Featured Coaching Training: Accounts Payable Defined
Do you know how much your business owes people? Learn all you need to know accounts payable and why it's so important to know what that means in this training taught by the "Entrepreneur of the Year" winner Clay Clark.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Accounts Payable: The amounts that your business owes. For example, unpaid utility bills and purchases your business made on credit would be included in your accounts payable.
Lesson Nugget: One person must be responsible for all expenses in your business in order to accurately track your finances.
Lesson Nugget: You can train someone to keep track of your books, you can't train integrity. Whoever is in charge of tracking your finances needs to have extremely high integrity.
codeacademy for accounting and time management
-My name is Caleb Taylor, and I'm one of the hosts here at Thrive15.com, the online platform that teaches marketing, sales, time management, etc... And today I'm sitting down with ClayClark, the CEO and pale Visioneer of Thrive. He's going to be defining for us accounts payable, and why it's important for you to know exactly what that means.
As you know, here Thrive 15, we believe that knowledge without application is completely meaningless. So we ask you to always be asking yourself, what can I learn from this episode that I'm watching and how can I apply that to my business and my personal life? If you don't, today's episode could be more meaningless than outlawing picking buggers and flicking them into the wind.
All right, Clay, let's talk about accounting-- you know, financial planning. And specifically, let's go ahead and define the accounts payable, because I can't think of anything that I'd rather do with you.
-Here we go. The definition that we have for accounts payable are the amounts that your business owes. For example, unpaid utility bills and purchases your business has made on a credit card would be included in this accounts payable.
-Yeah. So hypothetically, a lot of people watching this, they own a business or you want to own a business.
-Why am I telling you that? Well, over 90% of all jobs that have been created over the past 10 years, over 90%, nine out of 10 jobs that have been created in the past 10 years are created by small business owners. And in small business ownership, guess what exists? Usually a husband and a woman, husband and wife-- they're a team, they're working together. And what happens is, the husband, let's say he's out spending like he's a drunk sailor.
-He's just like, well, I'll buy it. I'll get it. Let's buy it. I'll go get, just wait. He's going to like the state fair, and the guy who's selling those glasses and those rotisserie knives, he thinks I'll just get it. I'll buy it.
-Those are tempting sometimes.
-I'll just get it. But he puts it on a credit card.
-So now he has, next month, in about 30 days, he will have a big bill that comes due.
-Now, his wife is going, well, I probably shouldn't, but I think the company needs a new couch for the office. Or the company needs new business cards.
-The company needs an auto wrap. So she calls him. It goes directly to voicemail, because he's like, I'll just buy as much stuff at the fair as I can get. You guys are great friends. Let's do this. So he's trying to buy stuff at the fair.
-Sir Drunks-A-Lot, he's drinking. He's buying stuff at the fair. She's over here trying to dutifully go, well, I think we have-- and she looks at the bank account and says, we have $10,000 in our account. I guess I could go ahead and buy these business cards and this auto wrap.
-So she buys--
-I see what's happening.
-He is buying.
-All of a sudden the two bills meet at the end of the month, and boom! Quickly we discover accounts payable.
-So what has to happen is one person, one person, needs to be responsible for all expenses.
-One person. One person. If you go into a business, you're going to find there's a chief operating officer in big business-- a chief operating officer. A cheap, or a chief--
-Well, cheap would be good, too.
-But a chief financial officer.
-A financial officer who that's his whole job is to run the financial side. There's a chief executive officer. What I'm saying is, there's people who have specific roles, and you have to know your specific role. And in a small business, a lot of these husbands and wives, mom and pop shops-- you've heard mom and pop shops? The mom and the pop maybe don't talk about things sometimes.
-Yeah, they don't. They're having dinner, like hey, what are we having for dinner? Did you buy anything at the fair? No, I didn't buy anything at the fair. And that's what happens. It's like it's crazy.
-And so that's what we're doing here. Whether it's accounts receivable, accounts payable, any of these different accounting terms that you might not know, you just type it in here on Thrive15.com and we'll define it with these five minutes. And as you saw here, we give you the action steps. So your action step is that you've got to have one person overseeing all the finances so there's no confusion.
-So Liz is our controller right now. And so Liz told me, she says, hey, I just want you to know, we have an invoice that came due for this person. Do you want me to pay this or that? It all goes through Liz.
-It's not because Liz is a financial genius, it's because she's honest, she has high integrity. Now here's the thing-- the person who's in charge of your finance needs to be the honest, high integrity person. And Liz couldn't even formulate the words needed to lie. She just has unbelievable, impeccable integrity and that's why we have her there. You can't train that.
-You can train the numbers, and the accounting, the actual typing in the data, but you can't train that. You need that one person in charge who has impeccable, unquestionable integrity.
-Good. So what do I do? Is there a way if I feel like I've fallen behind, do I just start tomorrow?
-Well, here's real talk. This is probably not something that you want to hear, but I'm going to tell it to you. Credit card companies don't want to hear this. So this segment ends up being sponsored by MasterCard or something, I apologize.
Credit card companies cannot collect debt from you, so don't pay your credit cards. If you're way behind, just don't pay your credit cards. I mean, I pay my minimum balance so I don't hurt my credit score, but just don't pay them. They can't take anything. Now your house, they can foreclose on your house.
-Credit card company can just yell at you and lower your credit score. So if you're in a totally bad, end of time scenario, just pay the very minimum balance on your credit card. Or transfer funds-- get a brand new credit card on creditcards.com and transfer funds from one card to the next. I know one guy who lasted almost three years just transferring cards to cards until he had enough cash to pay it off. Or if you're in a total end of times and you cannot afford the minimum balance, just don't pay the credit cards.
-This is the advice that you will not find many other places, but it's real. This is why we go to you for advice. You're a real person. You've been through these difficult times, and you've made it to where you are now. And we want to help you get there, too.
-I want to say this real quick. A lot of people are like, are you a financial planner? Are you an accountant? No, I'm better than one because I'm an actual entrepreneur who's done this.
-And if you've dealt with this, and there's an accountant that's probably watching this right now, and we have some ones on our Thrive team that they will feel maybe financially like I shouldn't tell someone not to pay their credit cards because I'm an accountant, I'm a professional. I'm just talking about, if you're watching this and you're way behind--
-End of times.
- --you're in a bad situation-- pay that mortgage, please.
-Because they can take your car. They can take your house. They can't take anything away from you if you don't pay your credit cards.
-There you go. Thank you, Clay, I appreciate it.
-You're the man!
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