Cash, money, moolah, greenbacks – call it what you like, without money, it is difficult to survive. Commerce cannot take place with it, if you do not have cash to pay or a product of similar value to barter, you are going to come away empty handed.
Business is simply providing a product or service that other people need. They pay you the amount of money you have valued the product or service at. They may pay you cash or with a cheque, they might use a credit card or they may pay the money into your bank account. You may extend them credit and let them pay it at latter time.
Ideally, to survive a business needs to make several sales a month. Because there are different ways of getting paid, it is easy to lose track of the money. That money must also get used, some of it will be used to pay salaries, some will go to purchase supplies and of course, the object of any business is to make a profit.
Next time you visit a shop, take note of how they process your cash. Most shops will use a till and ring up the sale. Modern tills, even the simplest ones, will track the cost of the item sold, the item code (if there is one) and work out the change from the amount given. The more sophisticated ones that use a barcode scanner will also adjust the inventory.
Even if you are a Sole Trader and do business in your name and not as company, you should separate the business’s cash from your yours and track it.
I ask my clients to pay me by EFT (Electronic Funds Transfer) on receipt of invoice. As money money goes strain into the Bank and I have a Cheque Card I can use for purchases, I can track my income and expense from my Bank Statement. In effect, my Bank Statement acts as my Cash Book. But I go one step further and write up my expenses on a spreadsheet using the invoices and cash slips i get when making a purchase.
A simple system that works for me which I can then hand over to my account to do anything more complicated.
But what about the guy on the Flea Market, who puts the cash you give straight into his pocket. Any time, money changes hands for a service or product, that is commerce, so if the guy on the flea market was serious, he would track his cash and inventory. Simply writing it up in an exercise book would also work.
Money has a habit of disappearing if not tracked – how much do you think is in your wallet, now go check. Less, right!