Whether you’re new to the business world or your company has been established for a significant period of time, it’s important to keep track of all sales, as it makes things a lot easier as your business grows, and you make more transactions. That’s where a sales and purchase ledger can come in. But, what is a sales ledger? Find out more about what a sales ledger is, and how to create one, with our guide.
What is a sales ledger?
Simply put, a sales ledger is an itemised and detailed breakdown of all sales in date sequence, keeping track of whether they’ve been paid. The information in a sales ledger can vary, sometimes including the itemised invoice, customer name, amount of tax, and more. In the annual accounts, this will be represented as trade debtors, or accounts receivable.
Sales and purchase ledger – the difference
In contrast to a sales ledger, a purchase ledger is an account of the suppliers of a business. It keeps track of who the business has bought from, what’s been paid for already, and how much they owe. This will be represented in the annual accounts as trade creditors, or accounts payable.
Why is a sales ledger important?
Having a sales ledger will save you a lot of bother further down the line – when you’re just starting out, you may feel like it’s not necessary to track sales, but it’s likely to get a lot more complicated, meaning that you’ll benefit from a system. There are a few reasons as to why having a sales ledger control account is important. Let’s run through some of them.
Clients aren’t always reliable, and can vary in whether they pay on time, and in how accurate the pay is. Of course, some payments will go through with no problems almost as soon as the invoice is sent off, but that won’t always be the case. If a client pays with handwritten cheques, or there are multiple invoices to deal with, there’s always the possibility for human error. By entering all payments into a sales ledger, you can keep track of them, making sure that they’re accurate.
Another benefit of using a sales ledger is that you can use them in your research – if something’s selling particularly well, you can really scrutinise the data in the ledger before you promote the product further, to see whether it has mass appeal, or whether it’s bought by just one client, for example. Meanwhile a sales ledger will make getting audited a lot less complicated and stressful, as you’ll have all of the data you need if you’re asked any questions.
Creating a sales ledger
You, or your sales ledger clerk, can create a sales ledger on a spreadsheet or use accounting software to do so, and the method you choose may depend on your level of experience. A sales ledger clerk can help you take control and keep track of sales in your company, taking some of the pressure away from yourself.
Using a manual spreadsheet for your sales ledger can work if you have a background in finance, or have an accountant to help you out – it’s cheaper, but it might be easier to spend a little more on software that’s proven to work. Either way, you’ll need to itemise sales by date and customer account, and include both the total amount of every invoice and how much each customer has paid and still owes.
A spreadsheet might make sense in the early days, but after a lot of sales are made, it might be difficult to keep track of everything on a manual spreadsheet, in which case it would likely be worth investing in some established software, which will usually simplify the sales ledger into various reports, which you can view as and when you need them.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.