Why Does it Matter Where an Expense Goes?
Have you watched the Netflix series, Get Organized with The Home Edit, or read their books? Um, yeah, I have. Binged both/all. I also follow their Instagram account, and confess to coveting their super-organized refrigerators, pantries, linen closets, offices. There’s something — at least to my Capricorn self — so very soothing about everything prettily in its place.
So you see what you have.
So you don’t waste time.
So you don’t waste money.
Oh, I am most definitely in the Clean Desk-Clean Mind club (as opposed to the Clutter is Creative Club).
Of course, if you know me, this is no surprise. And given what I do for work — helping small business owners track, understand and grow their business money — again, no surprise. But here’s the thing. When it comes to your numbers, it 100% matters where you put them, what you call them (Office Supplies or Cost of Goods Sold or Dues or Other Business Expense). It matters what “container” you put them in. For many of the exact same reasons.
So you can see what you have (i.e., how much cash, how much debt, how you spend).
So you don’t waste time (so you can make the best decision based on the most relevant and clearest data).
So you don’t waste money (so you can see how much you spent on Facebook ads, for example, compared to how that translated into sales, for example, so you can make a good decision about whether it’s worth it).
Often people ask me, At the end of the day — i.e., when it comes to taxes — isn’t all just the same anyway? I just get taxed on what’s left over, right, so who cares about where I put this expense? Well, ok, sure, for tax purposes, you can make the argument that it doesn’t matter so much what cute little cubby (i.e., account) you tuck a particular expense in. But taxes is ONCE a year (maybe quarterly, if you’re doing your estimated taxes and working with your tax preparer more frequently).
Running your business, managing your business, is a DAILY undertaking. And to support good daily running of your enterprise, you need just exactly that Home Edit degree of clarity → like expenses with like, clear containers for each of your Revenue streams and their associated costs, a pretty system that encourages you to stick with it, keep it up, revel in it. Saving you time, increasing your ease, upping your joy.
And boosting your bottom line.
Because once you can truly see what you have, through reports that provide transparency into what’s really going on in your business, how it actually works, then you have so much more ability to understand what’s happening, to double-down on what’s working, to clear out the stale, expired product that might otherwise have been able to linger in the shadows.
Where you put an expense matters. Just like Clea and Joanna say, It’s a system. Work it.
PS Next week, I’ll be sharing an example of what can happen when you refine & dial in your Profit & Loss statement, so you have clarity on all the lanes money is using to flow in to your biz.
PPS I do have critiques of The Home Edit, but it didn’t seem like this was the place to share them, especially since none of them are relevant to my main point — that organization of your financial data is KEY. However, if you’re curious, if you’ve also watched and would like to discuss, email me email@example.com & let’s get into it. 🙂