If you know your 1+1 then you are sorted for your book keeping. More importantly though is the reason and necessity for keeping records.
In Module 4 we will be looking at our Finances, why it matters, how to do it and examples and downloads for you to use.
If you have missed any of the other parts of the course, have a look at How to Start a Market Stall and find out how you can be a better market stall trader.
The Merriam-Webster dictionary defines accounts as:
a record of debit and credit entries to cover transactions involving a particular item or a particular person or concern.
a statement of transactions during a fiscal period and the resulting balance
In short, it is a record!
Accounting is really record keeping for your business, so that things are clear for you as you move and grow with your business.
I know, you probably are already finding this hard to concentrate on as a creative entrepreneur but getting to grips with the reasons for accounting records will really help you develop your business and understand where your money is going.
Think of it this way, if you buy a bus ticket every day you won’t think of the cost of the ticket because you pay for it each day.
Buy 7 return tickets at once, and you will notice the cost. Buy 30 return tickets and you suddenly take note of the cost of public transport.
The same can be said for lunch or a bottle of cold drink. It is not much to spend it on a daily basis, but added together it becomes a great outlay for someone starting their fledging business.
You want to make money from your stall, and not being wise to where the money is going will not allow you to expand or develop your skills and craft. So walk with me a little in this post and see if you can see any value in it!
Accounting for Wisdom
You have probably heard it said, or may even think, that accounts are for Tax keeping purposes so you know what to pay ‘The Man’.
This is a very large misconception in fledgling new enterprises. Accounting is not for the benefit of the government, although they do want to know your accounts, but it is actually for the benefit of your own business.
Knowing when sales are high and ensuring you have stock, or when a lull is coming and preparing for it will develop your business.
Of course, when you are just starting out you will have little to no historical accounts to work that out on, but as you begin to develop your books, so you will also notice trends.
The wisdom in accounting is knowing where your money is coming from and where it is going.
If you have poor accounting/book keeping skills, you may forget to collect a debt that is owed to you, or pay a bill that has an exorbitant interest rate on it. (resulting in more loss to your business)
Being wise to your money is not to be pedantic, but rather to have an awareness of how healthy your business is.
Accounting for Health
The health referred to here is the health of your own mind and the health of your business. You should at any time be able to look at your books and bank balance and know where you are with your business.
There is no reason why you ought to stress over something as easy as accounting when all it is, is keeping a record of how your money is coming in and going out.
Laying in bed in the morning worrying if you paid a creditor or if you had to withdraw money for someone is stress that you do not need to start your day with.
There is also something quite therapeutic to making sure all your receipts and bank statements are recorded and that no-one is messing you around with your money.
We all have rent to pay and we all need food to eat, but thinking about it last-minute or because you just paid someone and now have no surplus cash is going to seriously cause you a short life!
Accounting for Sales
Sales are your business. It is well known that actually in any sale, it is not the item being sold that is the star, but the person selling the item.
Think about all the times you use one type of shop to get your food from. Why not use a different one? Was it due to poor service?
How about where you have a drink? Do you go to a place because you feel welcome and avoid other places that don’t make you feel good?
Your sales records are little pointers to how you are doing as a salesperson. You can see from trends in the marketplace, on TV or when something is being done in schools how your own sales are affected.
If sales are down, and you can see that from your records, you can actively take steps to improve them. Perhaps through an advertising campaign or by attending a course for better marketing skills.
There is plenty that can be done to turn sales around but if you don’t know that things are not going well how will you be able to adjust in time before its too late!
Accounting for Tax
There, I said it!
Of course, someone, somewhere is going to want to make sure you are abiding by the rules of your country. Our taxes pay for roads, medical care, security and more.There is plenty to be angry about with the government, but if you could do a better job you would be in that position wouldn’t you?
Tax is a necessary part to ensuring a country can operate at least. As part of that system you will be required to pay tax.
Some countries have a minimum threshold below which you do not pay tax. So for many market stall traders this is the bracket you will fall in.
Not being aware of how much you earn, and then one day receiving a letter telling you that you will be audited on your record keeping is going to cause you much concern.
It may also result in a deep investigation and result in you having to pay far more than you would have done if you had just kept a few records.
Accounting for the Future
Enough on the tax now, I think you get the point, and the point is not to make records for someone else, but it is rather to make a record for yourself!
Having the knowledge about your business will allow you to plan for the future. It will empower you to save toward purchasing new equipment that will benefit your business.
Should you want to expand into more stalls or a shop you may need to arrange finance from a creditor and the very first question they will ask is – “Can we see your books!”
The books give you an idea of how your business is going, it gives potential investors an idea and it will at some point come in handy for recording your tax.
Over the next 3 lessons we are going to look at how to make the most of your ability to keep records. There are examples and plans for you to download and start using right away.
Don’t fear accounting, because your fear is really only coming from your uncertainty to actually keep proper records. Learn how you can do this in 5-10 minutes every day and save yourself a headache.
If you think this is going to be useful, let me know. Perhaps you are a wizard at accounts and want to let me know how we can all be better at it. (I know about the programs available, but lets first walk before we run!)
If you haven’t had a listen to The Market Nosh Show podcast, you can hear it by clicking podcast above or visiting Soundcloud or iTunes directly to download it.
- Why keep records?
- How will records help you to understand your business?
- Why is it not about the Taxman?