June-July 2017

Why You Need a ‘Cashbook’

Every now and then all we get from a client is the proverbial box of receipts. To be sure, this is the exception. The large majority of organisations has some sort of system in place where they record and categorise their financial transactions. Amongst those, however, there is a fairly large group of organisations who think they are doing this recording for their accountant rather than themselves, and as a result the quality of the record can be quite poor.

A categorised record of your transactions involving your bank account or cash on hand is generally referred to as a cashbook. These days it is usually in spreadsheet format or in the form of accounting software such as Xero or MYOB. The key advantage of a cashbook is that it allows you to generate financial reports quite quickly that show you how you’ve done financially in the last wee while. Without this information an organisation is fishing in the dark: you simply don’t know if your membership fees, grants, donations or sales cover your expenses – until you’ve run out of money. You also don’t know if the opposite is true: whether you could reduce membership fees, offer more services or similar because you have enough money.

A good cashbook saves large amounts of money in accounting or audit fees. The main tool for checking whether it is accurate is the bank reconciliation. Every time you receive a bank statement you need to check whether the balance in your cashbook is the same as on your bank statement. If it is not (for example because of unpresented cheques) you need to explain this difference. If there is no reason why there should be a difference, it means you have made a mistake.

Also, a bank reconciliation needs to be done for every cash account that you have. This includes every bank account (including savings accounts), cash-on-hand, Credit Card or PayPal accounts. Many organisations only keep an eye on their ‘main’ account, but do not record transactions in any other.