Well maybe just a wrap-up for NOW. Maybe I’ll bang on this drum more, later.
I don’t know enough about John’s business to argue with him further. 400 journal entries a year sounds like <10 a week to me, which is less than an hour a week. But if an hour a week is more time than you want to spend on the business at all, because it’s supposed to be passive income… well. Hard to say.
The underlying principles are:
- A transaction should be recorded as soon as possible, and ideally by one of the people involved in the transaction
- The principals/owner/CEO should be aware of the current financial position of the company
When the owner is the only employee, then there’s an obvious candidate for entering the transactions: you! When the bookkeeping is simple, then there’s no need for intermediate layers of accounting. The financial position of the company is Cash On Hand + Accounts Receivable – Accounts Payable.
For a lot of people — for me, even, at several points in managing my business — it seemed “easier” to just take a quick look at the bank balance and make a decision from there. But there’s a big difference between $12,000 in the bank and owing $20,000 in taxes vs. $12,000 in the bank and expecting $2,000 in the coming month.
For a lot of self-employed people, if they’re not doing their own books, nobody is doing the books. So do your own books.
Post a Comment