Using An Analysed Cash BookAs your business grows you may start wanting some elementary management information from the records. For example, ‘How much have I spent on advertising so far this year?’ or ‘What sales are each of my products bringing in?’
Without getting into too much extra work this information can be easily obtained by adding a few analysis columns to your cash book, so that it becomes an
analysed cash book. Of course, it can only be a guide at this stage as it doesn’t quite give the full picture. It does not, for example, allow for the amounts that you still owe for advertising in last week’s paper. But it’s a good starting point towards management information.
Fig. 17. An overview of business accounts records.Note: The actual records are shown in the boxes. The arrows show the flow ofinformation between the various records.
Using An Analysed Cash Book
As your business grows you may start wanting some elementary management information from the records. For example, ‘How much have I spent on advertising so far this year?’ or ‘What sales are each of my products bringing in?’
Without getting into too much extra work this information can be easily obtained by adding a few analysis columns to your cash book, so that it becomes an
analysed cash book. Of course, it can only be a guide at this stage as it doesn’t quite give the full picture. It does not, for example, allow for the amounts that you still owe for advertising in last week’s paper. But it’s a good starting point towards management information.
Fig. 17. An overview of business accounts records.Note: The actual records are shown in the boxes. The arrows show the flow ofinformation between the various records.
How To Keep The Book
Figure 18 shows an example of a page from an analysed cash book. The example is for the credit side of the book (payments), but you can make a similar analysis for the receipts side. With this type of book, as well as recording the amount of each payment in a ‘total’ column a second entry is made in one of the analysis columns. You can adjust the headings of these columns to suit your own business. Depending on how you claim VAT input tax, for instance, you can enter the amounts in the analysis columns either gross or net of VAT. If you are using the cash accounting (or cash book accounting) methods of recording VAT (see Chapter 3), then just add a VAT column next to the total column, and you can analyse your expenses net of VAT.
By analysing the payments as shown in Figure 18 it is easy to see how much, for example, has been spent on advertising during the month (£138.64).
Tip: the last column is a sundries column to mop up anything that doesn’t fit neatly into any of the other columns. Your regular payments should each have a column of their own; only items such as the purchase of a new machine or other occasional ‘one off’ payments need to be entered in the sundries column.
It can also be useful to add small amounts of narrative (i.e. a few words) to some of the items, to remind you later what some particular expense was for.
There are two final points to make:
- In the example on 16 June a cheque for £662.90 was written out to the Insurance Brokers; this was to pay for both van insurance (motor expenses) and office insurance. In a case like this put the appropriate amount into each of the analysis columns just as in the example.
- When you add up the page at the end of the month it is vital that you check that the sum of the total of all the analysis columns does in fact equal the sum of the total column. This is cross addition (because you are adding across the page). If the totals don’t agree then there’s a mistake somewhere and you’ll have to recheck your work.