What is Bookkeeping?

Hey there.

So we are talking about bookkeeping today, and this is

really the meat of the course.

And so, um, listen up, and hopefully you learn something

out of it.

Um, I first want to start with the definition of

what bookkeeping is, and really, it's simply the process of

recording financial transactions in your business.

Um, I've broken it down into mainly three different things.

Um, and those are basically one tracking income and expense

transactions to invoicing for your service or for your product

and accepting payment and then three pain yourself.

Um, so I want to go over and talk about

all three of those individually and move forward from there.

So first, let's talk about tracking income and expense transactions.

So really, you can keep this simple and just start

with a journal, just a notebook, if that's what you

want to do.

Um, if you prefer a spreadsheet, then Excel or Google

Sheets would be just fine.

Um, but you can start there, and then from there

you can determine if you should maybe look into a

bookkeeping software or something else.

But first start with a journal or spreadsheet, and then

it's really important to keep track of, um, income, but

I'm going to go into talking about expenses, mostly.

So, first of all, with income, you do wanna make

sure you keep track of it, keep track of the

date. Keep track of what you sold, what service or

what product it was.

And the amount.

Um, it's just that's important because it will be reported

on your tax return.

But let's talk about expenses and how and what you

should record for your business expenses.

So first you need to keep track of, um, when

the purchaser the exchange transaction happens.

So the date of the expense item and then who

did you pay?

So write down who you paid the money to.

Um, sorry.

Excuse me.

Um, yes, who you paid the money to?

And then, um, what was it for?

So it could have been for, like, your phone or

for a computer or for a cup, a keyboard?

I'm just looking at what's in front of me.

Um, whatever that business expense transaction was, and then, um,

how much it was for?

So you want to keep track of the amount and

then going a little further back to what it was

for. You're really going to categorize that expense into, um,

a certain department, basically.

So I do have a list of categories here that

I want to go over with you.

Um, so you might want to write this down.

Um, maybe get a piece of paper and a pen

and write these categories down.

Um, but really a business expense transactions probably gonna fall

into one of these.

So it's going to be maybe advertising the vehicle expenses,

memberships, contract labor, utilities and repairs, business insurance, professional services,

business supplies and business meals.

Um, there are a few others, but, um, these are

really the main ones.

What? Where you might the most common that you might

be using.

Um, if you do have any questions on maybe what

an expense items should fall into.

Um, I do know that I've had a couple questions

and, um, just f y is like, hey, I have

some questions along this line.

So, um, definitely feel free to send me your question

whether it be in my email or the Facebook group.

Um, I don't mind answering those.

And then I understand that sometimes there's a gray area.

So I will give you my professional opinion.

And, um, it will be ultimately up to you to

decide what you will do.

Um, so let's see, let's go into the next section

of what bookkeeping is.

And that's really, um, invoicing for services and accepting payment.

So this is where you ask yourself, How are you

going to charge your clients or your customers, and how

are you going to take payment?

Um, so really, In accounting, we when we charge a

client, we usually send them an invoice.

That's the term we use, and that's actually basically just

like a bill.

So when we get a bill in the mail, that's

an invoice that the company is sending to you.

So, um, how are you gonna send an invoice to

your client or customer?

And it can be as simple as using Microsoft Word

and preparing that invoice with the date on it with

what you're providing your customers or your client and then

the amount, um, it could be that simple or there

are bookkeeping.

Software is out there, for example.

I use QuickBooks, and there is an option that says

invoices within QuickBooks and I can, um, creating invoice in

there and then email it to my client.

And they can hit pay now.

And, um, the transaction will go through.

They can use their debit or credit card, and then

QuickBooks actually records the transaction for me.

And so it's pretty easy to do the bookkeeping and

to match, um, the money I received in my bank

and then the invoice that I created.

So, um, that's an option.

And then you have to think about how you're gonna

take payment, Um, and then get that money into your

bank account.

So with accepting credit and debit cards, there usually is

a transaction fee of around 2 to 3%.

And I really don't want you to shy away from

that, mainly because, um, that's kind of the cost of

doing business.

So you have a couple options here where you could

maybe increase your increase your the price of your services

or whatever you're selling, um, to include that 2 to

3% fee in there.

Um, and, uh, let's see, like, move it to your

client, or you can basically just, you know, think of

it as the cost of doing business And if 2%

means a lot to you, I can only imagine what

that 98% that you're truly receiving really means to you.

So, um, maybe kind of just think of it that

way and, um, go from there.

So another way to collect payment would be with cash

or check, which is totally fine, but, um, a little

more legwork there and timing issues.

So one more option would be through, like, an electronic

payment or a CH.

And sometimes banks have fees with those.

But, um, it's something to look into, if that's what

you want.

Um, in that case, you are probably going to have

to collect the routing number and the account number from

your customers.

So just keep that in mind.

Um, let's see.

And then let's go onto talking about paying yourself.

So I think this is the fun part, and this

is the most like, um, important for me.

I think is being a business owner.

Um, I truly believe that you should pay yourself first

from your profit, and I know that's a pretty bold

statement, but I kind of want to go into talking

about what profit really means.

And so, um, first of all, let's take a step

back. And, you know, we just talked about you invoicing

for your services and accepting payment.

Well, that payment, that money that's coming in, that is

called revenue.

That's your income.

Revenue income can be used interchangeably.

Um, but then you have your business expenses on top

of that so we don't talk about those to where

you're going to be categorizing those, um So what you

do is you take your revenue or your income minus

your business expenses, and then that number that you get

to that's your profit.

Or, in other words, it's your income net income.

So I like to use profit for that number.

But if you do have a profit, then I think

I truly believe that you should be the first one

to be paid from that profit to invest back in

your company.

Your business.

You are the secret sauce in your business, so your

business wouldn't be successful without you.

And so you should compensate yourself for that.

Um and then it's up to you to figure out

how how else you want to invest your profit back

into your business from there.

Um, I think that, you know, you may be asking

yourself Well, how much of that profit do you pay

yourself? Well, honestly, for me, it's 30 to 40%.

It's a pretty big chunk, but again, your business wouldn't

be successful without you.

So you should be keeping yourself happy, Um, and how

you pay yourself.

Well, it's really simply simple as, um, either writing yourself

a check from your business checking account.

Or you can transfer from your business checking account a

certain amount to your personal bank account.

And then that's it's just called a transfer to you

Owner's Equity, um, or from honors equity.

And it's as simple as that.

So again, I think that you really should be.

I wouldn't even call it rewarding yourself.

You should be compensating yourself for the work that you

put into your company.

Um, so that's a little bit of what bookkeeping means

to me and how I like to teach it to

others. Um, I did quickly go over all of this,

So if you do have any questions, please, please, please

reach out and ask me any questions.

There's no dumb questions, Um, and in In summary, we

just talked about, um what bookkeeping is by breaking it

down into three different things which are tracking your income

and your expense transactions.

Invoicing for your services and accepting payment there and then

paying yourself so until next time, I will see you

later.

What is Bookkeeping?

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