Flowers are more exciting than accounting!

This week, we are going to tackle the big UGLY A word: Accounting.  Now, before you turn off your browser and hide in the corner in fetal position, let’s set some boundaries.  These are my HUGE RULES for teaching people accounting:

  • You are not an accountant and that is OK.
  • I don’t expect you to become an accountant.  (I went to school for 4 years, took a gazillion exams, wrote a trillion case studies, and worked in the field for 3 years to have a small expertise in accounting.)  You do not need another career.
  • Accounting math is not difficult.  Accounting involves 4th grade math: addition, subtraction, very little multiplication and maybe some division.  The math is not hard.  Open your mind.
  • Accounting terminology can be challenging.  It is a new set of words, ideas, and language.  But who said you can’t learn a new language?  My goal is for you to have a “tourist fluency” in this language.
  • If you can swing it, hire someone to do your accounting.  However, educate yourself enough to understand “the big picture” of your business finances.
  • You MUST learn the NUMBERS to your business in order to truly understand what your business is doing.  Without knowing the numbers, you cannot truly gauge its success.  (Are you making money, honey?)

People often shut off from understanding “the numbers” of their business because of a traumatic school experience with math.  The truth is that math is a small part of accounting for your business.  It’s also not as exciting as the “pretty” things in the wedding industry: flowers, paper, love, music. But, keep this in mind: you have a business above all the “pretty” things.  So, I’m going to set you straight.  We are going to start off this lesson in accounting from the VERY beginning.  Today we are going to get you organized!

Knowing your Numbers Step #1: Get Organized

I haven’t done any hard research on this, but I’m going to guess that most small business owners who do not know their numbers don’t have this first step down.  You must get yourself organized.  Without this first step, none of the other steps will work.  Find a system that works for you.

Here are my tips for getting organized:

  • Set up file folders to hold your receipts for the entire year: one month per folder.  (I organize mine by month, but you might have different needs.)  Keep it simple.  Label 12 folders: January 2010 through December 2010.
  • Use a labeler to label your folders. (I love my Dymo labeler.)  This is SOOOO silly.  I read it in David Allen’s Getting Things Done book.  It’s something psychological about seeing them neatly labeled.  I don’t get it.  But it works!  Don’t use the computerized/printed labels because you won’t want to set it up every time you need another file folder labeled.  (Trust me – I’ve done it the other way – handwritten or computerized – and failed at this system.)
  • Label a 13th folder: Accounting Inbox.
  • As soon as you get a receipt or an invoice, place it in the accounting inbox file.  (No need to file immediately.)  Just get it out of your way; get it out of your distraction.  You can do this for client invoice copies and bank deposit slips too.
  • Use fun folders.  If this floats your boat, do it.  I tend to get tired of patterns quickly, so I stick with boring manila.  I also hate when a pattern is discontinued and then I have discombobulated/mismatched files.
  • Keep these file folders out of view but accessible.  You must be able to file things away quickly and refer to them when needed.
  • Pick a day in the last week of every month.  It can be the last Monday of the month if you like admin work on Mondays.  I like the last Friday of every month because I like the finality of it.  I like to “wrap things up” before starting a new month.  Now – write down “Accounting Day” on your calendar for the next 9-12 months out.  You will be using this day each month to process your “accounting inbox” file.  (More on that later this week.)
  • Maintain. Your system is only as good as you use it.  Find a system that works for you and that you can maintain.

That’s it!  You are now organized!  You are one step closer to KNOWING the NUMBERS of your BUSINESS!  I love it. 🙂