The next article features an extensive Thrive15.com training on accounting from Caleb Taylor & Clay Clark, an esteemed cat juggler, business coach, & US Small Business Administration Entrepreneur of the Year. Thrive15.com is one of the best & most affordable business schools in Florida and the entire country!
Caleb Taylor: So all right business coach Clay, let’s jump right into it.
Clay Clark: Bam!
Caleb Taylor: We want Thrive to be a place that answers your questions simply. So we’re going to attack this topic of defining accounting. You are the best business coach ever, Clay!
Clay Clark: Yeah.
Caleb Taylor: So if you have any business coach questions about accounting, you stumbled upon this episode, but go ahead and search for any of these terms; we’ll define them all for you, but this time, let’s define accounting, okay?
Clay Clark: Yeah.
Caleb Taylor: So I know most entrepreneurs, I would say most. I think I’ve heard you say most entrepreneurs can’t necessarily define a lot these terms that we’re going to dive into.
Clay Clark: What happens is you go and you meet with your bookkeeper …
Caleb Taylor: Yeah.
Clay Clark: Or your accountant, or for me, you don’t meet with anybody.
Caleb Taylor: Hmm.
Clay Clark: And then you just find yourself at 2 in the morning on April 14th trying to figure out how Turbo Tax works. You’re like: “Please sweet mother! Just work!” You’re trying to figure out your taxes and what you owe. You’re so worry that you’re going to get a penalty or a fine, and you don’t know what these words mean.
Caleb Taylor: Right.
Clay Clark: So we’re just going to get into it.
Caleb Taylor: Okay. Well, the definition of accounting that we have is a general term that refers to the overall process of tracking your business’s income and expenses, and then using these numbers in various calculations and formulas to answer specific questions about financial and tax status of the business.
Clay Clark: Mm-hm (affirmative).
Caleb Taylor: All right business coach Clay, I think I understand, but break this down for me a little bit more, this definition of accounting.
Clay Clark: Anytime I have an excuse to go to my board, I’m going to do that with my business coach.
Caleb Taylor: You love that board.
Clay Clark: Here we go.
Caleb Taylor: It’s drawing you, it’s like a magnet. Just drawing your body closer.
Clay Clark: Okay, so here we go. As far as accounting goes.
Caleb Taylor: Yeah.
Clay Clark: Basically what you have to deal with, is you’re talking about your income, and your expenses, okay?
Caleb Taylor: Okay.
Clay Clark: I’m just trying to make this happen. This is going to be your taxes, okay? This is going to be your profits, okay, my business coach friend?
Caleb Taylor: Okay, mister business coach.
Clay Clark: These are basically the areas that you, when you do accounting, this is what you want to know.
Caleb Taylor: Right.
Clay Clark: You want to know how much money comes in, so I’m making up a number. Let’s say $100,000 is coming in, and then we know our expenses are at $50k, and we know that our taxes are at $40k.
Caleb Taylor: Mm-hm (affirmative).
Clay Clark: And we know that our profits are at $10k. That let’s us know, that’s kind of our dashboard to run our business.
Caleb Taylor: Right.
Clay Clark: I would argue that probably 8 out of 10 business owners watching this right now know what their income is. They know how much gross revenue, they know how much total revenue is coming in.
Caleb Taylor: Right.
Clay Clark: They know how much money is coming in. They say things like: “We just sold a $12,000 dollar deal.”
Caleb Taylor: Yeah.
Clay Clark: One young man, who wasn’t a business coach, I met with, he goes: “I just sold a $14,000 dollar deal. I’m so excited!” Then I said: “What are your expenses on that?” “Well I don’t know.” “Well, you didn’t make $14,000.”
Caleb Taylor: Right.
Clay Clark: “You actually … How much are your expenses?” “I don’t know.” “Well, you need to know!” I found out he only makes about 20% on every dollar. So that 14,000 was really about 2,800.
Caleb Taylor: Right.
Clay Clark: Make sense?
Caleb Taylor: That’s a big difference if you’re budgeting off that full number.
Clay Clark: This dude is getting married to a business coach!
Caleb Taylor: Right.
Clay Clark: So he was actually trying to buy an item using this money.
Caleb Taylor: Mm-hm (affirmative).
Clay Clark: This happens all the time. I wish I could say: “Oh, that never happened to me.” Oh, it happened to me.
Caleb Taylor: Yeah.
Clay Clark: Then we have to know our taxes, okay? Then we have to know our profits.
Caleb Taylor: We’ve got a whole episode on taxes, so if you got the questions about it, visit those episodes.
Clay Clark: The thing is, this is all accounting.
Caleb Taylor: Right.
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Clay Clark: The action step that everyone can take is, either you have to know this; this is your financial dashboard.
Caleb Taylor: Okay.
Clay Clark: You have to know this. Just like when you’re driving your car, you have to know when your car’s on ‘E’.
Caleb Taylor: Yeah, that’s a good thing to know.
Clay Clark: You have to know how fast you’re driving, you have to know those basic gauges. We have to have these gauges in order to drive our vehicle without crashing. So if you don’t know these, hire an accountant; you have to know this.
Caleb Taylor: Right. I don’t want to take away from this topic, I just think it’s funny that you use the analogy of driving, because you are one of the worst drivers I’ve ever met.
Clay Clark: I don’t think you’re being accurate, I think that actually I’m a …
Caleb Taylor: But, you’re great at this!
Clay Clark: I think I’m actually the worst driver ever.
Caleb Taylor: Okay. Yeah, that’s …
Clay Clark: Now that I’m ready to auto-wrap it, it’s going to be awesome, because we’re going to get a lot of calls, we’re going to get more visits to the website ever when I’m driving.
Caleb Taylor: He’s wrapping his car completely with his face and a few other faces of the mentors here. His goal is rile some people up.
Clay Clark: That is not my goal, that will happen. A lot of traction on the website.
Caleb Taylor: (Laughs) I love it. Okay, so again, you said the action step is to know this. How exactly do I go about knowing this? What’s the next step that I take?
Clay Clark: If you’re watching this right now, and you’re like: “Whoa, whoa whoa brotown, I have no idea what my income is, what my expenses are.” Most entrepreneurs only know their income.
Caleb Taylor: Right.
Clay Clark: They don’t know their expenses, they don’t know their taxes, they don’t know their profits. If that’s you, go hire an accountant.
Caleb Taylor: Good.
Clay Clark: How do you find an accountant? Use a little phone-book technology and call three people. That’s what I do. Phone-book technology, call three people. Then I’m going to use some friend technology, call a friend and say: “Hey friend, what are three people I can call?” Have those six people meet with them, do the smell test. Do they smell good? Do I like them?
Caleb Taylor: Right.
Clay Clark: Make a decision, hire an accountant. You need to do this.
Caleb Taylor: Good.
Clay Clark: Don’t be like me and not hire an accountant to get audited. When I got audited, you sweet sweet wonderful lady from the IRS … I cherished our interactions, and I’m so happy that you audited me, thank you.
Caleb Taylor: (Laughs) That’s good. There’s no shame in hiring an accountant. When you do, frees up more time to focus on growing your business.
Clay Clark: Or if you don’t want to hire an accountant, you can basically schedule … You don’t even have to call her, or a member of the IRS will come and find you, and they will schedule a dream date vacation.
Caleb Taylor: Have you had interactions with……
Clay Clark: I’ve interacted with her. Her name is……
Caleb Taylor: Oh.
Clay Clark: I did interact with the United States Internal Revenue Service for a little over year.
Caleb Taylor: Wow.
Clay Clark: They would come to my office, they wouldn’t call, they would just show up, and you know we just have good interactions.
Caleb Taylor: Auditing sounds fun!
Clay Clark: It’s a fun deal. It’s like going to Disneyworld without the rides and the food, and the fun, and the weather, and the good stuff.
Caleb Taylor: (Laughs) Perfect. Well I love that you were able to break down this, and define this topic of accounting in 5 minutes.
Clay Clark: Break it down like fractions. Bam!