Office Life - The Ledgers - DBH1 The Web Site 2021

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Office Life - The Ledgers

Biography > Hills Electrical > Memories of Work
The Book Keeper

The book keeper used to “keep the books”. When I arrived there was a system in use called Kalamazoo. The basis of book keeping is that there are two sets of books, hence double entry. Every transaction is entered twice, once in a ledger and once in a daybook. The daybook tells you how you are doing overall in the company and the ledger tells you how each account is doing. What you enter on the daybook and what you enter on the ledger are the same and if you total both up the answer should be the same. That gives you the check that everything balances. You do that formally with a control account in a special ledger called a nominal ledger.

The Kalamazoo system was one system that reduced the work. You had a ledger card and a daybook. They both had a series of holes down their edges. So you’d place the ledger card over the daybook in the correct position and handwrite the transaction onto the card. The transaction would then carbon through onto the ledger. At the end of the week you’d add up the ledger cards and the daybook. The total of the ledgers and the daybooks had to add up to the penny. They had to  they were the same transaction repeated and carboned through. But somehow they never did. The hours and hours I spent looking for the discrepancy were a complete waste of time, but it had to be done.

I still believe in the fact that items must balance exactly, rounding errors are not allowed.

Purchase Ledger

Purchasing materials and services should be a simple cycle. It should be that you decide what you want, get competitive quotes, choose one, place an order and take delivery. Then you have proof of delivery, match it to the order so that you don’t pay twice and enter the invoice on whatever system you use. Once a month then you do a payment run and pay your suppliers.

In practice it just never happened like that. We had an order book in which the engineer wrote his requirements as he phoned the wholesaler to get the goods. A copy of the order went into the job file and another to the accounts department. The order would usually not be priced. The idea was that the wholesaler had agreed a series of discounts, (based on a trade price which was listed in a book called Luckins) with us in advance and they would apply those discounts on the invoice.
Up to the point where I started work no one had checked the discounts but I started insisting that we did. When we found a discrepancy we’d let the wholesaler know and hold the invoice until a credit note was forthcoming.

There was one wholesaler who always overcharged us, so a rapid stalemate developed. The branch manager, Alun, argued that his head office did the pricing. However It was noticeable that Alun drove a very nice car. They would then chase payment and I’d demand the credit notes. Eventually we stopped dealing with them. Coincidence or not our profits rose rapidly.

I was checking the purchase invoices one day and it seemed we were buying a lot of emulsion paint from Hughes and Holmes. My father confronted the engineer who had bought it to decorate his home. He admitted it and said it was because he was resentful that I had joined the company. My father then sacked him on the spot. You could do that kind of thing then.

Subcontract Ledger

When I first programmed the computers I didn’t need a subcontract ledger because we didn’t use any. However, as the 1980’s continued the nature of the work changed and more and more we relied on subcontract labour. The government introduced various schemes to counter what was perceived as wide spread fraud and using directly employed people as subcontractors. The ledger systems had to evolve to meet those requirements, especially the payment of CIS tax across.

Sales Ledger
Back in the day we raised invoices for work done and clients paid them -eventually. It was all so simple, provided you didn’t work for builders.

Then we started to get involved with construction and builders and the world became a different place. Builders paid what they felt like paying, when they felt like it.
They evolved a system called self-billing. You would submit an application for payment, they would then decide how much if anything  to pay you and then raise their own tax document and you would raise a receipt. The amount paid would be adjusted by a retention percentage and a main contractors discount.

They introduced the idea of pay when paid – so if the client didn’t pay the main contractor or the contractor said they hadn’t, then you didn’t get paid. The government outlawed the practice and it then became pay when certified.

In the beginning I’d spend my time chasing payment by phone on a regular basis, but as the business expanded we had to use other staff.  However you looked at it, getting paid was difficult. We ended up with a couple of clerks doing nothing but chasing for cash continually.

In the early days you would send a quote in to a client such as Walsall Council and they would accept your quote before “nominating” you to a main contractor. So you ended up working for a contractor who you’d never heard of. One example of this was a company called Shipston Construction which operated out of a house in Stonall. My father and I eventually got in our car to confront the guy who ran it in his house. He was very nice and simply explained he hadn’t any money, was about to go bust and that was that – we lost all of the outstanding cash. We started to credit rate builders after that. However, it was still a problem builders still went bust and took the money with them.

The idea of nominating a subcontractor died away and then you had no friend in the client – it was all at arms length. It may have been difficult getting paid the bulk of the money but getting retentions released was (and is ) a nightmare. Builders regard the retention as to be released when they feel like it.

The sales ledger function more and more ceased to be about keeping the books and more and more about liberating cash.

We did a lot of work for local councils at one time. The issue here was that you couldn’t invoice until you had an order but you had to do the work without an order. They were cash constrained and delayed raising the order, if they did at all, until they had the cash. I raised the issue multiple times with them at high powered meetings, until it was obvious that we couldn’t win and walked away.

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