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One Step Above the Simplest Recordkeeping System
For The Very Small Business
In the discussion on The Simplest Recordkeeping System that a small business owner can use, I mentioned that if you bill customers and collect later, then you need a place to write down those billings. This place is called the Sales Journal.
ACCOUNTS RECEIVABLE
The sales you make can be written down on a piece of paper. Or in a computer spreadsheet. Or in an accounting program. Generally the place you write down this information is called the Sales Journal. In a computer accounting program, the activity is called "Enter Sales", or "Enter Customer Invoices."
At a minimum, the Sales Journal contains the following information:
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Date of invoice to your customer
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Customer name
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Amount billed.
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This record is the beginning of an Accounts Receivable system: the tracking of who owes you how much, when they were billed, and when you receive payment.
COLLECTIONS
When you collect the money owed to you, you then enter this cash receipts information in the Cash Receipts Journal as described in the paper on The Simplest Recordkeeping System You may also want to note the date that you received payment next to the applicable entry in the Sales Journal. Or, at least mark the entry for the billing as collected. Then the unmarked entries are your open customer invoices. These are your Accounts Receivable.
EXPANSION
This elementary system will help you keep track of the customers who owe you money if there are not too many. When your business expands and you have a lot of billings to many customers, you will need to use a more elaborate Accounts Receivable system.
In a traditional accounting system, sales are posted to a customer ledger. Each billing to each customer is written down. Each payment received is written down. And the resulting balance still owing is computed. Almost all accounting software, e.g., QuickBooks or Peachtree, will maintain Accounts Receivable information.
Copyright © 1999 Ira M. Freed
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