While the tax year for self-employed people who are unincorporated is January 1st to December 31st and we are now almost into spring, it is never too late to take care of basic bookkeeping. Or to set up a bookkeeping system that is inexpensive, simple, and user-friendly.
Accounting and bookkeeping are two chores that many self-employed people put on the back burner. Receipts are generally stuffed in a shoebox or some other convenient container and then dragged out at tax time. If this is your modus operandi, then you have to rack your brains or pore over charge card statements and bank statements at tax time to figure out what expenses are business and what are personal.
Budgeting and controlling spending is an issue for many people and families. However, it is an important function when money is tight and times are tough such as the time we are currently going through. An old English saying comes to mind; keep track of the pennies and the pounds (or dollars) will take care of themselves
There are many websites on the net advertising bookkeeping solutions, software, and household spending self-help books. I have developed a very simple system, ideal for the home and small business. All that is required is a small box (around the size of a shoebox is ideal if used with my system) a monthly spreadsheet, an annual spreadsheet, a calculator, a stapler, and a pencil with an eraser.
Our box sits on top of the fridge and every receipt goes into the box.
Every receipt no matter how small! If my wife and I buy a lottery ticket or a cup of coffee, the receipt goes in the box. If we pay cash at a parking meter, we make a note of it on a small notepad kept in the kitchen, tear the page off and into the box it goes.
I have created both a monthly Excel template and an annual Excel template that lists all the categories we spend money on. I print off a copy of the monthly template and fill that in by hand at the end of each month.
Whether we pay for something with a debit card or charge card, the receipt from the purchase goes into the box. I remove the receipts at the end of each month and total up each category. I then staple the receipts together, writing down the total amount for each category on the monthly spend sheet and on the stapled receipts.
The grocery receipts are also totaled on a weekly basis but I toss these receipts after I write down each weekly total on the back of the monthly sheet. The weekly sums are totaled at the end of the month and included under the Grocery spreadsheet heading. This allows us to see much we spend on groceries month to month and also to compare with the previous years.
I then add recurring monthly bills such as cell phone, cable and internet, hydro, insurance and rent for example, total up the spreadsheet and place it and the receipts in a folder marked with the month the receipts were generated in. Each quarter, I enter each monthly total into the annual Excel spreadsheet with the last column containing a formula that totals the amount spent at any given time and an additional column that provides a monthly average for the year. The folder goes into a plastic file folder holder.
At the end of the year, I have 12 folders with monthly totals and the annual spreadsheet. Also, at the end of each month, we know exactly how much we have spent and on what. Also, if we need to return an item to a store, it’s easy to find the receipt.
At the end of each year, every purchase is accounted for. This makes it a heck of a lot easier for us to process our tax returns. I have a filing carton where I file the 12 monthly folders containing the receipts and the monthly summaries for easy reference.
When starting out, keeping track of your spending on a monthly basis for three months and averaged out can be the basis for your annual household budget. You will find every now and then, your spending will be a little over the average when an unexpected expense occurs. Sometimes it will be a little under.
When you get into the habit of using this very simple bookkeeping system, you will find it interesting to go back every few months and see what was spent on your wine bill, your gasoline, or any other expense. It also helps a great deal with saving.
If you would like a copy of the Excel templates, please contact me. I’m happy to email a copy of each one, free of charge.
About the Creator
I love writing and I think it shows in my posts. I also enjoy feedback, particularly of the constructive kind. Some people think I am past my "best before date" but if that is true, it just means I have matured.