Speed Can Kill! (At Least, It Can Seriously Harm The Bottom Line)
There’s a guy I know named Albert (not really), whose nickname is Speed (really), because he’s always in a hurry. And this is the sad tale of how Speed started his real estate investment business.
It’s sad, because Speed definitely rushed into things without giving much thought to his bookkeeping and accounting.
More...
“I bought a run-down house, fixed it up, and sold it for a nice profit,” Speed told me. “Here are all the expenses I had. I used the profits to buy another place, which I’m renting out, and I had more expenses for getting that all set up. Good cash flow. Gonna look for another place to flip. Add this all up, okay? Gotta go. Bye.”
“Wait, wait, wait!” I responded, barely catching Speed’s attention before he went cannon-balling out the door. “I have questions. How did you pay these expenses? What documentation do you have? Do you have statements from your business bank account? What do you want me to do with this?”
“That’s a lot of questions,” Speed said. “I’m hoping you can fix this up into some books that I can give to my accountant at tax time. I didn’t have time to open a business account, so I just paid these expenses myself. You have my documentation – I just handed it to you!”
“You handed me a napkin with some numbers written on it,” I said.
“I didn’t have time to find a piece of paper. I didn’t realize you were all fancy like that.”
“It’s not about fancy, it’s – well, do you have receipts? Credit card slips? Cancelled checks?”
“Yeah, probably, but who’s got time to look for all that stuff? I paid some with my debit card, some with a credit card, some with another credit card, some cash, some by check, and one guy let me fix his car in exchange for doing some landscaping. I wrote it all down on the napkin.”
Needless to say, helping Speed with his bookkeeping has been a challenge. And there’s been nothing fancy about it.
If I could’ve slowed him down for just a minute, I’d have given Speed a few suggestions before starting his business in such a haphazard way:
Open a business account at your bank. Use that account to pay all your expenses, and keep good records of all pay-outs. Also deposit all your business revenue (property sales, rental income, etc.) in your business account.
While you’re at it, it might be a good idea to establish a bona fide business entity, such as a Limited Liability Company (LLC)… and it’s a great idea to have different LLCs and bank accounts for each of your businesses if you have more than one. Not all businesses require separate entities. Your Friendly Bean Counter (FBC) (me) can work with your attorney and/or accountant to help you determine the right business entity or entities for your enterprise.
(For instance, Speed would’ve been smart to have separate entities for his rental business and his “flipping” business, since taxes are figured differently for different kinds of business operations, and Speed could’ve realized some tax benefits and other savings.)
Don’t mingle your personal funds with your business funds. Doing so makes a big mess that’s hard to sort out at tax time, and in some cases, it can invite an audit from your friends at the IRS. You’re also likely to see some impact on your tax rates, both for the business and personally.
Perhaps most importantly, get help from your FBC, and set up a workable chart of accounts that makes it easy to see where money’s coming from, and where it’s going, in each of your lines of business.
If Speed had done these things, not only could he have possibly saved money on taxes, he would’ve had the kind of information that would help him make good business decisions.
Are his rentals more profitable than his flips? Are some vendors providing more value than others? Without solid bookkeeping, Speed would have no way of analyzing how his business is doing!
When you’re ready to start your business, reach out to your FBC. Let’s get the company started the right way.
There’s always time to get it right, Speed!
Discussion Questions
- 1Are you always so rushed that you don’t have the time to read the rest of
- 2Do you have time to find paper, or do you write everything on napkins?
- 3Are you ready to start your business the right way, with good advice and service from your FBC?
Don’t forget: at DK/RK Services, you’re always “more than a number.” We WANT to take care of your bookkeeping, professionally and personably, so you can focus on running and growing a great business enterprise! Please check out our many enthusiastic FIVE STAR online reviews (Yelp, Google, Facebook, you name it). We look forward to earning our next great review from YOU.
You know someone who could use valuable bookkeeping insights… or, at least, a smile.
You know you do.
Forward Bean There, Done That to them… if they subscribe, you both win a prize!*
(* Prize is FREE editions of Bean There, Done That)
(Offer void where prohibited, but perfectly acceptable in Cannon Ball, North Dakota. Deadline is void where prohibited, too. No cash value. Not water soluble. Good luck!)
Not yet subscribed to "Bean There, Done That"?
Howl-dy! I’m Sadie.
Dottie is my person.
Sadie’s Paw Prints
Tick The Protection Box For Your Dog
If you’re a person who’s lucky enough to live with a dog, you have some important boxes to “tick” when it comes to protecting your dog during the warm summer months.
Woof, Sadie here – Dottie’s overseer and faithful canine companion – and this month I’m barking about the need to protect dogs from the nasty infections that come from ticks.
First, talk to your landscaper (which may mean talking to your spouse, in some cases) and find out what they can do to reduce the tick population in your dog’s yard.
Get your property sprayed. There are some good products out there that kill ticks, but don’t harm your fur buddy.
Also, talk to your vet about collars or other products which help protect your dog from these worrisome little blood suckers. And while you’re at it, ask your vet to help you come up with a treatment plan in case your dog gets tick-infected.
Finally, you should check your dog for ticks when she’s been outside playing (or protecting you from such dangers as noisy trash trucks). If you find a tick, get rid of it right away!
Your dog works hard to be your Best. Friend. Ever! The least you can do is make sure she doesn’t have to worry about ticks.
Bow, wow!
Non-Profit Spotlight
Have A Great Time Helping A Great Cause
At DK/RK Services, we’re very proud to support the Katie Adamson Conservation Fund (KACF).
KACF does amazing work all over the world to help preserve and protect wildlife, and to support the people whose lives are impacted by (and connected to) the important work of conservation.
Katie Adamson herself will always be remembered as one of the “bright lights” in the conservation world, and for her courage, her sense of humor, and her deep love for all living things.
Each year, KACF hosts a wonderful gala event known as “Katie’s Night,” during which patrons can learn more about the exciting work KACF’s doing, and enjoy great entertainment, too.
Check out the KACF website for more information on upcoming events, as it’s made available:
https://www.katieadamsonconservationfund.org/
… and while you’re there, consider making a donation to help further the important work of this fine organization, headquartered right here in Denver.
Thank you!
