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Putting the books in order
By Duncan Drury
Here in London in addition to the bitter cold wind that
whistles in via the river Thames, many businesses are experiencing a shiver at
the realisation that the end of the tax year approaches. This signifies the
looming significance of the taxman in our financial lives. At the end of my
first year of trading as a freelance web designer and infotech consultant I must
delve into the cardboard box of receipts I have kept on a shelf. I must look at
my incomings and outgoings and work out the financial performance of my
business. Most importantly I must figure out how much (or preferably how little)
tax I must pay.
Knowing next to nothing about book-keeping I have followed the path of many new
businesses and spent the year estimating my profit, without thinking much about
my expenses. Although I know that keeping a close eye on my businesses cash flow
would strongly assist making business decisions, it is only the prospect of
being over taxed or even fined that prompts me to bring the receipt box down
from the shelf.
But what am I going to do with those receipts? I could just add them up and
subtract the resulting figure from the sum of money I have brought in from
clients. This would give me my annual profit and serve the purposes of appeasing
the taxman. But it gives me no indication of where I might improve my business
practices and won't help me in the future.
What I need is an accountant to help me make sense of what is going on. But how
can I afford the services of an accountant? My annual profit certainly doesn't
make me feel that I can.
Accounts are made up of numbers and my computer is designed primarily to deal
with the manipulation of numbers. Couldn't I use it to deal with my accounts? Of
course!
Being the internet junkie that I am, it is not long after this realisation that
I am scouring Google for free accounting software and information about book
keeping practices. I am surprised to see that there are indeed a number of
software packages out there that will help me manage my finances. There is also
a sea of accountancy sites trying to sell me services I already decided I
couldn't afford. I decide to dive in at the deep end by having a go with an
accounting package called TurboCash. This is produced by Pink Software, a South
African company who go into some detail on their web site about why they made
their product free and open source. Their ethics correspond with my own so I
install the software and fire it up.
And quickly become confused. This software involves something called Double
Entry book keeping, and I have to set up something called a General Ledger. The
built in help makes my head spin a bit and I realise this package is aimed at
people who have some prior knowledge of accounting practices.
Back to the internet, this time searching for tutorials on bookkeeping. I
stumble across a gem on the Bean Counter web site. A humorous introduction to
book keeping, it concentrates on the processes of the double entry system and
the reasons for doing things this way. After a good hour of reading I am a
little more confident with concepts such as having different accounts for
different kinds of expense and the different ways of understanding debits and
credits on those accounts.
Still a little unnerved by TurboCash, I decide to download and install another
free (but not open source) accounting package that the Bean Counter site
recommends for beginners. This is OneStep Accounting from Enable Computing. It
comes with a document that shows me how to set up different accounts in the
General Ledger and then enter my income and expenses into the appropriate
places.
After this initial setting up I can now enter my invoices and when I was paid by
my clients, and also my receipts which are entered into different accounts
allowing me to see how much I have spent on my mobile phone and internet
connection, transport and stationery, and how much can be considered as an
investment in assets, such as a printer and other computer equipment. It takes
me two days to enter all my receipts (and I am sure that some more will turn up)
far longer than the invoices. After this endeavour I can hit a switch and see
how my books balance and find I have made a small profit this year. Very small,
but better than nothing. I still need an accountants help to understand the
figures that OneStep gives me, but I won't need to pay someone to balance my
books. Once again I found a way of using my computer to save money, if not time
Interesting sites
www.turbocash.com
TurboCash free open source accounting software, but not for the beginner.
www.dwmbeancounter.com
site with lots of information to learn about accounting and bookkeeping.
www.enablecomputing.com
vendors of the free OneStep accounting package.
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