new business module

KEEPING RECORDS AND MANAGING FINANCES 115
• know how much they owe suppliers and other
stakeholders;
• know the level of capital in the business;
• know the profit and loss status for any specific period of
time;
• obtain the information needed to plan (e.g. production,
inventory, sales, credit policy);
• control the costs and expenses of the business;
• identify the profitability of the business;
• monitor purchase and sales prices;
• guarantee transparency (important if the business is run
by partners);
• introduce accountability (vis-à-vis employees).
A properly managed and regularly updated accounting system
allows entrepreneur to manage their business smoothly.
Without such a system, they risk losing money. An accounting
system can also help demonstrate the financial viability of the
business when trying to obtain credit.
1.2 Basic records 19
The simplest way of keeping accounts is to run a simple cashbook
and to record sales and purchases on credit.
Cashbook
The cashbook is used to keep track of the daily business transactions
that are conducted on a cash basis. The book records
all the cash that is coming into and going out of the business,
i.e. only cash transactions are registered. Credit sales and purchases
on credit are not recorded in this book.
The following table presents a simple form of cashbook that
includes a bank account. If entrepreneurs have the possibility
to open a bank account, this is certainly to be recommended.
A bank account allows them to save for unforeseen events and
to put away the value of depreciation in order to be able to
repair or replace equipment once it breaks down.
19 Adapted from BDS (2008c).