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Do Your Own Books – Wrap Up

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.

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