Real World Accounting For Small Business Owners
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Real World Accounting For Small Business Owners
If you’re like me, you love accounting. It’s so fascinating and such an ingenious system. Don’t you just think that Double Entry Accounting is the most beautiful creation of all humankind?
By: Caroline Jordan
If you’re like me, you love accounting. It’s so fascinating and such an ingenious system. Don’t you just think that Double Entry Accounting is the most beautiful creation of all humankind?
By: Caroline Jordan
Okay, let’s get real. You probably think accounting is boring and best left to pencil pushing geeks (like me!). I mean…BOOORRRRING! Total Snooze-fest!
Well, my friend, I’m about to introduce you to Real World Accounting for Regular People. But, be careful, it just may change the way you look at accounting FOREVER! In fact, one of my clients looked up from a spreadsheet one day and said, “Wow, I never knew accounting could be FUN!” You just might have the same experience.
For starters, a lot of people think accounting is about math, which is an immediate turnoff. Although accounting does include math, it’s more like a foreign language. All you need to do is learn the parts of that language that actually apply to you. Think about visiting a foreign country. You don’t need to be fluent in the entire language. You just need to know the important things like what to order (or not order) in a restaurant, how to get directions, and how ask where the bathroom is. It’s the same thing with accounting. You need to know what you need to know and the rest is unimportant. I mean, do you really need to know about corporate accounting practices or off shore financial transactions. Probably not.
So, how do you figure out what you need to know when you don’t even know where to begin? Follow me and I’ll show you!
The first thing you need to know is this. You must, must, must keep your personal finances and your business finances separate. Using your personal checkbook for all your transactions is a bad way to go. Here’s why:
• The Internal Revenue Service wants to know that you have a very clear distinction between your personal affairs and your business affairs. They want details. If you try to pass off personal expenses as business expenses, you’re violating tax laws. They don’t like that.
• If you ever plan to borrow money for your business or get credit from your vendors, your lender or vendor will want to see detailed records of your business performance. Handing them your checkbook register is not going to make them want to give you money or sell to you on credit.
• You need to know how your company is performing at all times so you can plan ahead, make adjustments in your operations, and make informed decisions.
• The more accurate your records, the more accurate your tax return. It prevents you from missing deductions.
• It’s the only way you’ll know whether your business is making money or if you’re just kidding yourself.
So, if you don’t have a separate checking account for your business, go get one. It’s easy and inexpensive and it will give you clarity on how your business is really doing.
Page 2
Well, my friend, I’m about to introduce you to Real World Accounting for Regular People. But, be careful, it just may change the way you look at accounting FOREVER! In fact, one of my clients looked up from a spreadsheet one day and said, “Wow, I never knew accounting could be FUN!” You just might have the same experience.
For starters, a lot of people think accounting is about math, which is an immediate turnoff. Although accounting does include math, it’s more like a foreign language. All you need to do is learn the parts of that language that actually apply to you. Think about visiting a foreign country. You don’t need to be fluent in the entire language. You just need to know the important things like what to order (or not order) in a restaurant, how to get directions, and how ask where the bathroom is. It’s the same thing with accounting. You need to know what you need to know and the rest is unimportant. I mean, do you really need to know about corporate accounting practices or off shore financial transactions. Probably not.
So, how do you figure out what you need to know when you don’t even know where to begin? Follow me and I’ll show you!
The first thing you need to know is this. You must, must, must keep your personal finances and your business finances separate. Using your personal checkbook for all your transactions is a bad way to go. Here’s why:
• The Internal Revenue Service wants to know that you have a very clear distinction between your personal affairs and your business affairs. They want details. If you try to pass off personal expenses as business expenses, you’re violating tax laws. They don’t like that.
• If you ever plan to borrow money for your business or get credit from your vendors, your lender or vendor will want to see detailed records of your business performance. Handing them your checkbook register is not going to make them want to give you money or sell to you on credit.
• You need to know how your company is performing at all times so you can plan ahead, make adjustments in your operations, and make informed decisions.
• The more accurate your records, the more accurate your tax return. It prevents you from missing deductions.
• It’s the only way you’ll know whether your business is making money or if you’re just kidding yourself.
So, if you don’t have a separate checking account for your business, go get one. It’s easy and inexpensive and it will give you clarity on how your business is really doing.
Page 2
Caroline Jordan, MBA, is a veteran small business owner, accountant, consultant, trainer, and author. She is the owner of The Jordan Result, a company specializing in developing real world, practical resources to help small business owners improve cash flow and business operations. She is the author of Stop the Cash Flow Roller Coaster, I Want to Get Off! and Strength in Numbers. For more tips and articles to help your business succeed visit www.CashFlowRollerCoaster.com.
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