The Best Tool Ever to Get Control of Your Finances

Anyone who has followed my writing in this blog will know that I am a huge advocate of cloud-based accounting, and fully automating your accounting so that you are 100% paperless.

It was recently in my time in Kenya that I re-discovered a tool that can really enhance cloud-based fully-automated accounting systems…

Here is how my story started – I am involved in supporting a children’s home here, and as part of the project my wife and I initiated a permaculture food growing program to provide good, organic food for the kids in a self-sustaining manner.

The man in charge of the project, a Kenyan, named Josephat Barasa, is a former school teacher, and a man of impeccable integrity and attention to detail. He is one of the hardest working men I have ever met, a great leader, a great teacher, and manages projects with a very strong attention to detail.

Because this particular project was funded from a Canadian Charity, he and I worked closely together on the management of the funds.

When Josephat and I first met to go over the project finances, I was impressed with his simple system…

A Journal and a Pen

JB, as Josephat is affectionately called, pulled out a small black ledger book, neatly lined and on each row, he marked each item he spent money on, labelling each item numerically starting with number 1, number 2, number 3, and so on.

Next to each number was the date, who paid to, what for, and the amount.

He then labelled each actual paper receipt with the corresponding number – 1,2 ,3 and so on from the receipt book so that his black journal book would match to the actual receipts.

Is this a full accounting system? No, not at all…yet it got me thinking about a few things…

My Cloud-Based System

For me, I was gathering and keeping receipts too. Mine were stuffed into an envelope just like JB’s.

However, my system has some exceptions. In my system, I would take all those receipts and organize them later and put into our cloud-based, paperless system (In this case, I may, because it is a Charity, keep the receipts in an envelope by project).

One of the challenges I have is– especially when dealing with lots of paper receipts, as in Kenya – remembering exactly what I spent the money on, after the fact. Often, receipts can be vague and lacking detail. Or the receipts from those credit card machines can often fade in a few days making them indecipherable.

So, other than this, what do you think the benefits are in JB’s system that mine do not have?

The Benefits

There are a few powerful and compelling benefits. The biggest one is this – when you write down what you just spent – in the moment you spend it – you become conscious of what you are spending in a way that just getting a receipt and recording a few days later – electronically – just cannot compare to!

Somehow (and there are studies that purport to prove this) when you pick up a pen and write down something in a journal you become more conscious of what you are spending money on.

JB also had us both sign for each deposit I gave him from the Charity so that it was clear what I gave him and what he was receiving. Again, a form of conscious accountability.

Another main benefit is this…

A Matched Record of Receipts

Because JB labelled each item in his journal with the same number as on the paper receipt it will be very easy for him to find an item if he needs to look up something.

When JB buys something and the vendor does not have a receipt book (for cash items), he then makes up a receipt with the vendor’s name, amount, and phone number, and he has the person sign the receipt.

Another huge benefit of this system is this…

You Spend Less

It is a well-known fact that when you are intending to lose weight, the best thing you can do is write down every item of food you eat from morning to eat – everything.

Why? Because when you do, you really don’t want to write down that you just eat 3 chocolate glazed donuts! You only have to write down what you ate and the caloric content next to it for a few days and you will automatically see that you eat less!

We are denial creatures when it comes to weight loss and money management.  Many of us really do not want to face the facts of our actual eating, or spending habits, so would really rather not admit it, and pretend things are other than they really are!

Let’s Look at The Flip Side

In a fully-automated, paperless, cloud-based accounting system (like our own company and most of our clients) there are two things that get lost –

  1. The focused, conscious attention when you are at the point of spending money. For example, a bill can be emailed from a supplier, details extracted automatically, those details recorded in the accounting system, and you did not even really look at the expense item at all. It by-passed your conscious attention;
  2. Because you are not writing down what you spent money on, you will spend more.

I am going to repeat my last point – it is so critical – you will spend more. Just like most of us eat more when we don’t track what we eat and the number of calories in what we eat.

My Challenge to You

To really get a handle on your spending habits (for your business and personally) and start to spend less and save more, do this:

  1. Write down everything – every penny – you spend every day. Every single day. Do this for 90 days and I guarantee new insights will be revealed and new habits will emerge;
  2. For credit card expenses that are recurring, go online and see what showed up on your credit card statement that day, and then dutifully record those items too.

Often what we find when getting conscious and focussed on the credit card items we find out that there are some recurring items showing up that you no longer even use – perhaps a gym membership or some kind of business subscription that seemed small at the time+. It could be for software you no longer use.

You could expand this to all your department heads as a discipline for 30 days (depending on the volume of purchases) and then have them share their insights and new habits they saw for themselves.

So, in summary, adding a simple black book journal and a pen to your fully automated system may be a great way to:

  1. Stay organized and focussed
  2. Spend less
  3. Become conscious and intentional on your spending habits
  4. Easily be able to find receipts later when you number them like JB does.

Thanks for reading and all the best with this if you take up my challenge…