Thinking Aloud: Setting up an Accounting System

Thinking Aloud: Setting up an Accounting System

Business accounting has been on my mind a lot. I want to create a new product in the form of a Fountain Pen Friendly Notebook, but this will require careful management of my cash flow. The problem: I hate accounting, and this is just the tip of the wobbly tower of finance-related concerns that I have moving forward. In this post, I think aloud about the nature of the problem, and what I might do about it.

I’m a newbie businessperson, and with this comes the desire for a better way to manage money-related chores. I do the absolute minimum to keep things from going pear-shaped in my accounts, which means I am scraping by and not managing my money very well.

This year, I finally talked to a bookkeeper that was recommended to me by another artist-businessperson in the area, and I’ll start getting up-to-date reports on my finances. I’m wondering if it will actually makes me feel better; it should, but I’ve found that financial people don’t give me compelling reasons for it. They have a tendency to describe the benefits of accounting as an a priori fundamental truth, needing no additional explanation. Maybe it doesn’t work on me because I see life as a growing pie of opportunity, and avoid zero-sum thinking as much as possible. However, I have to admit that when it comes to the very limited pool of my own financial resources, the zero-sum mentality is exactly what I need to cultivate.

So…let me get to work on this.

Identifying the Blahs

Do I really hate accounting? Or do I hate keeping track of things?

  1. One of the most tedious things in life, as far as I’m concerned, is typing in numbers. This is exacerbated by the lack of a numeric keypad on my keyboards (I like a short keyboard so my mouse arm doesn’t get stressed). I also hate looking back and forth between the thing I’m typing in and the number I’ve typed. I’d rather get my teeth cleaned than type in numbers from receipts. I also am not particularly good at adding and subtracting numbers in my head. I suppose this is partly due to a childhood association of math with doing stupid exercises that had no real point. I bet if I spent a week drilling addition/subtracting I would get better at it, but in the meantime, the very thought of entering in numbers for a few minutes makes cleaning the bathroom look like a fun way to spend the afternoon.

  2. Tracking the expenditures and income are somewhat tedious to manage physically, because it comes in the form of mail. I don’t have a good place to stack, sort, and process this mail into my folder system. It’s a lot of tedious paper-handling, husking of useless paper, shredding of annoying cash-advanced checks from credit cards, and filing. Mail is a source of junk mail and yucky chores, so I’m loathe to process this as frequently as I should. As a result, drifts of paper pile up on tables around the house, and I have to collect them all before I can process.

  3. I have specific bank accounts and credit cards for personal use and business, and I use online banking to take care of bill paying. This keeps things somewhat separate. I am also using Mint to suck all the data in and generate reports, but the problem is I just never look at them. I know, it’s dumb.

  4. I have mounds of old financial records that I need to sort. They have piled up and just take up room, and are a constant reminder of how unorganized I am in this regard. I move the mound around from place to place, trying to find a permanent home for them, but they are a blight on my officescape.

  5. I don’t really like seeing the numbers because they never make me very happy. This is something I need to get over, because mindfulness in this area will lead to accruing money over the long term. Without this attitude, my various self-serving plans will never mature to fruition. Right now, I’m more on the “Dr. Horrible” scale of creative mayhem, but it would be nice if I could be a little more “Hugo Drax” in extending my reach.

Tentative Solutions

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p>The “accounting system” that I want is something that makes all this easier to manage. Just writing it all out has actually very helpful, and a number of immediate solutions come to mind.

Numeric Entry a problem? Delegate it to the bookkeeper. Before, I’d seen this as a possibly-expensive service, but it actually seems reasonable: maybe $200-$300 a year. The result would be a clear picture of my business in a form that I can manage.

Those piles of old records? Hand ’em off to the bookkeeper. I am not sure if this is a service she offers, but the idea of paying someone to go through all those records and organizing them would get a huge burden out of my head.

Buy some dedicated bins for mail storage. I think I can come up with a sorting methodology that allows me to process bills as they come in. The categories of mail that come in, as I sort them, are:

  • catalogs / magazines
  • utility bills
  • communications bills
  • credit card bills / bank statements
  • taxes / business costs
  • personal correspondence
  • rewards programs / tempting offers / coupons
  • revenue

I just need some kind of narrow table with a few bins on them, a letter opener, a shredder, a garbage can, and a place to save the catalogs/magazines. That would go a long way in processing the mail as it comes in.

So really, it looks like the entire system could be improved with better paper handling, and delegating the tedious numerical stuff to a bookkeeper. If I can also offload all the tedious organization of my past financial records into neat bundles of archived stuff, then I’ll be much happier too.

We’ll see how this goes.

10 Comments

  1. be chappell 9 years ago

    There appears to be cloud of doom hanging over this post. But I have to admit dealing with the accounting aspect of business and even personal finances is something I am reluctant to add as item 1 on my daily task list. I fight with the management of paper of everyday and have established a flow pattern for it. The whole office is set up with an IN side and and OUT side, so the projects, bills, files etc flow around me.

    Currently I use 1 inbox for everything and keep stack-able shelves (the file pile) for personal and business filing and a file folder for active projects. I have learned that once a project is filed in a file cabinet it is out of my thought process completely.

    After many years of struggling with the receipts process, I corral them on a designated tray on the file pile, then during a designated day I enter them into Quickbooks, and file them in a 3-ring binder divided by month and in clear plastic sleeves. Included in the monthly sections are bank statements. Another section is included for income, which has copies of all invoices with check stubs. At the end of the year I add the P&L and Sales Sheet to the first few pages of the notebook. This condenses the business to one notebook to be handed off to the accountant. When it comes back it is filed in a cardboard data box.

    Now having said all that… have you looked at a Neat Receipts scanner? The software seems to indicate that you can scan the receipts and it will magically be added to the appropriate account and stored digitally so you could actually shred the original.

    Of course, getting me to shred an original document would take a large support group chanting “you can do it!!” .. amidst major anxiety.

  2. Author
    Dave Seah 9 years ago

    To me, it felt more like a cloud of reluctance giving way to a strong beam of light. I find that anytime I give something I’ve tended to avoid a good hard stare, things aren’t really as bad as I’d thought. In this case, I could see some physical process changes that would alleviate some issues.

    Now that you mention it, though, I could probably set up my own accounts, though I am not sure what the best way is to set them up. Every so often I buy QuickBooks Pro and have a go at it, and that’s when I get that creepy feeling that QuickBooks Pro is not well-engineered software, and invariably I mess something up and it’s so difficult to un-do that I stop using it.

    For once, I’m going to try to follow someone else’s lead on accounting practice, at least initially, and see how a pro would do it.

    What I’d like to do with my file pile is get it off my dining room table, so I can actually eat at the table. Hence, the search for an actual piece of furniture for it!

    I like the way you gather up the data, with bank statements, by month. I’ll have to try that! I’d like to do more frequent reporting and projection now to get in the habit. Haven’t used the Neat Receipts product, as it seems like the kind of thing that is maybe 90% accurate, which means I still would need to double-check everything. And, it’s another piece of electronic junk that I’d have to put somewhere. I’m trying to trim down :)

  3. Mike 9 years ago

    Google “Financial Peace University,” find a course being offered nearby, and GO! It will cost you less than $100…You won’t regret it.

  4. Ian Craigen 9 years ago

    David, Try taking a look at http:// http://www.xero.com

    Numeric entry – Import directly from bank account Has dashboards Free trial and reasonable pricing.

  5. Rachel 9 years ago

    Oh my, although I have gotten to dislike that overused word “resonate” and although I am sitting at a desk in faraway Spain, this post has, indeed, resonated with me. I feel those pain points you’ve described so succinctly. And I’m working on it. Invoice by invoice, bill by bill. But my own “cloud of doom” has just lifted a little by reading your words. Thank you.

  6. Sue Thomas 9 years ago

    Paper records (mis)management is my biggest source of angst. High school and even grade school relatives/neighbors can sometimes be found who will work cheap (from homework assistance or tickets to movies, to minimum wage or piecework pricing) to assist in processing backlogged data entry (reading the numbers off the receipts for the typist). This requires one’s own participation but it is worth it for detail filers like me (many subcategories of stuff) … in my case the subcategories are often developing on the fly. (I like that you included a category for rewards/coupons/offers, that’s one of mine that I usually deal with as if it were special, outside the bounds of a system; which means all that stuff just gets left wherever I was when I read it.) One of my cousins used a monthly folder system like @be chappell; I can confirm it worked very well for her. I think it would work for me too, if I could stop overcategorizing. Regarding a space to sort … I’ve found that whenever I set something up I can’t or don’t convert all at once, so then there are two or more locations with mail opening/categorizing/filing piles/folders. This is a source of confusion/errors and therefore resistance. There are ways to manage this but they are time consuming. I want it to all happen magically, without any work on my part! (I.e., without packing it up in some semblance of order to send to a bookkeeper.) Thanks for this post, I’m inspired to try another round of consolidating the paper piles.

  7. IvanR 9 years ago

    as far as the paper is concerned, I have issues with giving someone else all my financial paperwork. I scan everything when I get it and it gets filed electronically.

  8. Sophie Dennis 9 years ago

    I’ve found that, for me, fewer ‘buckets’ work better. I keep a single cardboard folder where I naturally tend to open post – which for me means tucked behind the toaster in the kitchen! – marked “accounts”. Any paperwork that comes in for accounts processing goes in there. I keep a second folder, similarly marked, up in the office. Every so often I clear out credit card receipts from my wallet and they get dumped in there too. I have a similar folder in my email for emailed receipts and invoices.

    Some people also swear by Evernote, forwarding email receipts to it and taking photos of physical receipts on a phone and sending them to Evernote, which puts all your physical and digital stuff in one bucket.

    I do the same thing with other filing, keeping just a big box file marked “to file” and then going through it every once in a while. If I need a piece of paper that’s arrived in the last few months, even if it’s not made it to it’s proper filing cabinet hole yet, at least I only have one main place to look for it.

    Then when I finally get around to doing a big data entry session (usually sometime around the third time my accountant emails to nag about doing our end of year accounts) I at least know that all the bits of paper I need are in one location.

    I currently use QuickBooks for the actual accounts, and I think the only reason I tolerate it is that after 10 years I finally have a grip on how it works and how to do just about anything I need in it. I’m now faced with upgrading (hello, new learning curve), and am actually considering reverting to a simple income & expenditure spreadsheet, with Harvest for project/time-tracking and invoicing. I’d love an online system like Xero that does a lot of the dull entry work automatically, but as of yet I don’t trust them to be reliable and not go and lose all my accounts data. This may be overly paranoid. Given I reckon I spend a good couple of days a year solely on book-keeping data entry stuff, if I could get a book-keeper for around $200-300 a year I’d probably do that.

  9. Pen & Ink 9 years ago

    Ah, I found the comment section – my eyes couldn’t find the pale blue words at first.

    All these details don’t bother me (being an accountant), but I wonder to what extent the tail is wagging the dog here. Don’t start with the huge pile of receipts and panic at the thought of organizing them. Instead, put all the old receipts in a box (just in case), and forget about them. Then, decide what it is that you want OUT of your accounting system and work toward organizing your inputs to get what you want (think swim lanes)- in many respects, that is what accounting is all about.

    For right now, think big picture. Limit cash (budget)? Understand where your money comes from/goes (cashflow)? Feeling in Control and not a victim (and just what would that mean)?

  10. Patrick 9 years ago

    Do you type by touch? Get a 10-key pad input device and learn to key by touch.

    GnuCash.