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MGT602 - Entrepreneurship - Lecture Handout 38

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PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT
DECISIONS (Continued….)

RECORD KEEPING

It is necessary to have good records for effective control and for tax purposes. The entrepreneur should be comfortable and able to understand what is going on in the business. With software packages, much of the record keeping can be maintained on a personal computer. The goals of a good record keeping system are to identify key incoming and outgoing revenues that can be effectively controlled.

Sales (Incoming Revenue)

It is useful to have knowledge about sales by customer both in terms of units and dollars. The entrepreneur of a retail store might try to identify the profile of the type of customer that patronizes the store. Retailers also like to have information on specific customers. Credit card purchases can be tracked for information on the type and amount of merchandise purchased. An Internet venture can maintain purchase history data on the types of produces purchased.
Customers’ e-mail addresses can be requested so the customer can be notified of sales. Some Internet firms have established a free membership as a means of following up. In a service venture, records would need to be maintained on when a customer paid their monthly fee. As cash flow problems are the most significant cause of new venture failure, good payment records are necessary. Record keeping of payments can either be handled by a computer software package or a simple card file system. If payments are late beyond a reasonable time, it may be necessary to hire a collection agency, but only as a last resort.

Expenses/Costs (Outgoing Revenue

Records of expenses are easily maintained through the checking account. It is good business practice for the entrepreneur to use checks as payment for all expenses in order to maintain records for tax purposes. Canceled checks provide proof of payment. In the early stage, it may be desirable to make all payments on time to establish credibility with suppliers. The entrepreneur should maintain information about employee either in a software program or in a card file. It
may be necessary to maintain records on all assets owned by the business.

Other Records

The entrepreneur should maintain information about employees either in a software program or in a card file. Records on all assets owned may be needed. With a good record keeping system it is easy to maintain controls over cash disbursements, inventory, and assets.

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