Kids Kreative Korner
Keeping Business Information in Your Head is Impossible. Here are Some Simple Steps for Keeping Good Records.
As your business grows, it will be totally impossible to keep all the information about your business in your head. Smart entrepreneurs set up a bookkeeping system to record and manage all the money that comes in or goes out of their business.
In bookkeeping terms, "books" are whatever you write your records on. Your books may be kept on sheets of paper, in a notebook, in a card file, on a ledger, or on a computer disk. Your system doesn't have to be elaborate or formal, just as long as every business transaction is recorded. This is the only way to know exactly how much profit your business is earning.
It may surprise you to know that many adult entrepreneurs use the "shoe box" system of record keeping. Here's what you need to set up a shoe box system:
* Two Shoe Boxes--If you don't have shoe boxes, use small school supply boxes or large envelopes.* Customer Receipt Forms--You can buy a receipt book at the office supply store, print receipts from your computer, or photocopy samples.
* Payout Records--These are just 3 x 5 cards or small slips of paper with the words "Payout Record" written at the top.
* A Bookkeeping Ledger or Spiral Notebook--You can buy a standard bookkeeping ledger at the office supply store or use a spiral notebook. This book is very important because it is your bookkeeping journal.
* Large Envelopes--Save money by reusing large envelopes you get in the mail. This system doesn't have to look good to work.
HOW TO RUN A SHOE BOX RECORD-KEEPING SYSTEM
1. Label one shoe box "Income" and the other "Expenses."2. Each time you get paid for a sale or a job, make two copies of your customer's receipt. One copy goes to the customer and the other goes in your box marked "Income."
3. Each time you spend money on your business, save your store receipt. Then write up a "payout record" noting the date, how much you spent, and what you bought. Attach the store receipt to the payout record and put it in the box marked "Expenses."
4. Open the ledger and label the very front page "Income Journal." Turn to the first two facing pages of the Income Journal and label your columns (Date, Source, Taxable sale, Sales Tax, Nontaxable Sale, Total). Each week, you will take all your receipts out of the box marked "Income" and list each transaction in the Income Journal. Income you receive for service jobs is listed as a nontaxable sale.
5. Now open the ledger to the very back page and label it "Expense Journal." Working from the back of the ledger toward the middle, turn to the first two facing pages of your Expense Journal. Label columns for your most frequent expenses (Date, Paid to, Cost of Goods, Operating Expense, Other Expense). Each week, you will take all your payout records out of the box marked "Expenses" and list each transaction in the Expense Journal.
6. At the end of each month, total the Income Journal and the Expense Journal. Make new pages for the next month. Store each month's receipts and payout records in an envelope marked with the date and contents.
7. At the end of each month, you should also prepare a special report call a "Profit and Loss Statement" (sometimes called a P&L). The P&L statement is a short, one-page summary of your business transactions for the month. The formula for creating a Profit and Loss statement is the same you've already been using:
Income - Expenses = Profit
As the months go by, it will be very helpful to compare your monthly P&Ls and see how your business is growing and changing.
USING A COMPUTER
If you have access to a computer, you may want to use one of the popular bookkeeping software programs to manage your business records. These programs are a little complicated to set up, but they are extremely helpful. Generating a monthly P&L statement, for example, takes only the click of a button. Most programs also create wonderful bar graphs and pie charts to go with your financial reports. However, the biggest advantage of bookkeeping on computer is the ease of preparing data.
Bonnie Drew is the author of FAST CASH FOR KIDS (2nd edition), published by Career Press (1-800-227-3371). She is also the creator of the KIDS BUSINESS software for young entrepreneurs, available from Homeland Publications (713-332-9764).
Drew is also Editor of YoungBiz online magazine, published by Kid's Way, Inc., a company that helps youth prepare for business and the workplace of the 21st century. For more information, write to Kid's Way at 5589 Peachtree Rd, Chamblee, GA 30341 or call toll free 1-888-KidsWay (1-888-543-7929). YoungBiz magazine can be found at http://www.youngbiz.com
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