I work on applications that have user documentation but it is not organized or updated to the current release.

Is it worth my time to create my own documentation with screenshots and notes on all the current business operations that can be performed with the product?

I feel like this is useful in that it formalizes the various procedures that the product performs in my mind. However this is obviously time consuming and might be overkill.

If you need such documentation, it makes sense to create it. But create it in the form in which it's convenient to you (if it is easier and faster than to make documentation adapted for perception by others).
If you'll need to make this documentation public in the future, you'll adapt what has already been done, if not - everything will remain "as is". But in any case, you will not waste time on something that is not necessary now.
I am sure that you have enough really important things where your time and energy are really needed right now. Use them optimally!

It depends on some factors such as:

  1. Is this part of your role?

  2. Does the project you work in has this task or could accommodate for this effort?

  3. Who will pay for this?

It would be nice if you perform the documentation, but if it delays the project delivery, then this may affect you negatively.

What I would do is to tell the "boss" of the importance of this task and get it into the schedule.

Personally, I see it is very important to have documentation. After all, you may decide to go to another job and someone else will have trouble finding what you already know.

As of how you do this, what you described is good, but you could add a function breakdown and use that as a table of contents. The work will end up looking like a user manual.

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