For sure, that’s what I’m trying to record - my pledge of funds to the business so the business can then spend the funds. My intention is to pledge exactly the amount the business requires to pay it’s bills, as they come due and are paid.
I think I follow that, maybe that’s all I need to do. Each time I make a payment, be it for goods or services I just add a negative line for the total amount to Owner’s Equity account. Seems simple enough. I’ll try going down that path. Thanks very much.
I guess this is just an example of my accounting ignorance, but I can’t see for the life of me why it makes one iota of difference if I take my money out of one bank account and put it in another and call it “Business Equity”, or if I just record it as such within my records. In both cases it’s just a record on a piece of paper (or in a database). Surely it’s like budgeting to buy a car for example - I don’t need to open a bank account called “Car”, I just keep a record of how much I’ve put aside each week?
As I said, the main thing I need at present is a clear picture of my real COGS so I can set my pricing to provide a functional margin. If the business is viable longer term then I’m going to have to use an accounting package, so I might as well learn one now while the business is tiny. Manager seems a nice package that can grow if the business does. So I just need to learn how to enter my records correctly in Manager.
This is a business that at this stage is likely to have something in the realm of 5-10 transactions a month, it’s not that complex. If it looks like it’s going to grow significantly I’ll incorporate and structure it “properly”, with input from my accountant. If it’s looking like it’s not going to grow then I’ll either toodle along as a bit of a hobby or forget it. I really don’t care which way it goes - making some good money is nice, retirement is too.
How much money the business owes me? That’s in Manager.
How much money is in my bank account? I get a statement which shows that.
If I’ve neglected to enter a transaction into Manager? That’s possible, but in the short term fairly unlikely with the small number of transactions happening.
The tipping point for when to incorporate and isolate the business from personal accounts will come from liability issues more so than financial, and it will occur well before the business volume grows significantly larger than the few transactions a month, there is no doubt about that!
As a business owner;
- Yes I’ve other tasks to do, but the fact is doing the record keeping is one of them at this stage, like it or not, so I just want to get the process correct from the start.
- What that tells me is that I need to keep good records of my own. Irrespective of which bank account holds the money. So why would I muck about with another bank account, fees, time at the branch etc just to simplify finding 5-10 transactions a month for a few months? If the business proves viable I’ll be closing that account and opening a new one in the Company name. Doesn’t make sense to me.
- FYI after a couple of decades of reconciling bank accounts fairly carefully with no significant errors to speak of, I gave up on wasting my time on such fruitless and tedious activity. I glance down it looking for the big dollar amounts I expect to see and for any glaring anomalies and call it quits. Yes, maybe I’ve lost some money by doing that, but the chance is fairly small, the amounts probably also, and I haven’t missed it so who cares? So perhaps I am going to let my bank off the hook!
You’re right, nothing will convince me to setup another bank account at present.
I must be an accountant’s nightmare