Manual book-keeping for idiots

In “Computerised bookkeeping – pah!” I told you my reasons for feeling that computerised bookkeeping is often a waste of time.

Here I am going to give you a suggested way of keeping records on paper – it may not be completely idiot-proof but it has stood the test of time. Indeed for those clients keen to use computers I have applied these principle to create a simple Excel spreadsheet which is free to clients.

First off you need to invest in about £20 worth of stationery.  For a business which is not a shop or similar then the following process should work.

Firstly buy yourself an analysis book (with 7 cash columns), a hole-punch and a lever arch file.  A separate book is helpful as an invoice book – even the likes of a school exercise book will work so long as you keep it separate from the history homeworks.

In the invoice book you list all invoices raised – whether you have been paid yet or not.  Label the columns as follows:

• Date
• Invoice number
• Client
• Total amount due
• VAT included (if VAT-registered).
• Date paid

You can use a little column to insert the date you are paid.  A mere glance down this column will always show up the unpaid invoices.

Now we come to the main transaction book – the 7 cash column analysis book.  This records all money moving into or out of the business. It works best if all money from clients is banked, but is easily adjusted if some is not banked.
At the front of the book record all payments made from the business – using the double width of the open pages.  Work gradually towards the centre of the book.  At the back of the book (on a single page) start recording all income actually arriving in the business. Again working towards the centre.

Key payments columns to include are:

• Paid from bank
• Paid otherwise (like from your private account, by card or cash)

Then the total amount paid is analysed into the following columns:

• VAT (only if VAT-registered)
• Employees
• Premises
• Admin (phones, stationery etc)
• Motoring costs
• Miscellaneous (for what doesn’t fit elsewhere)
• Private drawings (for proprietor)
• Bank fees
• Bank interest
• Bank fees
• Equipment bought

On the income side use the following:

Income lodged

Then the amount lodged is analysed into:

• VAT included (if VAT-registered)
• Net sales (gross less any VAT)
• Non-sales lodgements (perhaps private money, sale of equipment etc)

A fundamental aspect of the above simple system is that each line across the book matches.  On the expenses side this means that the amount paid out must equal the amount you have analysed into various columns.
On the income side again the amount lodged must equal the amount analysed.

Once you get to the bottom of a page total each column.  Again for expenses the total paid out (Bank plus otherwise) must equal the total of the analysed columns. If it does not you have made a mistake and should hunt it down.