Business Essentials: What You Need to Know about Cash Books
No matter what kind of business you have, big, small, or medium, your records are the most important things you have to stay on top of. Any company hoping to grow or have any kind of success has to keep a detailed record of all its cash transactions.
You will include everything from utilities, transportation, food, labor, and so much more. If you’re spending it, you have to record it. This gives you a good idea of how much you’re spending and how much you should be prepared for in the future.
Now a cash book, in general, serves as a book of original entries and final entries. This just means that it is a detailed record of transactions that is also confidential.
Depending on the type of business you have and its size, you may or may not want to hire a professional bookkeeper to help you manage your finances.
All that said, here are a few more things you should know about cash books:
What is the Structure of a Cash Book?
For most people, the format itself can be entirely unfamiliar at first. That’s usually where the confusion comes from. That’s why, first and foremost, it’s essential to understand the structure of the cash book to use it well.
Here are some of the basic information every cash book entry should have:
The date of the cash transaction
A receipt number for allocating the document to the transaction
Summary or description of the transaction
Receipt and currency of the cash revenue or expense
Provision for tax rates such as sales tax
The present current cash balance and debit balance
How Does Cash Book Accounting Work?
Once you understand the basics, it might be easier to document everything and use a cash book effectively. Cash book accounting is an easy task. Even someone with little to no experience with handling finances should be able to do it.
The only thing you have to learn is the cash book template. It will be a breeze recording cash transactions by then. After that, just make sure to balance the cash book at the end of the day.
Here are a few things to keep in mind when making your entries each day.
The cash book should only be used to record cash transactions
You should enter the precise date of the operation as well as the opening balance of the previous accounting period
Any cash that the business receives falls under ‘revenue,’ and any paid out money falls under ‘expenditure'
All the transactions should be recorded in order, that is, on the specific day they occur
Your cash balance should never go below 0
Of course, even when people correctly understand how it works, it might still be a wise decision to hire a bookkeeper.
Benefits of a Cash Book
Anyone running a business knows how hectic things can get. Can you imagine individually listing down all the cash transactions before transferring them to a ledger?
That is a mountain of unnecessary work. Using a cash book can save time and effort in going through the hassle of recording and then re-recording these transactions.
Cash books also have the advantage of showing you how much money is left at the end of the day, week, or any other accounting period.
Here are the most important benefits of cash book accounting:
A time-saver
Labor-saving
Prevent misappropriation
Easy identification of errors
Determine your company’s cash status
Summary
Cash books are an essential part of any good business today. In everything you do for your business, it’s essential to ensure that it improves workflow and provides a good overview of your business. Simply put, a cash book is just a ledger to keep track of all cash transactions. However, the benefits it brings are significant.
Totally Booked streamlines the financial side of your business to make it less intimidating. We handle all aspects of bookkeeping, including accounts payable/receivables, budgeting, payroll, app integrations, sales tax, custom reporting, bank reconciliations, and so much more. If you are looking for bookkeeping services in New York, contact us today!