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In my role as a business mentor and finance broker I frequently meet small business operators who are struggling to come to grips with the financial side of their business. When asked about their trading figures, or cash flow for the month or year to date, they roll their eyes and say we get the accountant to do this or, worse still, they hide from it. This is especially true for the home based business or the newly established business where capital is tight, and they do not wish to spend precious cash on an accounting system.

If only they knew the value their bank statement contains!

After all it's where the accountant extracts his information, and earns some of his or her fees from.

Recording your cash flow
With your bank statement, your chequebook, and using a spreadsheet, you have all the tools you need to track your finances, and keep abreast of your cash flow. You will know exactly where you are at, any problems will become evident, and on average it's probably not going to take any more of your time other than about half an hour a month (depending on how many transactions go through your bank account).

It starts with arranging for your bank to send you a statement at the end of each month. From the statement you record information to a spreadsheet. The spreadsheet is available here - an example is below, showing March's extraction. If you need a variation to the spreadsheet you can contact me by email at dweusten@fspnz.com ).

Once you have the bank statement you go through it and record against each transaction what it is for (this is where you'll need your cheque book). Recording the information on your bank statement may well be handy later on if you also need to give this information to your accountant. It'll already be there, and you'll just have to give your accountant a copy (the accountant will still probably require your cheque books etc to do their own verification). Then you decide which expense category the item belongs to, e.g. a payment for petrol would go under vehicle expenses, and you enter it on the spreadsheet. In some cases there will be more than one payment for a particular expense (for example you may have bought tyres as well as petrol - all vehicle expenses) and you'll need to total these before entering them on the spreadsheet. You do exactly the same thing for credits.

In starting out you need to enter the opening bank balance from your bank statement in the appropriate space on the spreadsheet. This is the balance at the beginning of the period from which you are starting to keep records. It needs only to be entered once on a spreadsheet. Once entered it will follow on into other months on the spreadsheet (the spreadsheet is set up this way). Note: any negative figures just require a minus sign in front when entering.

I also pay for some business expenses on my VISA (for the rewards and convenience) and make one payment from my bank account via Internet banking. If you do similarly you will also need to identify these expenses from your credit card account, and enter them on the spreadsheet.

An example of entering information on your bank statement is given above.