Set up a basic record-keeping system
A sales ledger normally records:
- the sales your business has made
- the amount of money received for your goods or services
- money owed (debtors) at the end of each month
It's a useful business-planning tool, enabling you to monitor and chase slow payers and see which customers are most profitable. Also, if you are VAT registered, it can help you with calculating your VAT liability and submitting your VAT Return.
How do I use my sales ledger?
Every time you invoice a customer, record it in the sales ledger - do this regularly, at least once a week. Each week or month, you can add up the total amount of sales invoiced by you, also called turnover (an important business statistic). By recording the amounts paid by customers in the sales ledger you will also be able to identify the money owed to your business. Any customers that have exceeded your payment terms can then be chased.
If you choose to use accounting software, the process of identifying overdue payments will be quicker and easy. See computerising financial records.
If you are not VAT registered then you have no need of the 'Net' and 'VAT' columns.
Keeping records of invoices
To support your sales ledger you need to keep copies of your invoices. These must be kept on file or on computer for six years. It will assist tracing sales invoices if you give each sales invoice a number and record this number against an entry in the ledger.
If any of your customers has both cash and invoiced sales, the sales ledger can be used to record both. In these cases, the cash sales are normally recorded in the sales ledger on a daily basis, and should be supported by till receipts or any other record issued to the customer. The entry in the sales ledger can just say 'cash sales' in the customer column.