06 Sep, 2016 1:34 PM

It is important that your organisation's accounts are accurate and up to date so that you draw up a 'true and fair' annual accounts report. Your accounts should be backed up with full and detailed records of all business income and expenditure, such as receipts, invoices and purchase orders, payments in, payments out etc.

Below are the main reasons why an organisation should have accurate financial records:

1. Financial Transparency
How much cash is available and how much of it is accounts receivable has to be accurately stated. Numbers like Profit before Tax, Profit after Tax, and Profit after Interest, Depreciation and Tax are all important numbers that tell shareholders and management a lot.

2. Evaluate Tax Liability
When companies make a lot of profit, the taxes they have to pay are equally high. The owners will have a little left once they have paid taxes to the government. Can they reduce their tax burden? If yes, then they will need the most accurate financial numbers possible. Otherwise, all their resources could be depleted in a very short time. Conversely, for the government, accurate financial statements are essential because many firms fudge their reports only to avoid paying tax.

3. Mitigate Errors
Accurate financial statements are also essential to catch costly mistakes or internal wrongdoing early on in the process. If any illegal activity is taking place, there is no better way to catch it than through discrepancies in the numbers.

5. Build Trust
More than anything else, accurate financial statements induce trust in the company. Investors need a sign that a company is doing well and they can put their hard earned money in its business.

6. Improved Payment Cycles
In order to optimise the Accounts Payable and Accounts Receivable cycles, accuracy of financial statements plays a key role. Other outgoing payments include salaries and daily wages that need to be paid (payroll), dividends need to be given to the shareholders, inventory needs to be managed, and creditors need to be paid. All this cannot be done unless the numbers are in order.

7. Better Decision Making, Planning and Forecasting
Analysing financial statements are crucial when decisions are to be made. A finance manager would look at the value of the assets that he currently holds and decides if he can afford to purchase more. When the value of assets is severely depreciated, questions would arise if they need to be sold off.

At M K Mazrui, we know that the financial records are the basis of a well-running business. That is why we offer professional accounting services to organisations to help them maintain accurate financial records to run smoothly and keep stakeholders' shares safe.

For all your organisation professional accounting services, call us on +254722412151 or visit us at Milimani Road, Kp Flats, Flat 2 Nairobi.

Accurate Financial Records Importance of Having Accurate Financial Records Accountants