Sole proprietor that doesn't receive 1099 from customers - how to track money in a way that will allow one to apply for personal loans (like for a house or car)
As a retired accountant who has advised small and medium-sized businesses at various times over a 50 year career, most everything Ms. Perkins mentioned in the video is spot on advice. Three points especially: register your business, keep your business money separate from your personal money (even though it is a pain in the rear to have to put money into your business account from your personal account every time you want to spend money if the business account is short of funds), and keep track of all transactions that are in any way related to the business whether they are cash or credit. There are several points in the video where the explanation of terms is superficial out of necessity due to the shortness of the video and possibly as a marketing technique to sell memberships in the small business start-up program being sponsored (the cynic in me comes out). However, lack of clarity could get a person starting a business into trouble or result in misunderstandings that cause huge headaches for the business owner. Owner's Equity - the explanation in the video (at 1:34) is that subtracting liabilities from assets give the total value of the business. Not true. It is simply the amount of money that can be returned to the owner after all liabilities are paid (assuming that the business is using accrual accounting). The value of the business is independent of the calculated Owner's Equity. It is very possible to have a business for which the Owner's Equity is large, but the business has no value in the market place. Gross Profit - the video defines (at 2:53) gross profit as an alternative term for revenue. Not really. Gross Revenue or Gross Sales is the total money value of all items or services sold in the course of business. Net Revenue or Net Sales is Gross Sales less any discounts or a few items of expenses that are directly related to selling & delivering the items or services. Gross Profit or Gross Margin is Net Revenue or Net Sales minus the costs directly associated with making the products or delivering the services that are sold. The types of items included in each category may be different depending on the type of business. Cashflow Statement and Balance Sheet - the explanation (starting at 1:53) of the link between the two statements ignores the effect of cash basis accounting, which is a legitimate accounting method and may be beneficial for small businesses. The definition of Profit (at 3:08) may also be different depending on whether accrual or cash basis accounting is used. The recommendations for accounting software to use also have the potential to create problems for someone starting a business. Not because the recommended programs are bad. Rather, when it comes to accounting for a business in order to meet tax, bank lending, or investor reporting requirements, there is a significant potential for someone not trained in accounting to make mistakes in setting up the software and recording transactions, even with the most user friendly accounting software. Those mistakes could cost the business more money that going to an accountant in the first place. My concerns about incomplete or somewhat inaccurate information could have been addressed early in the video simply by shortening the section on accounting to emphasize the need for a complete set of financial statements and the importance of keeping track of all business related transactions. Then, recommending that anyone starting a business search for and work with a qualified small business financial adviser, such as Virtual CFO Susan Boles with whom Ms. Perkins has partnered for the finance section of the StartUp Society she pitches at the end. It seems strange that a person who got her start in business by doing outsourced work for others would not recommend early and often that people starting businesses contract with those who use their expertise to provide services to others who need that capability, but don't have the expertise. There have always been local CPAs and qualified bookkeepers providing small business financial services. Since the 2008 financial crisis, there have been thousands of well experienced accounting professionals who have moved into virtual CFO services as a matter of necessity as mid- and upper level accounting jobs were eliminated. Both local CPAs & bookkeepers and virtual CFOs can provide services that go far beyond simply keeping accounts for a starting business, in addition to making the transaction recording a lot less of a headache for the business owner.
thanks much Richard for your thorough analysis. Very insightful - could I scratch your brain :D May I ask how do you pay yourself as self-employed if you don't have a set amount of money that you are bringing every month? How do you create a salary for yourself? tips? recommendations?
@@fromstucktothriving - If your business is a sole proprietorship, partnership, or LLC, you would not be considered an employee and aren't paid in a way that requires reporting a salary and withholding taxes. If it is a sole proprietorship or single member LLC, any amount you set to take as what you might consider to be a "salary" comes out as an owner's draw. If it is a partnership or multi-member LLC, the money is taken out as a partner draw. The draw can be recorded as either a reduction of Owner's or Partner"s capital account or a separate draw account can be set up within the Owner Equity category. My recommendation would be to set the amount you would like to receive each month (of course within reason based on your average net cash flow each month). Then, take that amount out as a draw, even if that leaves to little in the business account to pay the bills. Record the draw in a separate Owner's Draw account in your accounting records. Then, if you need to contribute money during the month in order for the business to pay the bills, put the money back into the business account and record it as an addition to Owner's Capital Contribution. As your business cash flow increases, you won't need to make so many contributions back to the business and can eventually increase the amount of your draws. That approach is a little more record keeping that putting all contributions and draws in the Owner's Capital account. However, the separate transactions between draws and contributions will make your records a lot more clear and easier to track in case you ever get audited by the IRS. No matter how you decide to handle the draws for "salary" DO NOT EVER PAY PERSONAL EXPENSES FROM YOUR BUSINESS BANK ACCOUNT OR CREDIT CARD OR BUSINESS EXPENSES FROM YOUR PERSONAL BANK ACCOUNT OR CREDIT CARD. As soon as you mix business and personal transactions in one account, you provide an opening for the IRS to examine and question every penny that your spend and might claim as business income or expense. If you would like to contact me directly, please search for me on LinkedIn. I think I'm the only, or one of the very few,, Richard Archer's listed on LinkedIn as being in Thailand.
This!!. It's the kind of advice my husband gives the kids -- and he's had a successful small business all of their lives that paid for their college degrees. Wise!
This is a wonderful video. Great job and that's coming from an Accountant 😁. I just put together a guide for small businesses that touches on all of these topics. I haven't even had a chance to put together a video about it yet. You did it for me. I'll just send people here if they need a clear and concise overview.
I had difficulties with setting up financial business account, and it was my cofounder who helped me figure this out (he had another running business by this time). And yes, fast forward 3 years in operation, we’re still using spreadsheets on Google 😁
Your videos are very useful and provide lots of information. I have received lots of help after watching this post, please continue to share this kind of information. Thank you.
Thank you for sharing great knowledge bookkeeping, often entrepreneurs who just start their business concentrate on marketing and building the brand that they overlook financial side of it.
Very well explained. It made me think about my college accounting courses, which I still have in my textbooks. I actually referred back to these books from time-to-time for a clear understanding. o
Thank you so helpful. I’m trying to setup my eBay reseller business. Now after doing it for 2 years. I did not make enough money the first two years. But now. I am starting to make good profits and already registered my business. Setting up business bank account next week. Question? Should I track all back inventory and cost of equipment or should I just start from the day I open the bank account to keep everything even.
I do have past sales and past expenses. Should I include them. Or does it only go off a yearly basis. Also is my net worth all the money I personally invested such as startup cost, inventory, shipping supplies. Does that count as a net worth. I’m so lost.
Thanks Gillian! Another great episode :) Looks like the "Great (more affordable) alternative" in your Filming Equipment links to a camera that is currently unavailable. Any other recommendations within that entry price range? Thank you!!
My problem is that I buy products then sell over a period of time. I’m required to make a small amount each month for medical help. If I buy 100.00 in product and sell 20.00 each month I don’t show profit. What works to track expense of product made by sold to show each month how much I am making?
What’s your biggest question about organizing and managing your business money??
Nice video
Is it necessary to setup vendors in Quickbooks to run a company?
Have you heard of an IBC policy. Aka a infinite banking policy. If so, how would you consider trying to add that to your business
Sole proprietor that doesn't receive 1099 from customers - how to track money in a way that will allow one to apply for personal loans (like for a house or car)
especially if the amount varies from week to week.
As a retired accountant who has advised small and medium-sized businesses at various times over a 50 year career, most everything Ms. Perkins mentioned in the video is spot on advice. Three points especially: register your business, keep your business money separate from your personal money (even though it is a pain in the rear to have to put money into your business account from your personal account every time you want to spend money if the business account is short of funds), and keep track of all transactions that are in any way related to the business whether they are cash or credit.
There are several points in the video where the explanation of terms is superficial out of necessity due to the shortness of the video and possibly as a marketing technique to sell memberships in the small business start-up program being sponsored (the cynic in me comes out). However, lack of clarity could get a person starting a business into trouble or result in misunderstandings that cause huge headaches for the business owner.
Owner's Equity - the explanation in the video (at 1:34) is that subtracting liabilities from assets give the total value of the business. Not true. It is simply the amount of money that can be returned to the owner after all liabilities are paid (assuming that the business is using accrual accounting). The value of the business is independent of the calculated Owner's Equity. It is very possible to have a business for which the Owner's Equity is large, but the business has no value in the market place.
Gross Profit - the video defines (at 2:53) gross profit as an alternative term for revenue. Not really. Gross Revenue or Gross Sales is the total money value of all items or services sold in the course of business. Net Revenue or Net Sales is Gross Sales less any discounts or a few items of expenses that are directly related to selling & delivering the items or services. Gross Profit or Gross Margin is Net Revenue or Net Sales minus the costs directly associated with making the products or delivering the services that are sold. The types of items included in each category may be different depending on the type of business.
Cashflow Statement and Balance Sheet - the explanation (starting at 1:53) of the link between the two statements ignores the effect of cash basis accounting, which is a legitimate accounting method and may be beneficial for small businesses. The definition of Profit (at 3:08) may also be different depending on whether accrual or cash basis accounting is used.
The recommendations for accounting software to use also have the potential to create problems for someone starting a business. Not because the recommended programs are bad. Rather, when it comes to accounting for a business in order to meet tax, bank lending, or investor reporting requirements, there is a significant potential for someone not trained in accounting to make mistakes in setting up the software and recording transactions, even with the most user friendly accounting software. Those mistakes could cost the business more money that going to an accountant in the first place.
My concerns about incomplete or somewhat inaccurate information could have been addressed early in the video simply by shortening the section on accounting to emphasize the need for a complete set of financial statements and the importance of keeping track of all business related transactions. Then, recommending that anyone starting a business search for and work with a qualified small business financial adviser, such as Virtual CFO Susan Boles with whom Ms. Perkins has partnered for the finance section of the StartUp Society she pitches at the end. It seems strange that a person who got her start in business by doing outsourced work for others would not recommend early and often that people starting businesses contract with those who use their expertise to provide services to others who need that capability, but don't have the expertise. There have always been local CPAs and qualified bookkeepers providing small business financial services. Since the 2008 financial crisis, there have been thousands of well experienced accounting professionals who have moved into virtual CFO services as a matter of necessity as mid- and upper level accounting jobs were eliminated. Both local CPAs & bookkeepers and virtual CFOs can provide services that go far beyond simply keeping accounts for a starting business, in addition to making the transaction recording a lot less of a headache for the business owner.
thanks much Richard for your thorough analysis. Very insightful - could I scratch your brain :D May I ask how do you pay yourself as self-employed if you don't have a set amount of money that you are bringing every month? How do you create a salary for yourself? tips? recommendations?
@@fromstucktothriving - If your business is a sole proprietorship, partnership, or LLC, you would not be considered an employee and aren't paid in a way that requires reporting a salary and withholding taxes. If it is a sole proprietorship or single member LLC, any amount you set to take as what you might consider to be a "salary" comes out as an owner's draw. If it is a partnership or multi-member LLC, the money is taken out as a partner draw.
The draw can be recorded as either a reduction of Owner's or Partner"s capital account or a separate draw account can be set up within the Owner Equity category.
My recommendation would be to set the amount you would like to receive each month (of course within reason based on your average net cash flow each month). Then, take that amount out as a draw, even if that leaves to little in the business account to pay the bills. Record the draw in a separate Owner's Draw account in your accounting records. Then, if you need to contribute money during the month in order for the business to pay the bills, put the money back into the business account and record it as an addition to Owner's Capital Contribution. As your business cash flow increases, you won't need to make so many contributions back to the business and can eventually increase the amount of your draws.
That approach is a little more record keeping that putting all contributions and draws in the Owner's Capital account. However, the separate transactions between draws and contributions will make your records a lot more clear and easier to track in case you ever get audited by the IRS.
No matter how you decide to handle the draws for "salary" DO NOT EVER PAY PERSONAL EXPENSES FROM YOUR BUSINESS BANK ACCOUNT OR CREDIT CARD OR BUSINESS EXPENSES FROM YOUR PERSONAL BANK ACCOUNT OR CREDIT CARD. As soon as you mix business and personal transactions in one account, you provide an opening for the IRS to examine and question every penny that your spend and might claim as business income or expense.
If you would like to contact me directly, please search for me on LinkedIn. I think I'm the only, or one of the very few,, Richard Archer's listed on LinkedIn as being in Thailand.
@@worldcitizenra thank you so much for your kind response!!! I shall look you up! :)
This!!. It's the kind of advice my husband gives the kids -- and he's had a successful small business all of their lives that paid for their college degrees. Wise!
I’m blown away by how much GOLD you fit into 10 minutes!!! Thank you!
Gillian always gives the best tips, don't you agree? 👋
Glad you think so!
Agree
This is a wonderful video. Great job and that's coming from an Accountant 😁. I just put together a guide for small businesses that touches on all of these topics. I haven't even had a chance to put together a video about it yet. You did it for me. I'll just send people here if they need a clear and concise overview.
You agree. Gillian is the best.🌟
I don’t usually comment but the way you explain everything is brilliant
I had difficulties with setting up financial business account, and it was my cofounder who helped me figure this out (he had another running business by this time). And yes, fast forward 3 years in operation, we’re still using spreadsheets on Google 😁
They really do work great!
@@gillianzperkins they do! And I thought I’m the old-timer here 😄
For me this has really helped, thank you
Absolutely awesome! Today is my first day being self employed and I am setting everything up. I have been loving this series so far! Thank you!
Oh, congratulations!! What an amazing journey you've just begun!
I have to confess that you lost me in the beginning with so many terms 🤣🤣 thank you so much for this video! :)
Sorry! I thought that might happen... hope you found the rest of the video valuable, though!
@@gillianzperkins Ahaha you don't have to be ;) glad you explain them nevertheless! Have a great rest of the week Gillian! 🥰
Your videos are very useful and provide lots of information. I have received lots of help after watching this post, please continue to share this kind of information. Thank you.
Thank you for sharing great knowledge bookkeeping, often entrepreneurs who just start their business concentrate on marketing and building the brand that they overlook financial side of it.
True! It's always a part of a business
Hii🌹
How are u?
can we be friends?😘
Thank you Gillian. You're always so clear and easy to understand.
Thank you for your help! This video is literally just what I needed to know. You always give so many options and it great.
Glad it was helpful! Love it when the timing works out like that.
Yeah, she always give us such endless valuable information...
Very well explained. It made me think about my college accounting courses, which I still have in my textbooks. I actually referred back to these books from time-to-time for a clear understanding. o
This video is great and needs to be bookmarked 🤓 Great tips! 👌🏻
Yay! Thank you!
Thanks from a complete beginner, this is helpful.
Hello Gillian you are sweetly explain of Basic- Thanks
Well done Gillian. You covered all the bases. Wish you greater success on your channel growth. I am already a subscriber.
thank you for this! i just started making money from youtube and i should probably start figuring this stuff out
It's easiest (and the least stressful) when you're just starting out!
Checked out your channel out of curiosity and it is lit! #vegan
Great words for any business!🙏🏼Will be sure to share 😎
Great ideas. Thanks for sharing !
Thank you for this video and making it simple to understand!!!
Thank you !!!!!!
Thank you
As usual, these are great tip. Thanks for sharing.
You are so welcome! Thanks for watching!
Thank you so helpful. I’m trying to setup my eBay reseller business. Now after doing it for 2 years. I did not make enough money the first two years. But now. I am starting to make good profits and already registered my business. Setting up business bank account next week.
Question? Should I track all back inventory and cost of equipment or should I just start from the day I open the bank account to keep everything even.
I do have past sales and past expenses. Should I include them. Or does it only go off a yearly basis.
Also is my net worth all the money I personally invested such as startup cost, inventory, shipping supplies. Does that count as a net worth. I’m so lost.
Great advice! Really well explained too :)
Best!!thank you so much
TY
Awesome video thank you!
Glad you liked it!
Thanks for the great video
GREAT
Gillian why do small business owners use a CPA that can't (or won't) also do their bookkeeping?
Good sensible help
Thanks for the positive feedback!
Thanks Gillian! Another great episode :)
Looks like the "Great (more affordable) alternative" in your Filming Equipment links to a camera that is currently unavailable. Any other recommendations within that entry price range? Thank you!!
Thanks for the heads up! And yes, I'd recommend the Canon m50. You can find it at amzn.to/3pqHSyV
Nice tips
Thanks!
In Australia most businesses use Xero for bookkeeping
excellent work
Good video Gillian,
Glad you enjoyed it!
You need to stop saving money and start investing it into things that make you more money
note to self: quickbooks, freshbooks, wave.
Good
Good
1x(3/30/22)…1…done
2x….2….done
👌
Is there a difference between accounting software and bookkeeping software?
Not from a layman's perspective, at least. :)
My problem is that I buy products then sell over a period of time. I’m required to make a small amount each month for medical help. If I buy 100.00 in product and sell 20.00 each month I don’t show profit. What works to track expense of product made by sold to show each month how much I am making?
If you use the accrual method of accounting, rather than the cash method then I think that will solve your problem.
Which software is best
You can create an inventory account for inventory purchases and only record it as Cost of Goods Sold when you make the sale.
Thanks for this Video Gillian.... aabhie__@instagram
Wrìte up for more infö whats>>>{app}
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