Every business or family finances have some unique components that you must determine to help your business or home run smoothly. However, there are some very basic tools that apply to all.
- Bookkeeping-every family and small business should employ bookkeeping principles. These will include records by account, labor costs, profit and loss (income statement), working capital, balance sheet, debt-to-asset ratios.
- Use a double-entry system to keep track of where your money is spent.
- Set up basic accounts, these may need sub accounts depending on your company, but here are 10 basic ones: sales, expenses, payroll, and retained earnings for your income statement and cash, accounts payable, accounts receivable, notes payable, inventory, and owner’s equity for your balance sheet.
Most of us have taken basic bookkeeping in high school and so already have the foundation for setting up appicable accounts for our own families and businesses. The stumbling block is actually doing it! If you wonder where all your money is at the end of the month or year or complain about the lack of funds, then it’s time to make a resolution and commitment to keeping track of where your money goes. This especially includes all those little cash purchases; coffee, candy bar, water bottle, etc. Remember, too, you don’t have to buy software to do this. For millenia, record keeping has been done with pen and paper. However, if computer software will encourage you to move forward, I think there are some very reasonably priced packages out there. Many you may be able to try out for free for a short time.
Whether you choose computer software or a pencil and notebook, start this year taking control of your finances.