Of all the columns I’ll write here at festive.net, this is definitely the one I’ll feel most guilty about. You see, dear readers, I’ve been terrible at keeping the books up to date. There is no task I loathed more. It normally involves pouring over pieces of paper, writing cheques (i.e. sending your hard-earned money away) and then hoping the whole thing will balance. So in a case of “do what I say, not what I do”, I offer you some lessons from the world of doing your own accounting.

Although accounting seems complicated, your task is quite simple: accounting is measuring all of the money that flows into and out of your business. That’s it. In the beginning, it’s easy. Once things get moving, you’ll need a system.

Impatience

I’ve always thought that a more apropos title for The Dummies books is “For The Impatient”. Most people are intelligent enough to get the concepts but lack the time and patience to really understand topics they come into contact with. If you want to be competent at accounting - you’ve got to resist your urge to do something else - and really understand what you’re going to do.

My first recommendation would be to get a good accounting package. Quickbooks is extremely easy to use and, in my opinion, worth the investment. I know this sounds weird but read the Beginner’s Guide. Determine the recommended ways to enter transactions. In this one and only case, I would urge you ignore Larry Wall’s advice: in Quickbooks, there’s only one way to do it. If you use the software as intended, you will save yourself a lot of hassle later. Finally, make sure your accountant knows how to use the accounting package you’re using. This may seem silly to mention but it’s an absolute necessity.

Jargon

You need to know the following terms if you’re going to do your own accounting:

Balance Sheet: This statement consists of two columns. The first column contains all of the assets of the business. The second contains all of the liabilities and equity in the business. The statement totals each column. In the end both columns must balance - hence the name. A snapshot of the business at one point in time.

Income Statement: A statement which starts with the gross revenue for the year and then goes on to list all of the expenses to eventually arrive at a taxable income. Taxes are then assessed. In the end you’re left with a picture of the income for the year.

Cash Flow Statement: Follows the cash as it moved throughout your business over the year.

Reconcile: Reconciling is just going through the process of matching your entries to those your bank has on record. Enjoy this one.

Scheduling

Accounting is the least exciting task faced by an entrepreneur. You probably won’t get around to it unless you schedule a time every month to do it. Be diligent. If want to delegate this responsibility, make sure your assistant knows what he/she is doing. Ensure sure it’s done correctly and it will save you a lot of hassle in the long run.

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When the books are kept up to date, you should be using the data help improve your management of the business. Pour over expenses and reduce them. Understand your cash flow so you’re never left out in the cold. Reduce the amount of inventory you keep on hand. It’s an extremely useful tool. Furthermore, if you’re ever going to sell your enterprise, the buyer is going to want to look at the books. If they’re kept up to date in a professional manner, you’ll no doubt get a better price.

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