Smart Money: A Personal Note from the President

Hello. The following is a personal letter from me to you about my experiences using Smart Money. In it, I hope to provide you with a brief background of Smart Money's evolution and to provide you with some practical techniques I've developed which have helped me to better exploit it.

Origin of Smart Money

I have extremely complex personal finances. I own several houses (both residences and rental property), have several different kinds of investments and use several different checking accounts and credit cards to pay for my sins. It is unlikely that your demands of a personal finance product are any tougher than mine.

One of the pleasurable things about owning a software company is that when I want a particular piece of software that is not commercially available, I can have it developed. It's sort of like having a magic lamp with a resident software genie.

I have been using a computer to track my personal finances for over 12 years now and had some very definite goals in mind when I commissioned Smart Money development. I have attempted to do my bookkeeping on every best selling commercial product. All failed, mostly in their reporting capabilities, especially in the ability to produce sorted reports, e.g.: give me a list of all checks I wrote this year for more than 50 dollars sorted by Payee.

You can't imagine how nice it is now to reach the end of a year, and within minutes produce a listing of all your expenditures grouped by expense category! Regardless of whether you paid by check, credit card, or even cash. Tax return preparation quits being a chore.

Smart Money was built for performance first, then we added a simple user interface. It is important to recognize this when using Smart Money — simpler products may exist, however, I doubt that you will find another personal finance product on the market which can do more for you.

Unless you have a particular need to feel pain, do not jump ahead in the manual to try Automatic Transactions, Budgeting or Checkbook Balancing, until you are somewhat comfortable with your list of accounts and have entered a lot of transactions. I am not saying that bike riding would be fun if you couldn't go anywhere, just that one should find a nice level parking lot before hitting the pavement.

Summary: It takes time and experience to convert to doing your personal accounting on a computer, but ultimately it will save you time and help you better conserve, track and invest your money. It is better to start with a simple chart of accounts, no budgets and no Automatic Transactions and to take advantage of more of Smart Money as you feel comfortable.

Expense Reports

Expense reports are a fact of corporate life. Until I started using Smart Money, I probably wound up being reimbursed for only half of my out-of-pocket expenses. Smart Money does not prepare expense reports for you. However, it does help you prepare to write your report and keep track of how much cash you would have if you turned in your report.

Everybody is different, but here is how I handle it. Perhaps you'll get some ideas on how you can use Smart Money to simplify this difficult process from my experiences.

I set up the following Asset accounts:

Company Expense

The account "Corporate Expense" is a summary account which contains the detail accounts "Personal" and "Corporate". I occasionally pay for business expenses using cash or my personal charge card. Whenever possible, I use my company card. As you enter individual transactions, it is important to identify which ones are on a company card and which ones require reimbursement. When you enter these transactions, specify "Personal" as the distribution account when paying with cash or personal credit card. Use "Corporate" when paying with the company card.

Whenever I do something which is a company expense, I just write on the back of the receipt what the expense was for. I keep a separate sheet of paper in my wallet on which I can record the kinds of expenses that you don't get a receipt for: cheap cab ribs, doormen, etc. Once a week, I enter these into the computer. All those expenses which are reimbursable by the company go into a separate report. I use the memo field on transaction entry to indicate the cause of the company expense (either the customer entertained or the type of expense).

At the end of each month, run three transaction reports:

  1. Print transactions for the current month for the account "Personal".
  2. Print transactions for the current month for the account "Corporate".
  3. Print transactions for the current month for the account "Company Expense".

The first report will show you what the company owes you. The second, what you charged on the company card, and the last gives a complete total of company expenses.

To really polish your report, try sorting the third report on the memo field. You'll suddenly find out how much you've been spending entertaining each client. This makes a nice report to run at year end.

There is a better than 50-50 chance that if you attach your company's expense report form to the above report along with an envelope containing the various receipts, your work will be over! Just write on the form the magic phrase "SEE ATTACHED" boldly, preferably big and diagonally across the form. Transfer the relevant subtotals to the face of the form, and go do some real work. Everyone wants to believe a computer!


You should reconcile not only your checking account, but also every credit card statement you get. Nothing about Smart Money requires you to, you'd just be crazy not to. I have been doing reconciliations for years now, and almost never go beyond the statement to look at the checks I wrote. Get used to not looking at the checks. Think about it, do the credit card companies ever send you copies of your credit card charges? Nope, they leave you to fend for yourself at reconciliation time.

I have found that at least two-thirds of the time I spend using Smart Money is in reconciliation. On an ongoing basis this is the part of the program that will drive you crazy. We spent an enormous amount of time trying to simplify the process and you have to believe me that it's as simple as it can be and still handle everything from checkbooks to credit cards and beyond. After months of using Smart Money you will grow to recognize the importance of being careful when you enter amounts not to transpose digits. I recommend doing the following before doing a reconciliation:

  • Save your file — if something goes wrong during reconciliation, just get the file again and you can start fresh.
  • Enter all of the unentered checks and credit card receipts. It is a nuisance to realize you haven't keyed something in yet that is on the statement.
  • Look at the statement for all the miscellaneous charges and enter them before starting reconciliation. For instance, interest on credit cards or bounced check charges (don't ask how I know about these). These will always throw you out of balance.
  • Only reconcile one statement at a time - then save the file. Never try to reconcile two credit cards at once.
  • When entering Automatic Teller Machine (ATM) transactions, look to see if there is an identifying code that will print on your checking account statement. Enter the numeric portion of this as if it were a check number. It will help you reconcile later.
  • Use pre-printed checks for all your recurring payments, such as rent, car payments, utility bills, etc. Set up automatic transactions for all this stuff and do a check run once a month. Computer printed checks always reconcile and always get sent to the right address. Paying bills takes half the time it would otherwise and so does reconciliation. Another added bonus is that more transactions will fit on a disk. Life gets easier all the way around.
  • When you order your pre-printed checks, get them printed in numbers drastically different than your handwritten checks. In reconciliation you can tell right away whether or not a check might be wrong, and you never confuse a computer printed check with a handwritten one. I had them number my computer printed checks starting at 5000.

Reconciliation can be done with one person, but it goes 10 times faster if you can drag in your spouse, friend or offspring. Have one person read the statement and the other work the computer.

Under Mark Reconciled Transactions, there is a choice you can make about displaying either "ALL TRANSACTIONS" or "ONLY UNCLEARED TRANSACTIONS". I find it easier to choose the option for the "uncleared transactions." What this does is to display only those transactions which haven't appeared on a statement yet. Once you have done this, it will display all the uncleared transactions. You are only interested in the oldest ones so move the cursor to the top of the list.

(Of course, if you regularly good and mark transactions that haven't actually cleared, you'll have to go to "ALL TRANSACTIONS" to unclear it. To save a lot of bouncing around, you might just want to stay with that list.)

Now what you need to do is to match the transactions highlighted on screen to those on the statement. I have found it better to have the person on the computer tell the check number to the person holding the statement (if doing credit card statement reconciliation, the computer person can say the amount of the transaction). The person holding the statement should scan it, find the corresponding line item and then echo back some further identifying information (the amount). If the amount echoed back is incorrect, figure out what went wrong.

If you originally erred when you entered the transaction, just circle it on the statement and come back to it later. Once you agree that you have the cursor positioned on a transaction which is also on the statement, put an X next to it on the statement and press Enter. The transaction will disappear!

You are finished when either all the transactions on the statement are X'd or it becomes apparent that you've X'd all that are there to be X'd. Those that are left unX'd on the statement must be charges for which you lost the receipt or didn't key into the computer. Go enter those now, and fix any that you identified as being entered incorrectly. Then come back and mark them as reconciled. If you have any incredibly old transactions showing up on the list as unreconciled (more than two months old), you may want to consider deleting them — it's not your fault the gas station forgot you bought gas.


Now that you've X'd everything and think you've done things right, let's see if the computer agrees. Go into reconciliation summary. If the balance the computer shows is off from the balance you show, then you've got a problem. Here are the four most likely causes:

  1. Your starting balance was wrong — you didn't reconcile last month so there's no way you can this month.
  2. Not everything on the statement was X'd.
  3. You entered a transaction wrong into the computer.
  4. You accidentally marked a transaction cleared that wasn't.

That's it. If you check items 1, 2, 3 and 4, you will come into balance. Item 1 is the toughest. If you began this month without reconciling last month, forget it. Always, always and always reconcile every month — don't get behind. If you did this, try to fight your way through but I suggest just "patching" in the correct account balance using Edit Accounts. Al that will happen is that you won't know why you're out of balance for one month, since you've already looked at each line item on the statement and would have noticed any transactions you didn't do, no harm will be done. I won't tell if you won't.

If you suspect problem 2, cross your fingers and kiss the ground. This is the easiest possible problem to reconcile. Just study the statement, look for what you forgot to reconcile and reconcile it. If this doesn't work, prepare to work a little.


If you suspect problem 3, you have no choice but to use the option "Display all transactions". Match up every entry on the statement to what's in the computer. Some place you may not have noticed mismatching amounts. If you find the error, fix it in "Edit Transaction" and run the reconciliation summary again — hopefully, now you'll be in balance.

If yours is problem 4, restore the back-up of your file and start the reconciliation over. You might want to run a reconciliation summary on the unmodified file prior to starting reconciliation just to make sure the statement balance the computer suggests matches the starting balance on your statement. If not, you have problem 1 — oops. Just be more careful this time as you go through the reconciliation process.

You would think that when you recognize that your checking account is out of balance by 20 cents, it'd be an easy thing to correct. For reasons beyond the scope of this brief (it stared out that way, anyway) letter, I'll not explain why it's really very difficult other than to say that Smart Money is the easiest product I've worked with at solving this deceptively simple problem. Let's look at how you correct the problem with Smart Money. Say your reconciliation summary looks like this:

Reconciliation Summary
Current Account Balance $1000
Less Outstanding Increases $100
Plus Outstanding Decreases $200
This should be the balance on your statement $1100


In English, this is telling you that your checking account has $1,000 in it even though the bank statement may think you have $1,100. The reason is that you have $100 in deposits and $200 in checks that haven't cleared the bank yet (as of this statement).

Now what do you do when you look at the actual bank statement and it says you have $1,099.80? You need to lower your account balance by 20 cents. You may reexamine your statement and discover a bank charge you forgot to enter (this is common). But if you can't figure out where the discrepancy arose, don't run yourself ragged looking for 20 cents. Just go into "Edit Accounts", where your checking account balance will show $1,000. To lower this by 20 cents, enter $999.80. Then go rerun the reconciliation summary. It'll be in balance this time.

  • Use 80 column mode if your monitor will support it, especially on IBM computers. If you have an IBM, you may not see the ICON menus (you'll have text menus instead), but the roomier screen display will justify the change. Smart Money is shipped configured for 40 column screens because it is easier to read 40 columns on an 80 column screen than vice versa. Correct this immediately after installation.
  • Set up summary accounts for your expenses. Use them in generating reports. For instance, one of my favorites is to run an Actuals versus Budgets report for the summary account "Expenses". Summary accounts you should consider include insurance and utilities.
  • Get into a system. Don't let time pass without entering transactions. I suggest once a week, others suggest twice a week. Never go a whole month or you'll be sorry. If you can work it out, only print checks once or at most twice a month. It is not worth the effort to load checks into the printer and then only print three checks. Somehow arrange one or two days in the month when almost all bills are due. The 5th works for me. Don't put off reconciliations. Do them at the same time you pay bills - once a month.
  • Buy a hard disk. Sierra doesn't sell hard disks, nor do we get kickbacks. We just know a good thing when we see it. If you shop around, you can find a hard disk for your IBM or Apple for as little as $400 to $600. Always keep your hard disk backed up on floppies though, since hard disks do crash from time to time. This can really wreck your day.
  • I like to run the Actual vs Budgets report for future months in order to start guessing at my future cash requirements. All the Actual numbers will be zero, but the Budget and Last Year figures will be there.
  • If things go wrong, just reload the file data. I follow the convention of naming my file 1987-01, then saving it as 1987-02, then next time, I save my file as 1987-03. As I write this, I am on 1987-48. I use a hard disk so I have plenty of space. On floppy, just use plenty of disks for backup. Fortunately, I've never had to resort to loading an old Smart Money file, but with personal finance products other than Smart Money, I've frequently had to back up and re-input a month's data. Smart Money is the best product you can buy at any price. We've tried to make sure things always go right, but sometimes things go wrong. Always keep lots of backups just in case, rekeying a month of transactions is not fun.
  • I've set up lots of things as automatic transactions, which are not financially oriented. For instance, birthdays can be set up as annual automatic transactions. That way, a week before the birthday date, you'll be warned and can look like a hero. To do this easiest, setup an asset account called "Birthdays". Make an automatic transaction for zero dollars where the base account is the birthday account and the expense account is miscellaneous expense. Make the frequency annual and you're home free. Try it — you'll like it.
  • Don't forget to send in your product registration card. We are constantly enhancing our products. Our policy is that if the upgrade offers substantial new functionality, it will be offered to registered owners for some token charge (historically, this has averaged from 10 to 35 dollars). If the upgrade mostly fixes bugs (yes, Virginia, there are bugs — believe it or not every disk in your collection has dozens of bugs, they are just so subtle they haven't surfaced yet) and you are a registered owner, we charge just a minimal postage and handling fee (if the bugs are serious enough to jeopardize normal documented operation of the program, we'll provide you with the upgrade free). Always, always, always register. The worst that can happen is you'll get lots of junk mail from us. It really doesn't take all that long to throw away, although obviously I'd prefer you at least read it first.

Tell your friends about Smart Money. The more people who use Smart Money, the more we can afford to enhance it. Just being the best doesn't necessarily mean you should stop adding features. Even if your friends already own a competing product, that doesn't mean you can't improve their life. Without naming names, I'll give you a few questions to ask them about their product. Ask them to produce a list of where they spent their money, summarized by Payee. Virtually all other programs will immediately ask "O.K. for which checking account?" This is stupid. If you already knew how you paid, you wouldn't want the report. Ask them how long it takes to enter 50 checks. If they respond with anything over three minutes, invite them over some time to watch you enter automatic transactions. Smart Money will hopefully improve every year that you use it. To do this requires money, the more of us using the product, the more that can be spent. We all win.

Ken Williams
President, Sierra On-Line, Inc.


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