One of the occasional tasks that I find tedious and inconvenient is filling out forms or questionnaires. Whether I’m required to carry out a survey, complete documents for a financial institution or even submit contact information online, I usually have to overcome my initial resistance to the process.

I know I’m not alone in my aversion to data entry; but in many instances, it can be well worth the effort to capture information in a written or computerised format. When it comes to your finances, it is essential to maintain regular accounts of your transactions, both for individual and business use.

If you don’t have a firm handle on your financial dealings, it can cost you dearly in lost time, money and opportunities, and lead to confusion and frustration. Let’s look at some of the ways in which keeping timely and accurate records can help you to manage your personal or business finances.

Track actual spending

Many people are clueless about what they spend over a year, which often causes them to feel powerless about where their money goes. Use a notebook or a smart phone, or download a cash flow calculator at www.financiallysmart.org to record the expenses you incur every day.

In business, it can be detrimental to be oblivious to operating costs, and many enterprises suffer because the owners fail to make records of where the cash goes. Whether you use a ledger book, Excel spreadsheet or a computer accounting program, you must record all your daily transactions.

Plan for future costs

Once you are attentive to your current expenditure, it can help you to prepare a realistic budget of your expected costs over an entire year. In these high inflationary times, you can’t afford to make careless spending choices, and your budget will help you to allocate your money more effectively.

Similarly, if you are running a business, you need to make projections for all the expenses that will arise during the year. You can also download a business budget at www.financiallysmart.org which can help you to consider all your costs and plan effectively for how you are going to meet them.

Identify problem areas

Having a record of your spending needs will allow you to see if you will run into difficulties at some point. For example, if your budget shows that you need to earn J$60,000 monthly to pay all your bills over the year, but you only earn J$50,000, then you know that you will have an income shortfall.

Some business owners only focus on the best-case scenarios and ignore the possible risks that could occur in their operations. Your accounting records can help you to forecast for slow-earning periods, recognise if your credit terms are unfavourable or indicate unusual instances of loss.

Make swift adjustments

When you are able to look at all your expenses at one time, you can determine where to cut back on non-essential items to avert financial distress before it even occurs. Keeping daily track of bills can also allow you to make changes in your budget to counteract the rising costs of some expenses.

Instead of using guesswork to solve business problems, you can use data to determine the right course of action. For example, if your records show that a price increase in a certain raw material has made your product unprofitable, you can try to find a new supplier or adjust your charges.

Achieve income targets

Seeing your financial data forces you to be honest with your situation and may encourage you to improve how you spend and make money. Sometimes, the only solution to your money issues is to find ways to earn more, and your budget shortfall figure can be used as your income target.

If you operate an enterprise, it is helpful to use a business budget to establish quotas for your daily sales. Once you monitor your activity, you will know immediately if you will be able to meet all your bills, and you can quickly take steps to improve your strategies to mitigate any income shortfalls.

Support decision making

Recording information can help you to make important decisions for the future. Let’s say you wanted to buy a home; your budget would show how the extra costs of owning a property may impact your current spending, and verify if you were truly able to afford the purchase on your existing income.

It pays to have timely and accurate information on hand; there’s too much to lose by operating a business without proper data. Monthly income and expenditure figures can reveal your profitability levels and prevent you from continuing to sink your cash into a bad idea or losing business model.

If you used to think that there were better uses of your time than keeping boring financial records, you should now realise it’s not smart to be unaware of your money transactions. So, take up a pen and notebook, smart phone or computer and start tracking what you’re doing with your money.

Copyright © 2013 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, May 23, 2013

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Cherryl is a money coach and business mentor, and founder of Financially S.M.A.R.T. Services. See more of her work at www.entrepreneursinjamaica.com and www.financiallysmart.org. Contact Cherryl