PART 2: GETTING THE BEST RETURN ON INVESTMENT: How You Are Going To Control The Flow Of Money
It is very feasible to start and run a successful business selling hand made products. This series of articles introduces you to the things you will need along the way as you develop your business financial management road-map, and seek to get your best return on investment (ROI).
Controlling The Flow Of Money
These discussions here are not a substitute for consulting with a tax attorney or accountant in the state you do business in. These professionals will be more current with local, state and federal requirements. The discussions here are a guide to help you get organized, and to help you ask the right questions.
Below I discuss things like:
— understanding business costs and revenues
— when you work out of your home
— setting up a general ledger
— understanding business assets and liabilities
b) ROI: Tracking Your Costs and Revenues
You set up an accounting General Ledger to track revenues and expenses, and assets and liabilities. Your goal here is to adequately account for your expenses and revenues, and your liabilities and assets.
What are business revenues?
Business revenues include all the money coming into your business, including payments for products and services, interest on bank accounts and investments, rent you charge others to use your space or equipment, royalties you get from intellectual property.
What are business expenses?
Business expenses are ANYTHING THAT HAVE TO DO OR RELATE TO OR CONTRIBUTE TO MAKING A PROFIT.
You might want to secure copies of IRS publications that define each business expense and how it should be accounted for.
What are business assets?
Business assets are the current values of your physical property, from desks to chairs to computers to printers to major software packages. These are things which depreciate, that is, lose value over time.