In a previous edition of M3 Weekly, we discussed the theology foundation and practical benefits of good accounting in our missional businesses.
Today, we address some practical guidance for good accounting, especially for beginning entrepreneurs.1
For entrepreneurs in the early stages of building a business, there are several accounting tasks to address early in the business lifecycle, including:
- Gain a basic understanding of accounting principles, controls, and financial statements.
- Determine who will be performing the bookkeeping duties. Even if you outsource to a CPA or bookkeeping agency, there is likely a need for someone from your team to maintain records throughout the week.
- Consult a tax advisor. There are special considerations and strategies for self-employment or other legal structures.
- Choose an accounting platform. There are a variety of cloud-based or desktop platforms that range in price and sophistication. Consider whether you will have inventory and/or payroll, and whether you will want to integrate a point-of-sale system or bank/credit card accounts.
- Consider establishing a separate bank account. This can be beneficial for legal and tax purposes.
Some of the basic financial statements for an enterprise include:
- Balance Sheet: Shows a snapshot of assets, liabilities, and equity at a certain point in time.
- Income Statement / Profit and Loss: Shows cumulative revenue and expenses for a set period of time (usually a month, quarter, or year).
- Cash Flow Statement: Shows the cash coming into and leaving a business from operations, financing, and investing.
A primer on basic financial accounting is included in Chapter 19 of Business As Mission in a Nutshell – All the Basics: The Essential Road Map for Christian Entrepreneurs, by C. Neal Johnson, reviewed in a previous edition of M3 Weekly.
In addition, you can benefit from taking the time to introduce yourself to the following helpful websites:
- Small Business Administration new business guide: https://www.sba.gov/business-guide
- Accounting platform recommendations: https://bestaccountingsoftware.com/best-accounting-software-startups/
- Accounting and bookkeeping education: https://www.accountingtools.com/summary-bookkeeping-basics
- Accounting cycle checklist: https://quickbooks.intuit.com/accounting/small-business-accounting-checklist-10-things/
No matter where you are in your development of a missional business, a better appreciation and understanding of accounting principles will enhance your ability to lead well.
Verse(s) of the Week:
Be sure you know the condition of your flocks, give careful attention to your herds; Proverbs 27:23 (NIV)
Let’s meditate on this verse (and the rest of chapter 27 of Proverbs) to better appreciate the importance of knowing the amount and type of resources God has provided for the work he has entrusted to us.
Once again, we are grateful for the special contributions of Hannah Greene to this edition of M3 Weekly. Ms. Greene is a CPA, a member of the US Navigators Missional Enterprise Leadership Team, and currently works as Corporate Controller for a mid-sized international manufacturing company.