There are many journals used by companies to record their financial activities. They are crucial because, otherwise, they wouldn’t be able to calculate their financial situations accurately enough and keep track of transactions.
A Sales journal is one of these entry lists. It’s one of the most important of the bunch, seeing how it records sales transactions throughout the company’s life. Unlike many other journals that end up being sources of information for the Balance sheets and other statements, the Sales journals are useful on their own. You will end up with a list of how much of your revenue came from sales, which is essential for inner use.
Why use Sales Journals?
A Sales journal is a ledger containing information about all the payments the business received from selling its products. Each position in the journal usually has the following information written in it:
- Date of sale
- Name of the customer
- Number of the entry
- Customer’s number
- Amount of the money received & not yet received
- Value of the products delivered & not yet delivered
It’s a complex journal, but you should note that everything written in it has a purpose. Your Sales journal is bound to be overcrowded as it is, there’s really no place for unnecessary info – only the most relevant information is recorded. It’s also adjustable, which can be seen by the double nature of some of these parameters.
Both the price paid by the customer and the cost of the products themselves have a debit and credit side. The debit side (DR) reflects parts of the order already delivered to the end recipient (you or the customer), while the credit side (CR) reflects orders not yet delivered. That includes the money and the product.
So, the journals are clearly made to be updated whenever necessary, so you wouldn’t have to check on the information such as ‘whether the product has been delivered’ or ‘whether the sales order has been fulfilled’. It’s all in there.
Although the money is accrued as sales revenue when the deal is struck, you need to make sure the money are actually paid to you sooner or later. Accounting is often a bit different from reality, and that’s a perfect example of it.
Although it’s generally agreed that Sales journals are useful and important for keeping track of your activities, there are also sizable downsides associated with using these on a daily basis. Not that it should discourage you from having one, these are just inevitable hardships that can’t truly be helped.
- Additional strain on accountingSince Sales journals receive new information daily and have to be updated not just with the new sales but also with updates concerning older deals, it’s a massive task. Usually, businesses hire separate bookkeepers to fill Sales journals. Sometimes, they even hire additional bookkeepers to keep track of credit sales.Keeping these journals up to date is usually a tedious task, and businesses that don’t sell large volumes can often have less trouble with these journals. Customer numbers sometimes don’t even exist with the smaller businesses, and some other pieces of information are removed as it is time-consuming.
- Viability for smaller businessesSales journals aren’t the only way of keeping track of sales. Bank history often serves just as well if you sell a few items a day. Moreover, journals are critical for companies who sell to retailers, but they aren’t really essential for small shops or cafes because you don’t have to wait for part of your money to arrive.
There are lots of benefits to accounting for your sales, but a lot of business owners consider it a waste of time, and perhaps rightfully so. When you sell to only ~10 people in a day, and all of that money lies in your cash register, it’s not really a strain of figuring out where this money came from.
Apart from obvious advantages, there are also upsides that don’t really catch the eye immediately.
- Additional securityOne of the key purposes of keeping a journal is to have a constantly monitored storage of information. It’s not really supposed to be the only source of information you have. Instead, it allows you to compare data to other journals, see flaws and track them to their root.Without this additional pillar, you wouldn’t notice that some of your product costs don’t add up, or that you weren’t paid part of your sales revenue. It’s all about keeping several lists of information to have the most sources available to you.
- Extending your customer networkEven if you don’t have a journal, at some point in your business’ history, you’ll have to set up one. It usually occurs when you start dealing with retail volumes. Without some ledger that helps you keep track of where your payment went, you won’t be able to properly calculate your profits.Moreover, these journals allow you to extend your customer networks. By seeing which customer is the most trustworthy and beneficial, you can push for cooperation with them. Simultaneously, you’ll be able to keep up more connections by being able to keep more payments monitored.