Last month we started setting up your books by making up a list of your assets and liabilities and we covered opening accounts for your assets. This month we’re going to get your liabilities entered and cover printing your first balance sheet.
Depending on the program you’re using you may or may not be able to set up the asset and liability for your truck when you enter the truck. If you cannot, then that would be your next step. This assumes that you have a loan for your truck and are making monthly payments on it. You’ll need to know what the balance on that loan was on the day when you are starting the books. So if you’re starting your books as of Jan 1, what was the balance on your loan on that date (before any payments were made for the current year). Your truck will be considered a Long Term Liability and most programs should distinguish between long term liabilities and short term or current liabilities.
The last thing to set up will be your charge accounts. This will be any charge cards that you have that are used for business purposes as well as any accounts that you have with local merchants or shops. For example if you have a Comdata card that you use for business, you open an account for it. This applies whether it’s a company card from the company you’re leased to or your own card. Any charge accounts which you have and which you use for business expenses on a regular basis should be opened. Do not include a personal credit card that you use occasionally for a small business item; these are just accounts that are used exclusively for business.
Once you have everything from your list entered you’re ready to run your first balance sheet. So run the balance sheet and then compare all the numbers on the balance sheet to the items on your list. Be sure that everything agrees with your list and double check your list to be sure that you have all the correct numbers on your list. We are going to use these numbers to establish your beginning “Owners Equity,” so it’s very important that the numbers be correct and that the only things you’ve entered so far are your starting balances.
Owners Equity is the number that represents your interest in the company. Quite often with a new company, this will be a negative number. It really doesn’t matter what that number is for our purposes here, it’s only important to understand what it represents. When you set up your books you entered assets and liabilities which may or may not have balanced. You also entered money in the cash accounts and credit cards with balances on them. The owner’s equity on the day you start keeping your books is going to be the difference between the assets and the liabilities. Rather than account for every penny prior to the opening of the books, we’re going to use owner’s equity to adjust the books.
The balance sheet may vary a little in appearance depending on the program you’re using to create it, but roughly it should show the Assets in a column, the Liabilities in a column and then have a summary at the bottom that shows the equity. In order for your balance sheet to balance, Assets must equal Liabilities + Equity. So in order to get your original balance sheet to balance we are going to take Assets – Liabilities and use that figure as the starting balance for Owner’s Equity. Again, this will vary according to the software you’re using, but generally you will then take that amount and enter that as the Owner’s Equity. Once you have that set up your balance sheet should balance and any future entries should affect both the asset and liability sides of the balance sheet and thereby keep it balanced.
Once this is done you are then ready to start entering your income and expenses into the program. Accounting is a real time process, so in order to keep accurate figures you need to enter things in the same order that they happen in the real world. You can enter things in any order, but by doing them out of order you’ll eliminate your ability to run accurate reports as you go along, and one of the primary reasons for keeping a good set of books is so you can get accurate reports. Being able to run a report for the week, month or even by individual trip will help you stay on top of your business and help you understand what you need to do to stay profitable.
Regardless of what program you decide to use remember that the reports coming out are only as good as the information going in, so enter your data carefully and run your reports often. Knowledge is the key to success so stay on top of your business and you’ll find success is at your doorstep.
Till next month, be safe.
John Ewing is a former owner/operator and the author of The Truckers Helper, business management software for truckers. If you'd like to ask questions or make comments on this article please visit our forums at www.thetruckershelper.com. We will be happy to answer any questions on trucking or managing your trucking business.
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