Simple Bookkeeping

Bookkeeping for self-employed traders, contractors and professionals, and for those who are sole directors of limited companies should be easy and quick.

Unfortunately, it’s also a chore.  The easy option is often to pile receipts in a corner, put bank statements to one side and shuffle it all off to the accountant at the end of the year.   The problems with this approach are:

1. your accountant will charge more to sort out the paperwork at the end of the year,
2. you don’t have confidence in your finances, and find it difficult to keep track of money,
3. receipts, invoices and other documents are easily lost,
4. if you lose paperwork you could end up paying more tax than you should,

There is an easy solution, with just a little commitment from you.  Make it part of your working routine and get on top of your business finances for good.

Daily tasks

1. Put ALL receipts, bills and invoices in an envelope as soon as you get them.  Keep an envelope, or bulldog clip in your van, car or desk drawer so that you always know where it is.
2. Keep records of business mileage, the date of the trip, destination, mileage and reason for the journey.
3. Keep all business related documents such as bank statements, insurance documents, rental and loan agreements in a safe place.  Use document wallets or envelopes to organise them.

Recipe for monthly bookkeeping  

Set a time to do this, such as the last day of each month, and stick to it.

Ingredients

1 bank statement

1  spreadsheet, or analysis book (eg. Cathedral Analysis Book)

1 pen or pencil

Several purchase receipts, bills and sales invoices

A pinch of patience

A little time

 

Method

Separate sales invoices (income) from receipts and bills (outgoings).   Sort each pile into date order.

Write in Analysis Book (or spreadsheet) as below;

Income
Date	Ref	Payer/Customer Name		Description		Amount Received	Sales	Loan Received		Bank Interest Received
28/4/10	1	Sample Ltd		300 Gadgets		600.00	600.00
30/4/10	2	My Bank Plc		Interest earned		3.00				3.00
Totals						603.00	600			3.00
Costs
Date	Ref	Supplier Name	Description		Amount Paid		Raw Materials		Rent & Rates		Stationery & Postage
19/4/10	17	EG Supplies	1,000 brackets		200.00		200.00
25/4/10	18	CC Printers	Business cards		95.00						95.00
Totals					295.00		200.00				95.00

Add columns as required to analyse your income and costs.  Total up each column for the month.

Check each item against your bank statement.  It there’s anything missing, and you know it’s correct write it onto your page or spreadsheet and add it into the total (then go and look for the receipt – you did get one didn’t you?).

There could be some items on the bank statement from last month, and some that have not yet appeared on the bank statement.  These are your unreconciled items.  Check any other differences, as these could be errors on your part, or bank errors.

Carry the totals forward to the top of next month’s columns:  this helps you keep a running total so that for your year-end accounts and tax return half the work is already done.

Alternatives:

Omit the analysis book, and use a software package.  These automate the calculations for you, and make it easy to reconcile the bank statement.

Use the same principal for credit card statements, cash withdrawals and payments.