When an entrepreneur starts a business, it's like heading out on a long road trip. You'll be going through all kinds of weather and roadways. To avoid extreme weather and rough roads, you need a map to help guide you. In your business, your financial statements are the roadmap for your business's road trip.
Financial statements are active records of your business
They show the activities (the ins and outs of your money)
They let you know how your business is doing
The financial records of your business can be viewed at any time. The statement will depend on the data you are looking at. The data may be as of that moment for all time, it may be for the week, the month or the year (you can specify on some reports). Based on these records you can tell how your business is doing.
To know how your business is doing we need to view one of three, and then all three, financial statements.
For additional accounting definitions and helpful...
Learning to stretch your budget may come easily or it may be difficult. Learning to save money doesn't always come easily. It's a skill that can be learned, without feeling deprived!
There are painless ways to reduce your expenses, some you might not have thought of.
I've got something for you at the end that can help you reduce your expenses.
Do you have subscriptions that renew each month? It can be so easy to sign up for a service and forget we have it.
It's not uncommon to use a new service for the first few months and then forget about it. This happens in our personal life and our business.
Do you use all the services you pay for?
Here are a few ways to eliminate or reduce service costs:
Selling your products or services is such a great feeling. Seeing the email about another sale or hearing your phone go "cha-ching"!
When you sell high-end services or products, we often offer our customers a payment plan—this where it can get tricky.
Knowing what is revenue when it comes to payment plans and what are IOU's is key.
There is a concept of cash vs. paper money, or IOU, when it comes to revenue and payment plans. Here's why you need to know the difference between actual cash versus an IOU.
This post came from a reader (who has some accounting knowledge) and asked me to talk about this subject.
See, she had clients boasting about how much revenue they earned one month while also stating the money was coming in from payment plans.
Money "earned" from payment plans is what you would consider an IOU. It is not revenue that can be claimed as income at the time of sale for most entrepreneurs.
Because there are two types of accounting:...
There are two accounting words that business owners misuse all the time. Not knowing the difference between them can cost them their business.
The words are revenue and profit. I’m going to help you understand revenue vs profit and what they each mean. And why it’s so crucial to your business.
Revenue is the money you earn in your business. When you sell a product, service, or make money from affiliate sales, this is revenue. The number of courses sold times the price of the course.
Revenue makes up the top line of the income statement. But it doesn't tell the whole story.
Did you know that if you discount a product with a coupon code, this reduces your revenue? Yep. It’s called an expense to income or a deduction of your revenue.
Using a coupon, which reduces your revenue, is different from the fees incurred from PayPal and Stripe, which also lowers your income.
Fees from PayPal and Stripe are expenses and should be...
Here comes the new year, time to set exciting goals and resolutions. The parties wind down, and the kids (finally) go back to school. You're so excited about all the goals you set for your business for the new year. But being tax ready is not on your to-list.
Valentine's Day comes and goes, and then St. Patricks Day. And then you do a silent scream. You see the date on the calendar.
You can't run, and you can't hide. It's there, every year, the same month and almost on the same day.
Ok, that was a bit dramatic.
Taxes don't need to be big, hairy and scary. They can be easy. I promise! And you can be tax ready in no time.
HOW on earth can taxes be simple is a question people ask all the time.
It starts with a small action each week or each month. Small steps can take 30 minutes or less.
What is this?
Update your bookkeeping software!
Yep. That's all it takes. Getting ready for taxes doesn't need to take hours of work in January. If you take the steps below each...
Have you ever driven somewhere and had to be there by a specific time? But you left the address behind, so you don't have a map to follow?
Not using a bookkeeping (accounting) system for your business is like leaving the address behind.
An accounting system is your map. The income and expenses are the roadways to your destination: the amount of profit you want to earn.
A bookkeeping system is a place for all the transactions of your business, your income, and expenses to live.
It is a software system containing all the accounting rules that record the financial information and various financial transactions that occur in the business.
The transactions of your business are brought together in the financial statements. They are the balance sheet and the income statement (also called the profit & loss). There are other essential statements, but these are the most important two.
A bookkeeping system tells...
Has this ever happened to you? You purchase something for your business, and you have no idea what to do with the receipt. So, you collect them. Or you toss them.
Have you ever thought about how many receipts you receive in a week, a month, a year? They are annoying, take up space in our wallet, file folders, or the dreaded receipts box. Alternatively, many of them collect in our email.
Receipts are important to keep, however, the IRS does not require them. However, if you face an audit, you will need to prove the expense. The easiest way to justify an expense is with the actual receipt.
Yes, It's Annoying
Saving receipts can be a pain, yes, I know. However, if you have a system and a process, you can save a receipt in about 15 seconds. But why should you save receipts in the first place?
Have you ever approached tax time, scrambling to update your bookkeeping software? Did you have questions about expenses and...
Accounting mistakes often made by small business owners can be avoided by setting up your business and your accounting properly. As a result of setting up your business structure and accounting properly, you can avoid issues later on.
Now, I'm not trying to scare you, really. It's easy to avoid accounting mistakes by taking a few steps to set up your business up properly. I will teach you the basics of business structure, what you need to know and what not to do.
Small business owners can take a few steps to set up their business properly to avoid accounting mistakes. The structure of your business will affect your accounting which affects your taxes. And none of us like dealing with taxes! Don't worry, even if you have been in business for a while and did not take these steps, it's not too late.
If you are not tracking your income and expenses properly, consequently you will have issues come tax time. You can use a simple...