Bookkeeping is not only for Business
The term bookkeeping is enough to send people running for cover. Why is it that, of all the business tasks to perform, this one is the most popular when it comes to procrastination? We all know the im...
The term bookkeeping is enough to send people running for cover. Why is it that, of all the business tasks to perform, this one is the most popular when it comes to procrastination? We all know the importance of having a clear financial picture of our business activities. But what about our personal lives? In terms of bookkeeping from a personal perspective, many consider this to be simply “budgeting”. Actually this is not the case. Budgeting involves determining how much money you have, and where to spend it. Bookkeeping in a sense involves the same, however it’s more complex because it’s also about creating a system or process for managing the flow of your financial data. For instance, a simple household budget would not typically go any further than a spreadsheet consisting of “income in and income out”. Bookkeeping on the other hand shows the details behind what’s coming in, from where, so that you’ll be able to create trends and make decisions based on the cumulative data. Bookkeeping involves the process of not only the input of data but the manipulation and placement of that data.
So, the next question is how would you set up an effective bookkeeping system for your household? Well, I’ll show you.
First, let’s start with the beginning, which is the source of this data. For instance, our major source of household income is from salaries or business revenue. A good bookkeeping system would have separate bank accounts to receive the income. Any expenses associated with the earnings would also flow through this account. It may seem a bit redundant, however, it makes for a cleaner process when it comes to tracking your sources.
Next, any information from these sources should be kept in their own files or folders. Items received in the mail should be immediately sorted and filed according to their categories. Thus far, you can already see the importance of an efficient filing system.
Once the data has been received, next you must enter this information into a spreadsheet. Today, most people use financial software to accomplish this task. I often refer to QuickBooks, because it’s my software choice for both business and personal. QuickBooks has a line of software products geared towards your specific need. Even on the most basic of levels, the software is easy to maneuver. For personal financial software, there is no need to understand debits and credits. This is where most folks get confused. You will work directly from your bank account. The software even has features to track other items such as investments, property, and retirement accounts. The biggest task here is making sure than you keep your files updated. Rule of thumb is to update based on the number of transactions you produce on a monthly basis. 0-100 transactions, you can update your files monthly. 100-250, you should update your files more often, probably weekly.
After you have organized all your information, from receipt to recording, now is the time to analyze your data to make some key decisions.
Streamlining your household finances is an important process and must be handled with the same focus and energy as if you were conducting business. After all, your financial picture is the framework of your family.
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ABOUT THE AUTHOR
Jacqueline Williams is Founder and Chief Financial Strategist of JE Financial Services (JEFS), a Baltimore based Bookkeeping and training services firm. JEFS specializes in providing Bookkeeping Training & Services, Payroll, Tax Preparation, & Consulting Services. Visit our website here to download a free copy of “Selecting the right Bookkeeper for your Business”