We are good at creating Liabilities; but not so good at creating Assets

Now see, I know this is not the most desirable topic to speak on but I decided I’ll touch on it anyway. What I’ve notice most, is the way we do things is due to how we are condition to think, feel, behave, and operate. A lot of the time we are not really cautious of our spending or way of living because it is just the way we always do things. I am simply here to challenge you to look at your habits and encourage you to change them. The first step is recognizing and accepting. The second step is educating and applying.

I want to cover a few things that we do and if these things are some of the things you do, remember to accept it through owning how you’ve always do things and make an effort to change, that is if you are looking to save, invest and live a more wealthy life.

1.) We spend before we Invest.

When we are working, rather it be for yourself or an employer, we usually can’t wait to get paid. Why is that? Well, we usually already have an idea of who we are going to spend our money on. Rather it is a creditor, a bill, a vacation, or even simply for entertainment. It is just what we do. We plan out how we want to spend our money before we even get it. Paying your bills, your debt, your creditors is necessary, of course. So don’t get me wrong, but what if we trained ourselves to invest before we spend? Think investing instead of spending. When we cant wait for that client to pay their invoice or that bonus at the end of the year, what if we thought what we were going to invest our money on, instead of what we are going to spend our money on.

2.) We spend money too fast.

What is the point of working so hard when you spend your money as fast as you get it. I know many of us use Direct Debit. It is the easiest way to pay your bills and not forget about them. So when your direct deposit hit, sometimes so do your direct debits, I understand that. The challenge is figuring out how to hold on to your money a lot longer. Why do we work or wait 2 weeks to get paid and then less than 7 days the very cash we were waiting for is gone. If we look at our spending habits, I’m sure we can find a way to not spend our money so fast. Which leads me to my 3rd point.

3.) We usual have no Budget.

The biggest corporations have a budget for their spending. There is a budget for every department, or location, or even project. If organizations with a lot of money budget, why do company’s with less money don’t? I mean you would think they have the luxury to spend as much money as they want. Truth is, it doesn’t matter how much money you make, if you don’t track and manage the money properly your cash flow will be affected. Everyone should budget. Rather you have a business or not. You should tell your money where to go. You should remind yourself how much money you will spend on what each month. You should also track and see your remaining amount to spend for the month or the year, because budgeting saves money. I’m sure you will be able to invest a lot more of your money if you have a budget.

So those are the three things I wanted to share with you. We are good at creating expenses and not so good at creating income. Hopefully this will encourage you to think investing, don’t spend your money as fast as you get and to create a budget.

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Thank you for reading. If you will like to connect with me click here. You will receive more tips and education via email. You will also receive my FREE eBook: A Simplified Guide to Financial Literacy

3 ways to tell it’s time to Hire a Bookkeeper

 

I love bookkeeping. I have clients who came to me the first year of their business. I also have clients who came to me after being in business for several years. Starting record-keeping in the first year is usually much simpler for accountants . A lot of the time, business owners attempt to take care of the financial records themselves. Many business owners are savvy enough to do this and in return it saves money. However, sometimes we overlook the time it takes away from growing our business. I have  3 ways to tell it’s time to hire a bookkeeper.

1.) You can only get to doing your books every couple of months.

Financial records should be kept on a daily basis. It can vary depending on the size of the business. However, at minimum record keeping should occur monthly. If you find yourself not keeping up with your books on a monthly basis, it may be time to hire a bookkeeper.

2.) When you are more focused on your books than your sales

Again, of course many business owners are savvy enough to do their books themselves. As a CEO, we all know there are other things that need our attention that only we can do or maintain.If we are not focused on making the money we will not have any records to keep anyway! If bookkeeping take away from generating your cash flow, it may be time to hire a bookkeeper.

3.) You are stressed out during tax season

We are in tax season. After your books are closed you take your financial records to your tax accountant to file your taxes. The thing is, we are usual not prepared for our taxes. So we have to pay for tax preparation which includes 12 months of bookkeeping that we should of already done! So if you are stress during tax season. because your books are not closed so your tax accountant can successfully file your taxes with your financial statements, it may be time to hire a bookkeeper.

 

3 Reasons to keep Good Financial Records

 

Do we underestimate the importance of good financial records? Or are we uniform of the importance of good financial records? Either way, bookkeeping is one of the most important things you have to do as a business owner. It is required by law  to upkeep financial records. It is to your benefit as a business owner that you keep great financial records. I know it can be time consuming. So if it is something that will take up a lot of your time, then a bookkeeper should be the first thing you invest your profits in.

There are several different reasons why bookkeeping can help your business, however I am only going to cover a few.

1.)  Good Financial Records help avoid over and under paying taxes

The IRS requires us to pay as we earn our income. You can do this by submitting quarterly estimated taxes. If you are not properly tracking your expenses, you  may overstate your profit. which will cause you to over pay in taxes. Many times we pay more taxes than we have to. If we can be diligent with our bookkeeping we can determine how much we owe to the IRS to the dollar.

2.) Good Financial Records make it easier to get a loan or sell your business

Banks and investors like to see good financial records. It makes it easier to make sound decisions. You financial statements tell a story about your business. They also give a snap shot of that story. The last thing an investor or banker want to do is go through unorganized paperwork to make a decision to partner with a business.

3.) Good Financial Records helps identify the strengths and weaknesses in your business

Business owners can make business decisions from their financial records. Your financial statements can show how profitable your business is. What is your most popular product or service. When is your most profitable time of the year. All these things are great information to run a business.

These are 3 great reasons to keep good financial records. There are many software’s that allow you to do this yourself. If you want someone to do it for you click on the link to schedule a 15 minute bookkeeping consult.

BOOKKEEPING CONSULT 

 

 

Good Financial records are fundamental to your business success

 

We have so much to manage when going into business for ourselves; the last thing we want to manage is our financials. However, financial records are a part of owning your own business. There are many things that go into making sure the financial records are accurate. I will not go over that right now. I do want to share why financial records are fundamental to your success.

Many of us start a business for freedom, for money or whatever your case may be. Sometimes it is just a simple business to earn a little cash on the side. It doesn’t matter how small the business, you should always treat your business like a business. Here’s why:

Financial records allow for you to use financial ratios to determine the profitability of the business.

Financial records allow investors to determine if your business is a good investment.

Financial records allow you to reduce your tax liability.

Financial records allow you to increase your profits

Financial records help lenders determine if your business is a good financial risk to take.

Financial records give you information on your highest paying customer or highest paid vendor.

Financial records are fundamental to your business success. If you do not maintain financial records your business will lack the direction it needs to become successful. You will always need to see the big picture as a business owner.

If you know you need to learn more about the components of financial statements and keeping accurate records join my free webinar.

I will discuss the not only how to understand financial records but how to use financial ratios.

 

 

The Most Popular way to do your own Books

When starting a business you are required to maintain a set of financial records. Even if you decide to use software like Quick Books, you will still benefit from knowing how to manually record you books.

Accounting professionals go to school to learn how to manually book keep. Nowadays we have software’s to help us with the process. Thank God! This saves a lot of time,effort and can reduce errors. Bookkeeping errors increase IRS audits. However, I understand everyone is not ready to learn a new software. So I provide a few keep points on how to do your books yourself. To assure you are in compliance with the IRS you can upkeep your Income Statement with excel. Below are a couple key points on how to do that assuming you have basic knowledge of excel.

The first thing you want to do is: Create your chart of accounts

These accounts are the income and expense accounts you will like to track. For example, sales or revenue is a chart of account. However, I’ll be a little more specific. As an Accountant my sales accounts are broken into several charts of accounts like consulting, bookkeeping, taxes, e-courses, e-books etc. Also create expense accounts like utilities, rent, advertising telephone, internet, supplies and materials, professional fees, licensing etc.

The next things you want to do is: Create an excel sheet 1

Label this your Cash receipt tab. Label sheet 2  Expenses and the 3rd sheet will be labeled Income statement.

After creating your tabs: Label your columns

Cash receipt tab should have a date, name , and chart of accounts (in my case would be bookkeeping, consulting etc.)  The amount of the transaction will be listed under the particular account name. Set up all accounts to total sum separately at the bottom of the columns and transfer to sheet 3.

The expense tab should have date, vendor name, and chart of account listed, such as rent, utilities, professional services. The amount of the transaction will be listed under the particular account name. Set up all accounts to total sum at the bottom of the columns.

After labeling your columns: On your third sheet you will need to list your income accounts

This time list them vertically. Each account TOTAL sum should be transferred from sheet 1. By using[ = (select cell on sheet 1)].

You will also list your expenses accounts beneath you income account vertically. Transferring each total over by using the formula above [ = (select cell on sheet 2)].

To wrap it up: On sheet 3 Total sum all your income accounts and Total sum all your expense accounts.

At the bottom take your income less your expenses and that will be your profit

I would suggest doing this on a monthly bases. Each month you will have your Income less your expenses and you can determine your profit. You can compare your income statement with previous months.

For your year end, just transfer all monthly financial records in a master sheet. This will give you an accumulated yearly  amount.

If you are a business owner and need to learn more about the accounting process and managing your books join my free webinar to learn the language of an accountant which will allow you to better manage your business.

 

 

 

3 Simple Ways to Manage Business Profitability

Being an entrepreneur is a dream to many. We all want to do something we are truly passionate about, be our own boss and live freely. Although many of us start a business for the freedom, we shouldn’t forget that business has to turn a profit if you are looking to make a living

A successful business depends on several factors but three main factors are marketing strategy, goods and services, and healthy customer relations. All of these factors are key components of profitability. Profitability is the management of the money coming into your business and coming out of your business.

You have to keep track of your company’s finances to measure the sustainability of your business. One of the main ways to do this with is financial ratios. There are many financial ratios that can help as profit tools. They help implement your business profitability, liquidity, and financial structure.

I am going to share 3 financial ratios below to help you manage the sustainability of your business.

1.) Net Worth

Net worth = Asset – liabilities

Your company’s’ net worth is the business assets minus the business liabilities.

This is what determines if a business is worth millions. The net worth equals a million dollars. If    you do not like the net worth of your business you will need to focus on increasing your assets           and reducing your liabilities. Create a daily, weekly, monthly, quarterly plan that will allow you to    meet your desired net worth.

2.) Working Capital

WC= Current Assets / Current liabilities

Your working capital is your current assets divided by your current liabilities. This is a little different than net worth. It takes only you current asset and liabilities. This is an indication whether or not a company has enough short term assets to cover its short term liabilities.

3.) Return of Equity

ROE = Net Income / Shareholders equity

This ratio determines the profitability of a business. It measures how well a company’s uses investments to generate earnings to grow the company.

These are just a few financial ratios that business owners can you use to see the financial health of a business.

I am honored to share my upcoming free webinar that will cover these ratios and much more. The ultimate goal of the webinar is to share how to wear the hat of a CFO. From understanding bookkeeping to understanding Financial ratios and Cash flow management.

Click the link to join if you are an entrepreneur who needs to better grasp business finance from the perspective of an entrepreneur.