Accounting is a drudgery, a dirty word for some - yet others have chosen to make it their profession. Beyond the pain of regular data entry, the benefits of having an accurate dashboard of where your finances are heading is well worth the effort.
Knowing where the money comes from and where it is being siphoned out is in itself useful. But the prize lies in the fact that you can now see things not only in proportion to each other but also how they have evolved over recent times.
In business you have to wear several hats to survive. You have to be the visionary to be able to see beyond your marketing horizon. You have to be the engineer to come up with a better gizmo your firm is renowned for. Finally you have to be the accountant so that you don't run out of gas (money) half way through your corporate journey.
This also applies to personal finances because you should treat your estate like a business. Sound accounting information will help you handle the thousand decisions that confront you regarding the use of money, the lifeblood of business.
Should you buy an asset outright or lease it? Don't take your accountant word for it. That's the wrong person to ask especially if getting a commission from the leasing company... (same goes with superannuation and investment funds...) Bear in mind that there are leasing companies out there whose goal in life is to return a profit for their investors. If that profit comes from you then it better bring an outstanding benefit. Otherwise be your own leasing company or buy something second hand at an auction. That's not the talk you will hear often from an accountant. That's why you can't play dumb when your money is at stake.
Another concept to grasp is depreciation, a fictitious expense to represent the decrease in value of the stuff you own due to wear, tear and obsolescence. Check out how much you could get on Ebay for the gear you bought 3 years ago. That will be a reality check. Again an accountant with their arcane art will fog you with mumbo jumbo rather than give useful information.
Now for the good part - do a cash flow forecast. Put into a calendar (spreadsheet) all your expenses at their proper due dates in the future and similarly enter all your expected earnings. See what the running total looks like. Plot it as a graph.
Knowing where the money comes from and where it is being siphoned out is in itself useful. But the prize lies in the fact that you can now see things not only in proportion to each other but also how they have evolved over recent times.
In business you have to wear several hats to survive. You have to be the visionary to be able to see beyond your marketing horizon. You have to be the engineer to come up with a better gizmo your firm is renowned for. Finally you have to be the accountant so that you don't run out of gas (money) half way through your corporate journey.
This also applies to personal finances because you should treat your estate like a business. Sound accounting information will help you handle the thousand decisions that confront you regarding the use of money, the lifeblood of business.
Should you buy an asset outright or lease it? Don't take your accountant word for it. That's the wrong person to ask especially if getting a commission from the leasing company... (same goes with superannuation and investment funds...) Bear in mind that there are leasing companies out there whose goal in life is to return a profit for their investors. If that profit comes from you then it better bring an outstanding benefit. Otherwise be your own leasing company or buy something second hand at an auction. That's not the talk you will hear often from an accountant. That's why you can't play dumb when your money is at stake.
Another concept to grasp is depreciation, a fictitious expense to represent the decrease in value of the stuff you own due to wear, tear and obsolescence. Check out how much you could get on Ebay for the gear you bought 3 years ago. That will be a reality check. Again an accountant with their arcane art will fog you with mumbo jumbo rather than give useful information.
Now for the good part - do a cash flow forecast. Put into a calendar (spreadsheet) all your expenses at their proper due dates in the future and similarly enter all your expected earnings. See what the running total looks like. Plot it as a graph.
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