Bookkeeping: A basic formula?

I’ve been going on about leveraging our businesses for activism. It can be an exciting and empowering topic. I’m sorry to disappoint, but maybe we should switch gears to talk about bookkeeping? That is the work I do that brings in money. I know… it’s generally boring. At least to folks that aren’t me. We can go back to activism another day. But today… Bookkeeping!

Wherever you’re at with your business, solid bookkeeping should be a priority. It helps you understand the health of your business. And when your business is healthy, it enables you to do more things (like activism). Having your numbers categorized efficiently gives you an understanding of how your efforts in your business are working. (There are other uses for bookkeeping, but this is the one that makes me happy, so I’m talking about that - Come back another day to talk about taxes.)

Let’s talk about the basic formula, and then I’ll tell you some stories.

Do you know the basic formula? It’s super simple. As you categorize your transactions, they generally go into Income accounts or Expense accounts. (It can get more complicated than that, but this is the part we’re focusing on today.) So the basic formula is Gross Income (all your transactions assigned to Sales and whatnot) minus Expenses = Net Income. And this is how you can tell how much money your business is making (or not making). Essentially.

Once you understand that part, it opens a whole world. You can see where your money is going. And you have the power to change it! (If you don’t like the picture you’re seeing.)

Ok, so story time!

I have two clients that I often tout as my biggest stories.

The first one: She came to me, super stressed by her books. It was causing her to spiral and heavily doubt herself. It became part of a narrative of negative self talk that she had. “How can I be a business owner? I don’t even understand this one thing! Maybe I should quit.” We’ve all been there, one way or another. I was able to organize her books and bring her financial clarity. Last year, we were going over her books and we had a Holy Shit! moment. Her Gross Income doubled from the year before she started working with me.

This isn’t a normal occurence, and there’s another lesson that I usually pull from this. But from that information, we were able set a course and plan for the following year. This year, the client got set up for payroll. She made about the same amount of money, but we worked with the accountant for tax planning purposes and she’s probably going to be paying in less for taxes. (Ugh. There it is. We had to talk about taxes.)

The second one: She was a budding entrepreneur when I met her. Like me, she kinda fell into it. She saw a need in her community and wanted to do something to meet it. (Very much a matter of entrepreneurship as activism situation. So hey, we did get to talk about it today!) But she was floundering. She didn’t know how to price her services. Everything was everywhere all at once. I was able to help her create systems. She built on that and her business is thriving. It grew beyond her initial vision of “let me do this one thing,” and now she has a whole team of people that are carrying out her vision. She was able to think bigger than when she first started out. And to help more people. Because she had a foundation to build on.

I have a few other stories, and we’ll get to those another time. Maybe I’ll go on a tangent and tell stories from when I was working with folks that were really unaligned with my values.

But if you read the above stories and thought “Hey that’s me!” (Metaphorically). Yes, it was written for you! Hey bestie hey! We can go over your numbers and develop plans to grow your business. And if you don’t even know what your numbers are at this point, that’s ok too! Reach out and we’ll figure it out together.

You can go to the calendar on the bottom of my homepage to schedule a time to chat:www.phoenixgrowthsystems.com