IN looking at record keeping of small and medium enterprises (SMEs), today we tackle what the accountants call the main book of accounts called the cash book.
One of the challenges faced by most SMEs is business record keeping and a recent survey in the United Kingdom attributes 30 per cent of business failures to non adherence to that.
In as much as the business owners may be technically superior to the reason of founding a business, failure to keep financial records and failure to follow up to reading of financial statements pose a
constant hindrance to improvement of the businesses.
In an effort to sensitise the non financial business owners we take a look at the financial tool called the cash book.
The cash book is considered as the main book of accounts by financial analysts including accountants.
This so because any money that comes into business and consequently goes out passes through and is recoded in this book.
Every coin in a business is supposed to be accounted for and the right financial tool to use is the cash book.
However, looking at the diverse background of SMEs, I will try by all means to use suitable language that can convey the message across the board.
For this I beg the professionals in this field not to crucify me  for departing from using their technical language.
An entity that opens a business current account at the bank must equally maintain a book in which it should record the money which is being deposited in the same current account whether in form of cheques or cash.
Equally, in the same book money withdrawn in form of cash and the issuance of cheques must be recorded.
If this is done carefully with precision then the business will keep a clean record and this record will not differ with the record kept by the bank.
The record kept by the business is called a cash book while the same record held by the bank is produced in form of a bank statement.
In my experience with SMEs, some of the business owners who don’t keep such records take it upon themselves to take up the phone to inquire the balance of the business account from the bank on the daily basis when in fact a properly kept cash book can tell them the balance in
the business account.
It is important to notify the business owners that in practice the balances held at the bank and the balances held in the cash book can not be the same at any given time for the following reasons:
–       At the time the business may be presented with the bank statement to compare with the details in the cash book, it may be discovered that the business had issued cheques to the clients who by the production time of the bank statement have not taken those cheques to their banks to claim the money. This results in a huge balance in the bank and less balance in the cash book.
–       Equally, a cash book may show the huge balance than the bank statement simply because it has recorded deposited cheques which the bank has shown that it has not received the money from the paying bank or it may turn out that the cheques have been dishonoured for various reasons.
–       Sometimes a bank performs on the account legal charges on its own without informing the client thereby reducing the balance in the account.
These are some of the commonest reasons among others.
Running a business must not be considered as a chance, but an opportunity to make profits and improve one’s life.
The SMEs must ensure that they know how to read and interpret the financial statements.
At one time I related  to one business owner who did not know how to interpret the cash book and what used to happen is that, cheques issued used to bounce for insufficient funds.
This was so because each time they would inquire the account balance from the bank, they will simply withdraw the money forgetting that whatever is withdrawn covers the issued cheques.
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