What are Business Documents?
A company relies on documents for communicating, carrying out business transactions, and analyzing its productivity and progress. Business documents can be defined as all digital and physical records, books, business records, files, reports, plans, documentation, correspondence, financial data, customer data, or any other item associated with the company and its operations.
Business documents have a particular importance for limiting contingent liabilities of the businesses. They also act as a proof of an organization’s dealings. These can be referred to any time in the years to come. Hence, it is crucial to have them well-drafted. Here are some of the major business documents that every company needs to maintain a record of.
Documentation of bylaws:
The bylaws of the company are the primary business document. They are the laws that the company has established to keep the organization in control and in regulation. The bylaws serve as guidance offered by the authorities or the top management. They clearly define the purpose, rights, responsibilities, shareholder obligations, schedule, annual board meetings, and more. They also cover the process of appointment and removal of directors.
Documentation of Byelaws helps in establishing a structure for the business and defines the individual roles of the employees. They help in resolving any disputes if they arise during the decision-making process. This business document is used solely for internal use by a company.
Important Legal Business Documents are:
A Memorandum of Association [MOA] refers to a legal document usually prepared during the incorporation. It clearly states the objective for which the company is formed. It clearly specifies its powers, privileges, and rights. It is an important document and is often referred to by third parties while entering into important transactions with the business.
The Article of Association of a company is a legal piece of the document along with the MOA that serves its constitution. It comprises rules and regulations that govern its internal affair. AoA also includes information of relationship between the shareholders and the company. It includes vital information about he shares of the company and important terms governing them.
The first line of defense for any business is to secure its sensitive information. This is what a non-disclosure agreement does. It helps a company in safeguarding its sensitive information such as clients, customer details, financial records, and countless other information that the company classifies to be sensitive.
While working with employees, freelancers, and contractors, the companies have to reveal their confidential information from time to time. This is very critical to the company and if leaked can cost a fortune. Hence, companies have to make the other party enter into a non-disclosure agreement that binds them legally to maintain confidentiality.
Every employee has certain expectations and obligations that they need to fulfill for the organization. This agreement specifies the ground rules of the relationship between the employee and the organization. The vision and culture of the company are reflected through this agreement. It also safeguards the rights of the company and plays a crucial role in resolving a dispute between the company and the employee. In case of important emoloyees, the document also includes terms for any ESOPs provided, non compete clauses, non solicitation clauses and liability in case of any damage to reputation of the company.
A business report typically provides sales figures, information about the number of employees, teams, founders, marketing plans, safety compliances, feasibility reports, and more. Business reports come in handy while trying to pitch new investors on board and while reviewing the progress of the company. Besides, banks while approving business loans often ask for business reports to study the current performance and future plans and projections. Furthermore, reports can help in evaluating risks and offer recommendations to mitigate them. It is best to have a template ready for reports to be followed within the organization throughout.
Company Financial Report & Financial Agreement:
You need to have a strong grasp of the finances of your company. It is crucial to know whether you are operating within your budget and making profits or are reaping losses. A financial report helps in identifying it and it also helps in determining whether a department has been productive or not. Financial agreements generally offer a broad review of the performance of a company. These also assist in filing taxes and budget proposals.
Here are some of the important financial business documents that every company needs to have:
Profit & Loss statement
A profit and loss statement helps in projecting revenue and expenses. Companies need to prepare this statement for the purpose of accounting as well as for sharing it with the shareholders of the company. The statement also helps the companies review its own performance from a bird eye level and spot the areas of concern.
A balance sheet documents all the assets and liabilities of a company. The investors, shareholders, and creditors of the company usually look into the balance sheets for studying the financial health of a company. They are usually prepared at the end of the financial year and help track the growth trajectory of the company.
Cash flow statement
Few companies are mandated by law to prepare and file their cash flow statements with the regulatory authorities. But most of the companies prepare these statements to study their cash flows during the year. This statement includes determination of net cash flow from operations, investments and funding operations. The cash flows are then reconciled with cash balances at the beginning and end of the year.
A payroll report is used to inform the government about the employment tax liability of a company. It comprises details of the payroll of every employee working within an organization.
Business documents are extremely crucial as they define the roles of various bodies involved in setting up a business and working to realize the goals defined by the institution during its institution. Hence, it is essential to maintain a proper record of these vital documents.