Manual Records
Manual record keeping means recording all business transactions in a physical record book. These transactions must be supported by source documents such as receipts/ purchases invoices from your suppliers, carbon/ second copies of sales invoices/ receipts issued to your customers and copies of bank deposit slips and bank statements for bank accounts used in your business.
When you keep your records manually you must make sure you keep all your records in a legible and well-organised manner. For example, you should file your records in chronological order and retain photocopies of receipts if they fade easily.
Electronic Records
Another way of keeping records is through electronic means by using a computer and/or accounting software. This includes using Microsoft Office applications such as MS Word/ MS Excel, off the shelf accounting software or customised accounting software.
Source documents (e.g. invoices, copies of your bank deposit slips and bank statements) must also be kept to substantiate your income and expenses.
Advantages of using a computer to keep records include:
(a) Recording of your business transactions (including income and expenses, payments to employees, and stock/ asset details) in a quick and efficient way.
(b) Greater accuracy in record keeping for example you can build in automatic functions to tally amounts.
(c) Efficiency in retrieving and updating of information such as customer particulars and payments details.
(d) Leveraging on computer accounting software to give you an up-to-date picture of how your business is performing to plan and forecast your future business situation.
(e) Facilitating the generation of invoices and providing summaries and reports for tax purposes.
(f) Enabling you to e-file your tax returns more conveniently.
(g) Requiring less storage space as compared to paper records.
(h) Facilitating the back up of records and keeping back-ups in a safe place in case of theft or natural disasters like floods or fire.
Manual Records Versus Electronic Records
When your business expands and the transactions become voluminous, you may find that manual recording no longer caters to your needs. For a small retailer shop operating in a neighbourhood area, you may find that manual recording is sufficient. On the other hand, a retailer with many outlets would find electronic recording more beneficial.
Using an electronic record keeping system will make your job easier and you will incur lower manpower costs because you do not have to manually track each and every business transaction.