Entrepreneur's Guide to Basic Bookkeeping by Scott G Falls

This starts my bookkeeping for entrepreneur's series. This series will run a few installments.

It all started in the seventh grade. I had my mom bring me down to the school when I turned 13 to get my hands on a "working card". This was the license needed to obtain one of the greatest money making gigs a thirteen year old could ask for, a paper route.

After obtaining the magic "working card" it was pretty easy getting the actual paper route. These positions seemed to always become available. I think at age thirteen the idea of making money is very appealing but the actual work involved might be more than some kids signed up for.

Besides the actual working seven days a week, one of the hardest things for kids to wrap their hands around in the paper delivery industry was bookkeeping. This seemed to be the make or break point that separated the "Junior High School Lifers" (JHSL) from the kids whose parents got so sick of cutting them a check to cover their mismanaged funds that they forced them to quit by their 3rd week.

So this post is for all of the entrepreneurs that seem to fall into the latter category. This is a basic system that works well. It's not too complicated and not too technical but it will make your record keeping efforts a whole lot cleaner come month-end. (You really should take a look at where your business stands each month; this allows you to catch mistakes and unfavorable trends early and allows you to make the necessary adjustments).

For this lesson I won't be talking about actual bookkeeping software. This is my non-technical approach.

The only supplies you need are:

• A good quality binder (get a 4″ or 5″ binder from the office supply store)
• A set of monthly tabs for your binder (a pack of these has the twelve sheets with a tab on each sheet and each one has one month on it).
• A memo pad (get a small 3 x 5″ memo pad, preferably one with a spiral top or side, think a homework pad from grammar school).
• A basic 3-hole punch
• A large manila envelope
• If you already have a spreadsheet program like Excel on your computer and a printer, great. This will make things much easier. Otherwise don't worry about this step right now.
• If no excel & printer get a calculator or adding machine.

I call this the "Capture Method".

Our goal is to capture every business expense in a given month (this obviously also works with personal expenses which is a good habit as well).

For this method to work accurately you only need to do a few things:

• Save every business receipt you receive (All receipts from expenses, supplies, web hosting, internet connection, phone bills, that messy falafel you ate while discussing a proposal with a perspective client... You get the idea).
• Save receipt for all sales (All receipts for sales, PayPal statements, bank statements showing credit card settlements and checks received)
• Write down in the memo pad everything you pay cash for.
(Write down anything that you don't have a receipt for.)

Each day throw these items into the manila envelope, both actual receipts and the pages from the memo pad. At the end of the month take all the receipts from the envelope and use the 3-hole punch and put them all behind that months tab in your binder. (You can tape or staple the small receipts on plain paper and add the whole sheet to the binder).

Tally ho!

Now the last step in the simple monthly plan is to tally your results. This is where Excel really shines and makes things really easy but whether you are using a spreadsheet or a loose-leaf sheet the concept is exactly the same.

At the top of the page or spreadsheet write the heading: SALES; then list all the sources of your monthly sales underneath the heading and put the actual sales dollars per source in the next column to the right.

Total up all of your sales.

Next you'll do the same thing with the expenses. The one thing with expenses (and this will help you when you grow to the point that you need actual bookkeeping software) you must get used to grouping expenses into categories. For example, Telephone, Internet and Cell phone may all go under the Communication Category. List all expense categories and put the total category dollars in the column to the right. Total up all of your expense.

Lastly, subtract your expenses from your sales to arrive at your Net Profit for the month. This sheet (either hand written or spreadsheet generated) goes on top of the monthly receipts in your binder.