Update records daily

Press, 9 February 1983, Page 30

Update records daily

To the small-business owner who brings records up to date only once every fewweeks. or even months, the task is an irksome chore.

The answer, say the counsellors of the Small Business Agency, is to spend a fewminutes on them every dav.

Effective management is very difficult without good records. The time spent each day bringing them up to date will be amply repaid by the better understanding of the business gained, and by the greater degree of control. It may also reduce accountants’ fees.

Records are a little like the instruments on the dashboard of a car. The driver hardly notices they are there until a red light' comes up one day to warn him that something is wrong. Similarly. a firm's records will give warning of problems. The types of records that must be kept are: • Money received. @ Money paid. ® Stocks. • Goods on order. ® Debtors (goods sent out that have not yet been paid for). A cash-book will carrv re-

cords of both receipts and payments and show the state of the bank account.

It is essential that receipts and payments are recorded so that a running balance can be kept and spending and income analysed. "Analyse" does not mean just look at the figures. It means that they are separated out into sectors so that the owner can grasp what the various Darts of the business are contributing. Similarly the expenses of each part should be apparent.

Accounts should be paid by cheque, and the information transferred to a cash-book each day, broken down into the sectors decided upon. All cash and cheques received should be banked, and the daily amounts entered in the cash-book. A multi-column cash-book is recommended by the SBA. The columns should be headed with the sections that help the owner control spending; for example, "purchases," “wages," "vehicle."

SBA advisers say a surprising number of small-busi-ness owners fail to record transaction details on cheque stubbs. Sometimes. they seem embarrassed to take the time to record the details when they are writing out a cheque. They take a mental note to do if in private later, and usually then forget. Remember automatic payments: these and such items as charges for cheque books can be recorded in the cashbook on the appropriate day.

It is essential that the transactions of the business be kept separate from personal finances, so make sure a personal bank account is kept. Money should be transferred from the business account to the personal account for personal and domestic expenses. A dairy owner who needs cash for personal purposes at the week-end should put a personal cheque into the till for any cash taken out. Avoid relying on mental notes “to put it back."

Records should be kept of all stock purchases and these should be used in deciding order quantities. The smallbusiness owner needs to be on guard against taking the bait of discounts only to be hooked with an order that will lead to a big, slowmoving stock. In recording all orders in an order book, the delivery date and date when payment, is due should be noted. This will be of help in planning cash requirements for the months ahead.

Footnote.— A small-busi-ness finance course is being run at Hagley High School, beginning on Wednesday, February 16. The topics covered will include record keeping, cash-flow planning, and the services that an accountant can offer.