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Small Biz Accounting Tips, September 2015
September 08, 2015

What you'll learn this month:

All about Cash Disbursements - kinds of business disbursements, what to do with them, how to record them.

Ready? Let's go!

Kinds of Cash Disbursements

Cash disbursements for my purposes here includes any business transaction that you use cash for. This includes petty cash as well as your checking account.

What is considered a business transaction?

--purchase of materials or supplies
--payment of rent, utilities, phone, advertising, etc.
--payment of subcontracted services
--payment of payroll and taxes
--payment of loans or leases
--purchase of business assets or investments
--distributions to owners

What is NOT a business transaction?

--paying for lunch for yourself, unless there is a client with you and you discuss business
--paying for your personal bills
--paying for anything personal, or that doesn't directly affect or benefit your small biz

Well, you get the idea.

What do you do with your Cash Disbursements?

Cash disbursements should be entered in a Journal (a book of original entry). A Journal can be on paper or on the computer, and should track each disbursement of cash (or check) for your business.

A good Cash Disbursements Journal will also keep track of the business purpose of each transaction. You should also keep receipts for each transaction, either scan them into a folder on your computer or keep a paper file of the bills and store receipts for documentation.

If you have a business lunch, write on the receipt who you met with and what business you discussed right on the receipt. If it's a cash register receipt, make a copy of it. The original may fade with time until at one point it'll be unreadable.

For more on the discussion of building a Cash Disbursements Journal,

click here.

Sample Journal Entries for Cash Disbursements

What kind of Journal Entries would you make for these kinds of costs?

Some basic disbursement entries would be for your usual business expenses paid by check, right?

Here’s some sample Journal Entries:

Let’s say you pay the rent (or phone bill or gas bill etc.) with a check.
Rent Expense………………$500

Or, let's say you have the printer down the street make up some "sale" signs to put in your windows.
Sales Promotions Expense………$2,500

Then let's say you reimburse yourself for expenses you paid cash for out of your own pocket. Maybe you do this monthly, and keep the receipts to put with the check stub in your files. You had purchased paper for the copy machine for $50, had lunch with one of your customers to discuss a new project for $35, and had traveled 176.5 miles, which you reimburse at the IRS mileage rate of 56 cents per mile.
Automotive Expense………..$100
Office Expense………………………$50
Meals & Entertainment..$35
Cash in Checking..................$185

But what if you pay for purchases on your credit card?

You can do that one of two ways.

You can wait til the end of the month, when you get your credit card statement, and make one journal entry to record all the months expenses.

Like this:

Meals & Entertainment......$80
Automotive Expense.........$190
Credit Card Payable..................$1800


You can enter each credit card purchase as you go along. But you may miss a transaction if you don't sit right down and make an entry. I think it's easier to wait for the statement. But it's up to you.

Looking for a better way to keep your books?

Is your checkbook your accounting system?

If you use QuickBooks, preparing an Income Statement is as easy as a couple of clicks.

But if you’re just using your checkbook, it's a little harder. You may want to consider upgrading to a system I’ve created. It uses a simple Cash Receipts Journal and Cash Disbursements Journal to record your business activity each month.

These journals can be created on paper or in Microsoft Excel (or the free version), whatever works best for you. They need not be complicated or fussy.

But you can pack a lot of info into these journals, and get a lot more information that just a checkbook entry. And, from these journals it’s an easy couple of steps to an Income Statement.

Check out my navigation panel on the left of the screen and click on 'Cash Management' for more information on these journals.

Or, for a more in-depth discussion of this system, check out my ebook here.

I'm also working on an e-course on setting up your own bookkeeping, which will cover some accounting basics (no accounting speak, I promise!), setting up a chart of accounts, setting up your journals (cash receipts, cash disbursements) and then finishing up a month and preparing a balance sheet and income statement.

If you're interested in this course, send me an email and get a discounted price!

Or maybe you're looking to venture into computerized accounting for your small biz.

There are a few free options that are pretty good, but most small business owners choose QuickBooks.

QuickBooks is a full accounting software system, and it's the #1 small business accounting software package on the market. I use it, so I know it has a lot of great qualities. You can invoice customers, pay bills, pay your employees, track your jobs or projects, and prepare all manner of reports. So if your business has outgrown your manual system, check it out.

A New Option for Small Business Loans

You hear all the time how hard it is to get a small business loan. Well, there's a new option. I found it for a personal loan, and they're expanding into small business loans, so I thought I'd let you all know about this.

If you're looking for some funds for your small business, look into Lending Club.
They have investors, who will contribute to your loan request. They earn interest, you get a loan. The rate starts at 5.9% and you can choose a term up to 5 years. They report your payments to the credit bureau, which helps you earn a good credit rating for your business, too.

To qualify, you need to have been in business at least 2 years, have annual sales of at least $75,000, and have some business credit (a credit card or some vendor credit).

As I said, I'm using them personally, and it was a quick, easy process. Check it out, and see if it makes sense for your business.

Well, that's it for this months newsletter.

I'll be back next month with more news and tips to help you with your small business bookkeeping.

Take care!


PS: Please feel free to let your fellow small biz owners know about this newsletter! Send them to my sign up page - the last button on my navigation panel.

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