Signature Block Bookkeeping Contract Template Made Easy

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in this video you'll find out how to organize 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 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 the last month was maybe you've been stashing receipts in the 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 there 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 it dressing that on 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 trades 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 predates 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 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 recognizes 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 recognize 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 summarizes 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 is January 2000 the new millennium the Prisoner of Azkaban came out six months ago and you're desperate to get started on your fanfiction 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 return to 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 would double entry accounting you 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 fanfiction 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 will 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 packed in some extra detail the first thing to note is that we now have a reference column this is essential for any organized 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 say back 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 categorize 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 Rowling'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 and 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 recognizes 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 recognizing 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 times because you won't be tracking your counts 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 organized using a templates 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 zero 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 start by clicking on this circle for more weekly videos