKKEEPING/ACCOUNT
Book-keeping can be defined as an act or process of gathering or collecting, recording and classifying of business transactions expressed in their monetary term or values (money worth) that is, the recording of the day to day business transactions of any concern.
This is mainly the work of an account clerk, who is responsible to an accountant within an office.
During the first month, many new businesses will not make profit. It takes some time before money from sales start to come in. During this time the business is very vulnerable and you must keep a close eye on the financial situation.
When you start your new business, two things are very important:
That you make a profit
That you do not run out of cash.
Your business can run with a loss for a while because you can use the working capital from your start-up capital to pay for lost in the beginning. But when the start-up capital is finished your business must have higher sales than costs, other wise it will run out of cash.
Before you start your business you must plan for both profit and cash flow. You should follow the sales and costs as well as your cash flow closely to make sure that everything is going as your planned. If anything goes wrong, you should take action to sort out the problem immediately.
Record-Keeping System
To keep business records means to write down daily:-
How much money your business receives.
How much your business pays out.
THE PURPOSES OF RECORD KEEPING
The right type of record-keeping system used in the right way is very useful for your business and will help the business to increase its profits.
(a) Record Help You Control Your Cash:- Your records show how much money your business should have at any point in time.
(b) Records show how your business is doing:- Your records help you find problems before it is too late.
(c) Records show others how your business is doing:- You need proper records, when you apply for a loan, pay your taxes, and so on.
(d) Records help you plan for the future:- Records show how well your business did in the past and how well it is doing now.
When you know your business strengths and weakness, you can plan properly for the future.
Your Record Keeping System Can:
(a) Help you make decision, for example what products you should sell and how much money you can afford to invest in a new machine.
(b) Give you a warning if something is going wrong, for example if your profit is going down.
(c) Help you cost your products so you can set the right prices.
(d) Help you to plan for the future.
(e) Give evidence of how much profit you have made when you pay tax.
http://www.omoegua.com/business-ideas/how-to-prepare-a-clean-financial-statement-records-in-your-personal-life-and-business/