An Easy-to-Use Manual Bookkeeping System

It doesn't always make sense to use a software program like QuickBooks. If you are a very small business or simply spreadsheet challenged, a manual bookkeeping system may be in order. Using this simple process, you can set up a basic bookkeeping system in just a few hours.

First gather together a few supplies:

  • One-third tab file folders with metal prong fasteners on the front and back covers. These folders should be in a distinct color so you can differentiate them from your general files.
  • File-folder labels.
  • Two-hole puncher.

First take a file folder with metal prongs, label it "Bookkeeping" with the current month and the year. At the top of its left side, label it "Income." Label the right side of the folder "Expenses."

Handle Your Income First
On the Income side, place paid invoices, copies of checks received and deposited, fee/commission statements, retail receipts (proof of customer purchases), deposit slips, and bank statements (with deposits highlighted). Here's how you should handle these items:

Paid invoices: Make sure all paid invoices have proper notations on how a customer paid (check, cash, or credit card), the check or transaction number, date of payment, if the invoice was paid in full or is a partial payment, and date of the deposit.

Checks: Make copies of all checks received with a copy of the deposit slip attached. You can usually fit three to five checks on an 8 ½-inch x 11-inch sheet of paper. Write the invoice number on the copy of each check for cross-reference purposes.

Fee/commission statements: These statements should already have all the information you need — simply hole punch and place them on the Income side of the folder.

Retail receipts: Copies of receipts or a statement of products your customers purchased should also have the required information on them. Simply hole punch and place on the Income side of the folder.

Deposit slips: Attach a copy of your deposit slips to copies of the checks/payments received.

Bank statements: Make a copy of your bank statement (you'll be using the copy on your Expense side). On your original bank statement, highlight all deposits and credits. Note: This is why it is important to have a dedicated checking account for your business.

Two-hole punch all these items and place them in the folder in order of date received or statement date. The most recently dated documents should be on the top; the documents close to the first day of the month should be on the bottom of the pile.

Handle Your Expenses
On the Expense side, place paid bills, receipts for purchases, your credit card statements, copy of your bank statements (with debits highlighted), and any other item that designates money spent. Here's how you should handle these items:

Bills:

On the billing statement, write the date, the amount paid, and the check number or transaction number (if paying by credit card). If you own a home business, you will find that there are some bills that your household and your business share. For many entrepreneurs, Internet access, long-distance calls, utilities, and other recurring bills are personal accounts that you share with your business. Make copies of these bills and highlight all charges made on behalf of your business. On the copy of the bill, total the charges, write the date that you reimbursed your household for the charges, and the check number or credit card transaction number. Place this copy in the folder.

Receipts: These can be tricky little things because receipts come in all sizes and shapes — some too small to hole punch and secure. That's not a problem, however, if you take the receipts and tape them onto a sheet of paper (more than one receipt can be taped to one letter-sized piece of paper). On that sheet or on the actual receipt, write some identifying phrase like "parking for client meeting 8/9/04" or "business lunch with Mr. Jones."

Credit card statements: You should have a separate credit card for your business. Highlight all business charges.

Bank statement: You should set up a separate bank account for your business. Take your bank statement or a copy of it and highlight all debits/charges.

As you did on the Income side, two-hole punch all these items and place them in the folder in order of reverse date with the most recent items on top.

Keep this system up-to-date, and at the end of the year you can take your neat little folders to any accountant, tax preparer, or IRS auditor so they can easily create accurate reports from your well-organized information.

Figure Out Your Bottom Line
Finally, at the end of the month, you can total all your expenses on the right side of the folder and total all your income from the left-hand side. Now subtract your expenses from your income to get your net income. Write this figure on either side of your folder. Congratulations, you've created an effective, yet simple bookkeeping system.
More from AllBusiness.com:
Loading...
See all articles from AllBusiness

Friend's Activity