Entrepreneurship Success: Record keeping and documentation

Some years ago, a company I was associated with was contacted by a ‘Debt Collector’ on the grounds that they were appointed by a bank to collect what the bank alleged as unpaid loan that the company took from the bank some twelve years earlier. We listened to but advised the Debt Collector that the […]

Some years ago, a company I was associated with was contacted by a ‘Debt Collector’ on the grounds that they were appointed by a bank to collect what the bank alleged as unpaid loan that the company took from the bank some twelve years earlier. We listened to but advised the Debt Collector that the bank needed to write to us about the appointment before we could respond to them in respect of the allegation, which was into several millions of Naira! 

In under fifteen minutes of receipt of the bank’s letter appointing the Debt Collector, we were able to retrieve our documents evidencing full repayment of the loan. The documents included our duly acknowledged letter to the bank instructing them to sell the shares we borrowed the money to buy; the bank’s own statement of account evidencing that the shares were sold by the bank on our instruction and the proceeds paid into our account, leaving us with a neat profit as the shares were sold at a price above the cost at which they were bought and the financial costs of the transaction. We wrote to the bank, attaching the undisputable documentary evidences of the repayment and the matter was fully rested without a whimper. Our twelve-year old incontrovertible records and documents had saved us a lot of headache. 

Keeping records and documents, a very important way of life and business is, unfortunately, not a culture we have fully adopted in our environment yet. Transactions and contracts are carried out without proper documentation, and records are not necessarily kept well either. Any dispute becomes protracted and can be costly on all parties. But all that can be avoided. 

What is record keeping and documentation? Record keeping is the process of building detailed, complete, accurate and reliable information on business transactions. On the other hand, documentation refers to the preservation of records in various formats. Whilst the two terms may be distinct, they are often used interchangeably. 

Benefits of record keeping and documentation: 

• Regulatory Compliance: Keeping certain documents is required by law. Compliance documents, like business registrations, approvals to operate in certain industries and/or equipment such as those that emit ionising radiations, etc., are all required by law. Keeping these records helps keep you on the right side of the law.

• Development of plans and strategies: The information you keep about and for your business are a source of operational intelligence for you. They will reveal your strengths and weaknesses and will be handy for the development of your plans and strategies, thereby helping to position you appropriately in the market. 

• Enhances corporate governance and creates opportunities: Keeping records and documents enables you engage positively with potential investors, financiers, suppliers, etc. who may consider doing business with you. 

• Eliminates ambiguities and protects your business: Keeping records eliminates ambiguities and protects you and your business in disputes and from wrongful claims and counterclaims, both of which will help you save time and money.

• Establishes your credibility: The first evidence of your and your business’ credibility are the records and documents you keep as well as their quality and integrity. Keeping true and reliable records and documents are indicative of your transparency and credibility. 

What types of records should you keep? The types of records you are to keep would depend on your business, scale, model, regulatory requirements, etc. Some of the records and documents that you must keep will include:

• Registration documents: I always strongly advise and encourage entrepreneurs to register their businesses and to keep such records safe. Your registration documents are what gives you the first legitimacy to operate as a business with certain corporate rights and responsibilities.

• Operational transactions and communications: All relevant activities of your operations should be recorded. Transactions and communications on all aspects of your operations should be captured and documented.  

• Financial documentations: Specifically, you will need to keep financial records of transactions. Your financial records, like all others, will need to be kept both for your internal use as well for the use of regulators and potential business partners.

• Contractual documents: Certain documents such as employee contracts, non-disclosure and non-compete agreements, loan offers, etc. must be kept for records as may be required for several legitimate reasons. 

How do you keep records and documents? Records and documents can be kept in several ways and formats. But whatever system you use, make sure that all details are captured easily and seamlessly. You should also ensure that they meet your legal and operating requirements. 

• Time statute: Records should be kept for a minimum of the period required by law. Preferably, you should keep them longer than that. With modern IT systems available now, keeping records for long should not be much of a challenge.  

• Control and retrieval: Any recording system you have must allow for easy retrieval. It must also ensure security and control, meaning that only people with appropriate authorisations can access and use the information available. Document trails should be in place as well. 

• Security: Records and documents must have backups and kept safely and protected against sabotage and hazards. 

To make sure that your business keeps records and documents appropriately and meticulously, you have to do three things simultaneously:

• Train your people: You have to train your people the art and science of keeping records. Discussions and agreements internally and with external parties must be recorded as much as is required. Your people must be proficient in and comfortable with keeping records. 

• Don’t take any chances: A key aspect of the human side of record keeping and documentation is that your people must learn to be dispassionate and not take anything for granted.

• Provide the required resources: Records are kept in various ways. Ensure that your staff have the facilities they require to build and keep records and documents.

This gives us a snapshot of what record keeping and documentation are, their importance and how we can keep them. Next week, we will take up Business Metrics.