Also called Doing it By Hand.
Manual Accounting must seem like a dinosaur in this computer age we live in. But for some small businesses there’s just not enough accounting activity to warrant buying a software package, learning to use it, and then just writing a few checks and making a few deposits each month.
If you prefer using the computer, that’s fine. But if your business is very small or you are a pen and paper person, you do have options.
First, think about what you need your accounting system to do for you.
**How many checks will you write each month?
**How many deposits will you make each month?
**Do you need to bill customers and track their payments?
**Will you have employees? How many?
**How many products will you make or sell?
If your answer to these questions is not that many, you can probably get by with a manual accounting system.
And what do I mean by a manual accounting system? A manual accounting system is a set of journals and a ledger. Journals and ledgers can be a pack of 4 column accounting paper or an Excel spreadsheet. A journal keeps track of similar business transactions, and a ledger is where you post those transactions by account. More on that in a sec.
You could also get yourself a nice desktop checkbook system, like One-Write. There’s a ledger attached to the checkbook, and you can post your expenses at the same time you write the check. You can even write payroll checks on this system. You can also bill customers and send out statements with a Manual System too.
Manual Accounting – Some Basic Accounting Procedures
With a manual system, you’re probably doing this all by yourself, and taking everything to your CPA at year end so they can do your taxes.
Please don’t take him or her a shoebox full of receipts and checkstubs. OMG. Believe me, I’ve been on the receiving end of those shoeboxes a few times. True, the thrill of the hunt applies as you’re sifting thru all that small business accounting info. But it takes a lot of time and you know what that means…a higher fee.
Get yourself something like a One-Write System, or a packet of ledger paper, even, and at the end of the year you’ll have 12 months of Cash Disbursement Journals, and 12 months of Cash Receipts Journals.
Your tax preparer will love you!
Now let’s talk about those journals.
**Cash Disbursements Journal
This is an accounting term for a list of all your checks written.
Here’s how it works. You write a check. You then write the amount of the check in the appropriate column for that particular expense. You would head your columns with whatever expenses you use most, including one for miscellaneous.
Get more info on Cash Disbursement Journals here.
**Cash Receipts Journal
Cash Receipts Journal is an accounting term for a list of your deposits.
With a Manual Accounting System, you do the same for your deposits as you did for your checks. You can buy a desktop receipts journal with corresponding deposit slips and customer statements. As you prepare a deposit slip your carbon will enter the deposit information onto your customer’s record. That enables you to send out customer statements each month as a reminder of what is owed yet.
But maybe you don’t work with specific customers, maybe you sell your handmade items to a shop, for example.
Get more info on Cash Receipt Journals here.
You can get a columnar pad of 7 or 13 column accounting paper, and use one sheet for each month. Write the amount of the deposit, then list each individual deposit. Use your columns to represent each product or each outlet or each customer, whatever suits your business, then write the amounts in the appropriate columns.
At the end of the month, total each column.
You now have a completed Cash Receipts Journal showing total revenue for the month, and a break down of your revenue by product or customer.
Pretty nifty, huh?
With a Manual Accounting System, you will have to track your bills by hand. I suggest using an expandable file folder, or a group of file folders, one for each day of the month. Or you could also specify a day of the week to take care of paperwork and pay bills.
Put bills and other things you need to tend to into the folder for the day you need to pay it or take care of it.
For the next step, using a ledger, click the link below.
For a discussion of computerized accounts payable, check out the next blog post.