Good data is incredibly important to making good financial decisions. If you don't know where you are or where you've been, it's hard to know if you're on track and making measurable progress towards your goals.
Today I've invited Ryan Marquez CPA, MSAT on the show to give an introductory overview. Ryan is an instructor in the Masters of Taxation program at Boise State University. He also runs a bookkeeping and tax business.
Enjoy this introduction to business bookkeeping systems!
Joshua
Show Outline:

Overall Theme

Change Your Mind Set on Bookkeeping and Accounting

Accounting is the Language of Business
Don’t need an accounting degree or CPA designation

However, should try to understand basic concepts.


Bookkeeping = getting accounting information organized so that you can start to make better decisions about your business.

Some information you can get out of good bookkeeping is:

Which areas of my business make the most money?
Getting a high level picture of expenses so you can analyze and see where costs can be cut.






Accounting Needs to Be Simple

If you follow one rule… accounting needs to be SIMPLE.
Two Reasons:

Complicated provides little value.

Large spreadsheet hard to process and takes time.


Complicated has less likelihood of getting done.

Entrepreneurs want to be out running their business, not sitting around doing bookkeeping and analyzing reports.
Simple system = less time doing and analyzing numbers.








Source of Funds

Open Business Checking Account & Credit Card

Only run business expenses through this account AND run ALL business expenses through this account.

Put business in this account and personal in another account.
DO NOT mix the two.


The reason you want to do this…

Everything is in one place and electronic.

Less likely to lose deductions.
Everything will be on statements. One can go down and categorize.


Avoids having a box of receipts that you have to sort through, figure out what is business vs. what is not, try to make sure nothing is double counted, etc…


How to get a business account

Go to a bank and open a business checking account and credit card (debit cards are fine… the point is an electronic payment method that will show up on a statement)
Will likely need two things:

EIN from IRS. Can do online. Will get letter by paper / electronic.
SOS documentation. In Idaho, just fill out a one page form. The SOS will stamp and mail back.






Avoid Cash

I know a lot of people like to use cash. However, I like to recommend not using it for business purposes.
The reason I recommend not using cash is.

Easy to lose track of.

Receipt could get lost, accidentally thrown away.
Pay with wrong source of “funds” or “cash”.
Main reason is the transaction is never recorded at all.

Want an accurate picture of your business.
Lose tax deductions.




Gets more important if you have multiple businesses.

Take what I just mentioned, and multiply it by 2 or 3 times and that’s how complicated it can be.
Tough to remember which business it was for.


Cash adds complexity to the accounting system.

Doesn’t sound too complex, but it’s just one more thing you have to do / remember.
When you’re trying to rack your brain to figure out what was paid for… it can get complex, but most importantly it can become frustrating.


You’re most likely not going to find cash on a bank statement, which makes it harder.






Recording the Transaction

Use Accounting Software Such As QuickBooks / FreshBooks

You want to do this because…

Saves you time.

Mainstream accounting software is made for non-accountants to be able to follow and use the software.






Use App or Other 'On the Go' Software

Easy because you can pull up your phone and categorize transactions on the go.

I’ve found people that do this almost feel like they’re not




Keep A Balance Sheet

The balance sheet is important because in business you're always going to have people that owe you money or people that you owe money to. In addition,