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Finding customers… keeping them happy… getting your product or service sorted… there’s nothing like starting a new business to put your organisational skills through their paces.

Of course customers are important. And so are your products or services. But nothing is more crucial to running a business than cash. Without it, no company can survive.

And the only way to manage your cash is by setting up a very basic accounting system. Don’t panic. If you’re operating as a sole trader or a partnership, it’s easy and straightforward. If you run a limited company, you will need to meet other statutory requirements.

Set up a cash book

The most important record you need to keep is a cash book. This can be a simple book you buy at a stationery shop or you can set it up as an Excel spreadsheet. Whatever you use, your cash book should contain two sections: ‘cash in’ (or receipts) and ‘cash out’ (or payments).

The ‘cash in’ section should include all the money you receive through sales and may include the following columns:

·          Date (you were paid)

·          Item (the goods or service you have sold)

·          Customer

·          Amount of invoice (if you charge VAT you will need separate columns for net payment, VAT and gross payment)

·          Method of payment (cheque no., BACS, cash, credit card)

The ‘cash out’ section should include details of the invoices and bills you need to pay, detailed in the following column:

·          Date paid

·          Goods/service you have purchased

·          Supplier

·          Amount paid (if you charge VAT you will need separate columns for net payment, VAT and gross payment)

·          Method of payment (cheque no., BACS, cash, credit card)

It can be useful to break your ‘cash out’ section down further so you can see exactly how you are spending money. Typical areas include: rent, heating and light, salaries, insurance, bank interest and charges, marketing, raw materials if you sell goods, stationery, telephone, travel and miscellaneous.

Always reconcile ‘cash in’ and ‘cash out’ with your bank statements. And when you get to your year-end, simply add up the amounts in the two sections to see how your costs stack up against your income (remember, this does not show your profit).

Tip: Make sure you keep all records relating to your financial situation. This includes bank and credit card statements, bills and invoices (yours and those you pay), receipts, cheque book stubs and bank paying-in books.

Start a sales ledger

Setting up a sales ledger is a good way of seeing what is selling well and who your best customers are. It is also very useful for keeping a tight grip on your cash flow and making sure that you are being paid quickly.

A basic sales ledger usually contains the following:

·          Invoice number

·          Date

·          Goods or service sold

·          Customer name

·          Amount (if you are VAT registered you will need three columns: net total, VAT, gross total)

·          Date invoice paid

Tip: Give your invoices a number in a sequence, this helps to track them and looks more professional.