Why I Say Keep Bookkeeping Simple
When bookkeeping feels complicated, there is usually one word you have not understood. Here is how I keep mine simple.
You know how I always end my newsletters with the words "keep it simple"?
That is my motto for bookkeeping.
As soon as it starts to feel complicated, there is something you have not understood.
Find the word
Find which word being used is not understood. Clarify it using a dictionary, and you will find that it becomes simple again. Pure magic!
The three areas of an accounts department
Debtors, also called Accounts Receivable. This is where you create invoices and collect the money your customers owe you.
Creditors, also called Accounts Payable. This is where your purchasing department is, and where you receive the suppliers' bills and pay them. This department also includes the payroll administration.
Records, assets and materiel (the equipment and materials of an organisation). This looks after all the assets of a company. It also makes sure all the financial transactions are recorded and filed correctly: the invoices, bills and payroll above, and every way money moves, such as bank accounts, petty cash and credit cards.
From those records, you can establish the financial position of the company at any given moment in time.
Why the paperwork matters
It is of crucial importance that all the paperwork is there and accounted for.
If any is missing, the picture of the financial position is incomplete, and so it is incorrect.
I work for my customers off-site. I am not on their premises, and I am not part of the day-to-day running of the business. So the paperwork has to speak for itself.
I should be able to look at a piece of paper from any business and know what that sale or purchase is about. If I cannot, it is very helpful if a note is made on it so I can identify it.
Part of bookkeeping is also making sure everything cross references. All money coming in is accounted for in the invoices. All money going out is accounted for in the bills and receipts. That gives you a paper trail for any transaction.
It matters most for the Financial Reports of the business. Think of the manager using those reports to make important decisions. If the reports are wrong, the decisions will most likely not be the best either.
And a happy new year to you! My new year is starting off fabulously, so this bodes well for my plans coming to fruition. Have you made plans for the year ahead?
Having correct data lets management make correct decisions, and that helps the business survive.
As always, keep it simple and... Flourish and Prosper
Lisa
I learnt the management technology I use in my business at the Hubbard College of Administration.
P.S. If you want me to look at your own books and tell you plainly where you stand, call me on 07729 524611, because a quick look costs you nothing and I would rather you knew.
