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How to start BOOKKEEPING for YOUR Small Business (FREE Template)

How to start BOOKKEEPING for YOUR Small Business (FREE Template)


In this video you’ll find out how to
organise your business’s finances using an ancient technique.
It’s simple, it’s free
and you can have it up and running in a matter of minutes. [Music] Hey there, welcome back to the channel.
I’m James This is Accounting Stuff
and in today’s video we’re going to head back in time… Why?
Because I want to show you a ‘quick and dirty’ method
that you can use to start bookkeeping your small business today.
Have you ever struggled with keeping a record of all of your sales and expenses?
Can you tell me what your profit or loss for last month was? Maybe you’ve been stashing receipts in a shoe box under the bed,
but it’s all good you’ll sort them out when you find the time.
Don’t worry we’ve all been there And seriously if any of that resonates
then congratulations you’re watching a video about Accounting which means
you’ve taken the first step towards grabbing your business’s finances by the…
And you can take that second step by subscribing to this channel for more
weekly accounting videos. The biggest reason that small businesses
fail is because of poor cash flow management. So we’re going to make addressing that our number one priority. On Accounting Stuff
we’ve talked a lot about double entry accounting,
even when we haven’t mentioned it by name. The accounting equation,
debits and credits, pretty much everything we’ve covered
in the Accounting Basics playlist is a direct consequence of
one beautifully simple idea. That there are two equal and opposite
sides to every business transaction because in the world of finance
money can’t magically appear or disappear. But in this video we’re going to take
all of that stuff and throw it out the window. Double entry accounting
might be one of the greatest discoveries of the past six hundred years but it was
invented for merchants in Venice who were doing complex trade
with loads of different groups of people. Not all modern businesses
are as complicated as that. So not all businesses need to use
double entry accounting. The alternative pre-dates double entry accounting by literally thousands of years and it still has its place today. Especially when we’re talking small businesses with
minimal financial transactions. Can you guess what it’s called? Single entry accounting. I’m going to show you how you can
use single entry accounting to manage your business’s cash flow
right now. Don’t forget to watch this video through to the end
because I have a free template to share with you
and I also want to make it clear that this ‘quick and dirty’ template
isn’t for everyone. It has its flaws so hear me out
and we’ll see if it fits in with your business. Let’s go! We’ll kick things off with a definition… The single entry system, single entry bookkeeping,
or single entry accounting. Whatever you like to call it. Is a method of bookkeeping
that only recognises one side of a business transaction
as an accounting entry. Bookkeeping is what we call
the process of recording all of your business’s financial transactions.
And that one side that we’re going to recognise is an accounting entry
to the cash account. I said earlier that the biggest reason
that small businesses fail is because of poor cash flow management.
Single entry accounting is about taking control of your cash account
so you’ve got a record of all of the cash flowing in and out of your business. And what’s great about this system is that anyone can do it. It’s simple and practical. All you need to get started is Excel or Google Sheets .Let me show you… Here we are in Google sheets. I like to use Sheets because it’s free,
everything safely stored in the cloud, and all you need to do to get started
is have a gmail account. And this… is what a single entry system looks like in its simplest form. We have a table that summarises
all of your business’s transactions in a cash ledger. Which is basically another name for your cash account. This is called a three column ledger because we have three columns for
date, description and amount. For this example let’s imagine
that you’re starting an e-commerce business from scratch. You’re a keen writer,
a dog lover and a massive Harry Potter fan
so you decide to combine all of these passions together to create and sell
Harry Potter fan fiction under the pseudonym JK Growling. Let’s do the bookkeeping for your first month in business. Imagine we’ve gone back in time. It’s January 2000,
the new millennium. The Prisoner of Azkaban came out six months ago and you’re desperate to get started on your fan fiction. The first thing we need to do is identify the accounting period.
So we can go and write January 2000 in the top corner of your empty cash ledger. We now need to enter all of the transactions that happened in January. At the start of the month your opening balance was zero. This is a brand new business so there’s no cash to begin with. You decide to head down to the bank and open up a new checking account.
That’s a good call because you don’t want to get
all of your business and personal expenses mixed up
in your personal account. On the fifth you decide
to transfer five thousand dollars into your new checking account. This is your initial investment. If we were double entry accounting you’d call this owner’s equity. But we aren’t. So we won’t. A few days later you decide to buy a laptop from the Apple Store. This is what you’re going to write
all of your fan fiction on. You cough up a whole
two thousand dollars on the spot and enter it into your cash ledger. Next you want to set up a website. So you pay thirty five dollars
to register a domain online and a further one hundred dollars
in hosting fees. You complete your ebook in record time and within a couple of days you put up your first ad. The ad clearly works because two days later
you make your first sales. Over the next two weeks you
incur some bank fees, make some more sales
and decide to buy a swish new office chair so you can write a home in comfort.
JK Growling closes out the month with two thousand eight hundred and forty three
dollars in the bank, and has made a loss of
two thousand one hundred and fifty seven dollars. We can find that by taking the total
of all of your income and expenses for the month. Ignoring the initial investment
because that doesn’t fit into either category. Great. So we can easily calculate your business’s profit
and cash is being closely monitored. But on closer inspection… This template just looks like a copy of your bank statement?!
If only there was a way to get some more detail. Then this would become really valuable to us. And that is where the multi column approach comes in. The multi column ledger works in a very similar way to the
three column ledger. We still have the three columns for date, description and amount. But in the middle we’ve packed in
some extra detail. The first thing to note is that we now have a reference column. This is essential for any organised bookkeeping system. In this column we give each transaction a unique reference number
to help us identify it. And if you’re really savvy
you can save back up documents that support each transaction in your Google Drive
with a naming system that corresponds with these unique reference numbers. That way you can easily find and pull out the invoice for
your office chair if you need it. Because everything is cross-referenced.
Moving on to the right… We have grouped the columns
into two main categories… Cash in and cash out. This allows us to categorise
all of our income and expenses into their own distinct columns.
This will be a big help when tax time comes around because it makes it easy to
identify all of JK Growling’s taxable income and deductible expenses. Now we’re talking! You can set up one of these templates
for yourself by copying this layout. Or if you’d like to save some time,
you can use this one for free and get started right away.
I’ll drop a link to it down in the description below. Just delete the sample data
and you can get cracking. One important thing to note… You will need to check the transactions
in this template against the ones in your bank statement each month
to make sure that none are missing. This is called doing a bank rec
and it’s critical because an incomplete cash ledger
isn’t much used to anyone. I’ve made a video explaining
how to do a bank reconciliation that you can find up here in the corner. So that’s how to start bookkeeping for your small business
the ‘quick and dirty’ way. This works great if you have
minimal transactions because it’s fast and easy to maintain.
Very little accounting knowledge is required so you might be able to get
away without having to hire a qualified accountant or bookkeeper. Hold up…
that been said, this system does have its flaws. It’s the ‘Quick and Dirty’ method after all. It’s not for everyone.
The double-entry accounting system is one of the greatest discoveries
of the past 600 years because there are two sides
to every financial transaction. This single entry accounting system only
recognises one of these sides so it gives you an incomplete picture
of your business’s books. You’re also cash accounting
so you’ll be exposed to all of the disadvantages of that method.
Things like fluctuating profits caused by recognising related income and
expenses in separate accounting periods. More on that in this video.
Another problem with cash accounting is that you have no idea what your
business’s financial position is. Which is not ideal
if your business buys or sells on account with credit terms
because you won’t be tracking your accounts receivable and accounts payable.
So if that’s the case then what’s the point?
This single entry accounting method is a great place to start for anyone who runs
a small business with few transactions and little to no assets or liabilities.
Especially if you don’t have a bookkeeping system in place yet. This technique will help you get your books in order. Many small businesses are using a variation of this right now.
However double entry accounting is the king of all accounting systems! It’s a much tighter method with built-in checks that
leave less space for errors. It also gives you a complete record
of your financial transactions. There’s a reason why
all large businesses use double entry accounting. So I would seriously consider upgrading to it at some point.
The good news is that a single entry accounting record
can be transferred into a double entry accounting system at any time. And if you’ve got things organised using a template like
the one I’ve linked below then it will make the whole process
a lot less stressful. These days double entry accounting is becoming more and more accessible to everyone.
There are a whole bunch of cloud accounting software packages
out there that do all of the double entries for you so you don’t even have
to think about them. A couple of the biggest names
are QuickBooks Online and Xero. I’ll link to a free trial of QuickBooks Online
down in the description. And here’s a video that I made
that will give you a general overview of how it works. If you’d like to learn more about double-entry accounting
I made a whole playlist covering accounting basics for beginners
that you can find here. Any questions let me know down below in the comments. And you can subscribe to Accounting Stuff by clicking on this circle for more weekly videos.

Comments (18)

  1. Sir (don'tmind )
    speak little bit slower we are not native speaker. sometimes it creates difficulties to understand clearly.

  2. You're Taking This Channel To The Next Level πŸ˜€

    Please Make a Video on Your Future Plans / Goals For This Channel
    It Would Be Great For You & The Consumers <3

  3. J K Growling x'D

  4. Sorry to let you know that I have just fail FA1 for 2 hours. I feel so depressed, you gave me so many helpful things to take the exam, however I failed it. So sorry, I will try to take it next week again. One more time, sorry Sir πŸ™

  5. I can't get over your creativity <3. You're the best. Thank you for the template.

  6. Bro can you do a vid about accounting cycle?

  7. Simplicity & reliability .. should be the tagline for you channel… XD XD .. great stuff

  8. You are AWESOME. I LOVE YOU. πŸ˜„ your videos are so excellently done .
    you are so fun, speak so clearly and make everything so much easier to understand.
    Your videos are helping my son learn about bookkeeping and accounting better than any other videos Ive found to help him begin learning.
    I hope your life is blessed many times over for sharing your talent, humor and your own wonderful intelligent style that is so extremely helpful to others.

  9. hi whats up I've got my management and financial accounting exam in like 3 weeks, can you do a video going over some past papers and walking through them with answers, please. like a 10-20 min long vid pls. thanks

  10. hi whats up I've got my management and financial accounting exam in like 3 weeks, can you do a video going over some past papers and walking through them with answers, please. like a 10-20 min long vid pls. thanks

  11. Could you do a video on income statement?

  12. Can u please make videos for straight line method and reducing method for depreciating please please😟😟😟😟😟

  13. And bad debts and doubtful debts please

  14. Thank you so much for such an easy to understand explanation. I do some freelance work casually and needed a way to keep my books that provides enough info for doing my personal tax return (sole trader) accurately and this is perfect. The thought of doing double-entry and journalling etc. was a bit daunting and I was sure I remembered there is another method from way back in 3rd form economics, this was it πŸ™‚ I'll definitely be using your referencing tip for my receipts etc. too.

    A quick question that might make a good topic for another video though, how would I record a transaction where only a percentage of an expense is being charged to the business? In New Zealand, we are able to claim a percentage of certain expenses like power if operating from a home office. I know how to calculate what percentage I can claim as an expense but wonder how to account for each bill in my books? I can think of several ways but am not sure what would be best.

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