Did you ever think that you could relate your bookkeeping to ducks? Well, when I am helping SMEs and sole traders to understand what bookkeeping is and how they can do it I always use the metaphor of “having all your ducks in a row”. We can all relate to this and knowing it can help to ease the fear and stress around managing your finances when you are new to the business!
So how many ducks do you have to play with and get to know while paddling furiously to get your business off the ground and dabbling with all the new things you need to understand?
For my bookkeeping workshops, I use five ducks! My five ducks are like family, they all have names, are all related to each other, all swim in the same pond and you get to know them personally from the first born to the youngest. So, what are the names of my five ducks you might ask……. and where do they fit in the bookkeeping family? Like Daffy and Donald, my ducks all have names beginning with D.
The first born is DAILY DUCK – let me introduce Daily to you, she is the organized & conscientious one of the family, the typical eldest child. Daily Duck tracks time, money, documents and transactions and you can guess from the name she does this on a daily basis! Daily loves to carry a diary, where she logs appointments, who she meets, and anything she might sell or buy during her daily swim. Daily is the first duck in the row and now has a list of all her daily transactions which she calls her Day Book.
The next in the row is DELIVERY DUCK – she dives into the pond to deliver her service/product and never forgets to deliver the invoice as well. Even if her customer doesn’t want a copy, Delivery creates her own and keeps them all in a nice neat little pile in her folders these are her Sale Invoices.
Do Not Duck
The third child in the family is one who we all know. He tries to please all the others he is called DO NOT DUCK –
He like his name suggests, is told what to do all the time by all the others and he is also the lifeguard!
- Do Not use your personal bank account as you need a separate one
- Do Not dip into your business bank account to buy personal items
- Do Not dunk your own money (Capital Introduced) in with business money
- Do Not plonk cash in your pocket (put it in the bank, and take it back out again)
- Do Not throw away receipts, even emailed ones, this is his most important job
- Safeguard all the Purchase Receipts; without them we cannot claim expenses for the business!
The fourth duck in our little family is called DIRECT DUCK and he too is in a difficult position in the family and sometimes he feels like he is not valued, but his job is especially important. He must direct all the money through the separate Business Bank Account, even cash! All income must be lodged directly into the bank and everything bought for the business must come directly from there.
Our last little duck in the family is called DRIVE DUCK. He plugs his two lily pads early in the business, his first lily pad is Profit & Loss and the second is Balance sheet. Profit & Loss which records all Income and Expenses – any money going in or out of the business. Balance sheet records what you own (office furniture) and what you owe from the business (the loan to pay the furniture). Drive Duck steers all the other ducks in the family onto his Lily Pads when they are finished swimming. In other words, he drives all the information from the rest of the family into these two reports.
Keep these 5 ducks in mind when you’re running your business and they will help you to avoid using a word which rhymes with duck! When it comes to finances you can’t afford to rely on luck (that’s the word I meant, of course!). I’ll be going into more detail in my next blog post about five steps you need to take to have a handle on your business’s finances.
Now that you are familiar with all your ducks, make sure you become very friendly with them and when going swimming in your business pond every day, don’t leave anyone behind!