2. If you want to glean valuable
information from your
financial reports, you need
to get your hands dirty. And
that means compiling details
yourself. By becoming
involved in the data entry process, you can
better see the inner workings of financial
reports.
3. You don’t need to “do the books” manually or
create full financial statements. But you should
understand what those recorded transactions
mean and how your financial statements work
to provide you with information you need to
make decisions.
5. Mental preparation
Your journey into the world of bookkeeping only
transports you a short distance; your objective is
more like understanding Dr. Seuss than conquering
Shakespeare. Rather than
fearing the subject is
too complicated, take an
interest in learning basic
bookkeeping rules. It’s
like studying up on a sport you want to appreciate
as a spectator; you don’t want to play the game
yourself. Focus on your goal of discovering how the
figures deliver the true health and state of your
business.
6. Tools
Find a helpful resource that
explains the basics of book
keeping in plain language.
Many books tie together the essentials in a short
format that’s easy to remember. Help is also
available from friends or online articles, and of
course your accountant is a valuable source of
information.
7. After learning how a business transaction is
recorded, you can begin to record one yourself,
starting with a very low-tech system – the old-
fashioned pencil and paper.
8. Once you fully comprehend the basics of the
manual system, you can advance to computer
programs. But note that accounting software
does not do the work for you; these platforms
only produce an output of reports based on
your accurate input of transactions.
9. Following the procedure
Doing simple transactions is sufficient to teach
you how they are summarized on financial
statements. Make sure you know how to record
a basic sale: Money comes in on one ledger and
income is recorded on another ledger. Next, pay
an expense: Cash goes out on one ledger and
expenses go up on a different ledger.
10. Make things a little trickier by adding accrual
accounting to the picture. Record a sale for
which you invoice today and receive payment
later. Try an expense in which you are billed now
and pay two weeks later. After each step, watch
to see how your transaction shows up on the
financial statements.
11. Summing up
By becoming involved in the data entry process,
you can uncover errors. You also begin to see
opportunities for analysis. Accurate records that
speak to you allow you to improve spending
decisions, conduct better budgeting
assessments, manage cash flow and monitor
what’s owed to your vendors and due from your
customers.
12. Providing a great product or service and winning
customers is only part of a business owner’s
mission. The difference between working hard and
working efficiently is clearly revealed in your
financial statements.
Grasping the steps that go into producing
statements gives you the ability to extract from
them useful and profitable information.
