Managing the money means looking at 3 numbers at the end of the month

Can you pay for next month's stock? Will anything be left once the rent is paid? To know that at the end of the month you do not need a complete set of books. Three numbers are enough: the cash you hold, the money that has not come in yet, and the money you have not paid yet.

Managing the money sounds like a grand phrase, as though you had to study first. What it comes down to is writing those 3 numbers in the same place once a month. You can do it without ever having kept books. In fact, if that much is happening, half of what books are for is already done.

The 1st number is the cash you hold: the cash in the drawer, the balance in the bank account and the balance in the e-wallet, added into 1 figure. Adding them into 1 is the point, because looked at separately it always feels as if something is still left somewhere. 1 caution: if the shop's money and your own money sit in the same account, this number cannot be counted. If they are mixed, separating them comes first.

The 2nd is the money that has not come in yet: what you have sold and not yet been paid for. If you deliver at the end of the month and are paid the month after, there is always some. What matters here is not only the total, but who owes it, how much, and by when.

The 3rd is the money you have not paid yet: what you owe suppliers, the rent, loan repayments, wages. Here too, write the date you have to pay next to the amount.

Taxes belong in that 3rd number as well. They are the kind of payment where the other side does not wait and the deadline is not yours to move. Let me be honest about my own limits. I am not a tax accountant or a lawyer, so which tax falls due when, and how much, is something to confirm with a professional. What I can say here is only that if those deadlines are not written into your 3rd number, your end-of-month judgement will be off.

None of the 3 lets you decide anything on its own. A month with plenty of cash in hand is still short if next month's payments are heavy. A month with little cash can be fine if money is due in before the payments go out. Only with the 3 laid out side by side can you see whether next month's version of you is going to struggle.

Dates come before amounts. I treated that lightly for a long time. I compared the total due in with the total going out, and if the first was larger I thought we were fine. But a total can be enough while the order is wrong, and then you jam halfway through. Here are made-up numbers, only to show the shape. You hold 3, 10 is due in, and 8 in total goes out. The total is enough. If what goes out falls on the 5th and the 10th while what comes in arrives on the 25th, you are short on the 10th.

If you write the date next to each amount when you do your 3 numbers, that shows up in advance. Once it shows up, there are things you can do: ask to be paid earlier, ask to pay later, buy less stock that month. None of them work if you notice the day before.

These 3 numbers are not there to keep a record. They are there to decide. Whether to buy more stock, whether to buy the machine, whether to take on one more person, whether to pay yourself. With 1 sheet holding the 3, each of those is something you look at rather than guess at. The real reason for keeping books, I think, is this one, not writing down the past.

In KAZENA Books, which we build, the 2nd and the 3rd come up in yellow. Things not yet received and things not yet paid are coloured, and yellow means not finished, so you can pull up only what is still open.

The records underneath do not have to be typed in by hand either. You put in receipts, invoices or a bank-statement CSV, AI reads them and proposes the account, the amount and the tax, and the user checks and approves. Invoices are made in the same place, and who owes you how much, and who you owe, are managed there. The tool itself matters less than people think. Paper works. What matters is that the 3 sit in the same place and that you look at them once a month.

One thing to do today. Write today's 3 numbers in 1 place: the cash you hold, the money not yet in, the money not yet paid, with the name and the date against the last 2. Then at the end of next month, write the same 3 in the same place. Write them twice and you can see whether they are growing or shrinking. The first time takes about 30 minutes; after that it is 10.