Record keeping and basic accounting

What to avoid when budgeting and what to strain your money with the right financial planning.

Proper inventory management to save money and get more profit.

Basic accounting for entrepreneurs.

How to limit stock losses due to stock wastage, breakage and spoilage.

introduction

Many companies fail due to insufficient or non-existent filing and recording systems. Another reason for failure is the lack of routine monitoring of profitability, bank balances, and cash flow forecasts versus actual cash flow.

Nothing is more embarrassing or frustrating when you fall into the trap of not being able to find important documents at crucial moments.

For example; I once visited a company that became my customer and during the discussion one director mentioned an issue with one of their suppliers regarding pricing and a credit note that was incorrectly issued. She insisted on showing me the story and began searching for the relevant documentation. Did you know that after half an hour she found the supplier’s invoices and monthly statement in two separate folders, but still couldn’t get to the credit note or the last payment advice? She blushed in embarrassment.

I asked her if her previous accountant had suggested a suitable filing system, in which case she would have been able to get her hands on all of the vendor documentation in ten seconds. SHE TOLD ME SHE DESIGNED THIS FILING SYSTEM HERSELF AND ADMITTED THAT IT WAS ABSOLUTE DAMAGE.

Not to mention that I changed the filing system right after taking over the bookkeeping. All supplier documentation must be filed together, only sorted by supplier name and alphabetically. They had all supplier invoices in one file, all credit notes in another, all payments in another, all purchase orders and goods receipts in another, and inquiries in another. More like a spider web in my eyes.

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I suggest that you structure a filing system like this:

A separate file or set of files for:

– Any business or company registration documents

– Minutes of meetings

– Formal and annual accounts

– All management and informal operational reports as these are used in decision making

– All tax authority registration documents and monthly/bi-monthly declarations

– Industry regulator documentation

– Industrial relations and union-related documents

– Retirement fund registrations and monthly returns

– Registrations for medical assistance and monthly billing

– Contracts

– Letter of Appointment for Employees

– Wages and salaries

– Suppliers / creditors and their monthly reconciliations

– Customers / Debtors and their monthly reconciliations

– Legal matters and labor disciplinary hearings

– Bank statements and reconciliations, a separate one for each bank account

– Cash book and reconciliations

– Any other separate group that may exist in your organization.

This type of filing is at least a good, structured introduction to keeping a company’s books and accessing all source documents.

To read more in this direction, follow the information in the author’s bio.

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