Dear Business Owners
The end of the year gives us an opportunity to do some introspection.
If you have not been doing things the right way, as far as record keeping is concerned – please aim to do things differently in the new year. Your business depends on it.
I just thought while we are a bit settled, may I please ask you to perform this little exercise.
✍️ Pull out your November business bank statement with the transactions dated 01 November to 30 November 2022.
✍️ Start by recording all the monies received as a results of sales – categorize them as ‘Sales’ or ‘Income’
✍️ Then record the monies that went out of the bank account as a results of business operations. Purchases of raw materials, Payments of operational expenses such as wages and salaries, paying electricity, rent, telephone and internet, etc.
✍️ Total sum both the Income and the expenses, respectively.
✍️ Are there any other expenses that were catered for but had nothing to do with the business? Record them separately and the total sum in the end.
✍️ With your calculator enter the Sales / Income figure and less (minus) the costs of raw materials and expenses. And see how much you are left with.
For e.g. Sales = R10 000,00 – R6 000.00 (which is the total of both the raw materials and operational expenses) thus your total answer is R4 000.00
This means your profit for the month was R4 000,00
You may ask, what do we do with the personal expenses that were covered by the business?
The answer is Pay back the money to the business account. It was not supposed to be used in that way in the first place. Failure to pay back will result in writing off as a wasteful expenditure. You can just imagine the negative image this will create 🥺
Hence you might not see the business profit.
The objective of this exercise is the following:
✅ To indicate to you the importance of record keeping
✅ The importance of separating personal funds from business or rather the importantance of earning a salary from the business
✅ Check if you are running a profitable business
✅ Learning to budget and certain decisions you can draw by just looking at your figures. For e.g. you might realise how much you can save by bulk buying.
✅ You may also be able to check if your pricing for the products or services are correct.
✅ Controlling your expenses
✅ Having monthly sales targets
**there are many other decisions that can be drawn by just looking at your business figures and overall business performance.
Make sense? Try this exercise with only your one month bank statement and see if it will not assist
This is how things need to be done on a monthly basis!
Y2023 we are talking growth in our businesses. Manifest it 🤑 We are fetching the Bag 💰 for real!
http://www.matsobanemetja.co.za
Compiled by Ms. Dikeledi Seoloane – Accountant, Tax Practitioner, Owner at Matsobanemetja Business Consulting – The Accounting Firm | matsobanemetja_bc
Matsobanemetja Business Consulting Pty Ltd 