Regardless of how motivated, entrepreneurial, and inspired you are, we must know about income statements how to accurately understand them. Watch and learn as Clay Clark, the Small Business Adminstration's "Entrepreneur of the Year" goes over accounting tips for small business.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Lesson Nugget: Hiring a bookkeeper will free up your time and allow you to focus on growing your business.
Lesson Nugget: A statement is a summary of how much you have paid and still owe for the year.
Lesson Nugget: Being able to produce a formal statement will increase your credibility with your clients and is essential when working with large companies.
Statement: A formal written summary of unpaid, and sometimes paid, invoices. Unlike an invoice, a statement is not generally used as a formal request for payment, but may be more of a reminder to a customer or client that a payment is due or that payment has been made.
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-My name is Caleb Tailor and my favorite job here at Thrive15, the online platform that teaches sales, branding, time management, and more, is sitting down with ClayClark, our pale and fearless leader. Today, he is going to be talking to us about the statement and making sure we understand the true definition and how it applies to our business.
Here at Thrive15.com, we believe that knowledge without application is completely meaningless. So as you're watching today, ask yourself, how can I apply this principle to my life and to my business? If not, today's episode could be more meaningless than bringing a lunch to a hunger strike,
Oh, Clay, it is just wonderful be sitting next to you again.
-I'm with you and I'm thinking about just you.
-Ha! That's wonderful. Well, I'm thinking about accounting, honestly, and specifically, this question that I have about the definition of a statement. And as you know, what we're doing right now is we're breaking down these definitions into five-minute bursts for you, OK? So you might not know what a definition is. Do not hesitate to type that in the search bar in here in Thrive and we will define it for you--
CLAY CLARK: It's true--
-in a fun, exciting, and aesthetically pleasing way. You get to look at Clay.
-So today, let's define the statement, OK?
-So a statement is a formal written summary of unpaid, and sometimes paid, invoices. Unlike an invoice, a statement is not generally used as a formal request for payment, but may be more of a reminder to a customer or client that a payment is due or that a payment has been due. So again, what's the difference here between the invoice and the statement?
-Well, OK, what we're doing is we'll make sure we get some clarity there.
CALEB TAYLOR: OK.
-It can serve as a reminder to a customer that, like, you know, hey, you have a payment that's due or that you made one. So a lot of times, companies'll just send you a statement saying, hey, this is how much you've paid. Now, if you don't--
-so it's less formal?
-Well, what is happening is it's not a bill. It's just telling you how much you've spent for the year.
-So there's a company right now that I'm upset with. And what they do is they play the game. They call up and they act as though I-- they say, hey, we wanted to just go ahead and see if Mr. Clark was going to go ahead and pay for the yada yada services. I haven't even agreed to do the services. I haven't even talked to them. So people on the team are, like, sure, we'll pay it.
-So these guys keep charging me for something I've never agreed to.
-So my dad does accounting. I go down there. I talk to my dad and I say, dad, did we just pay, like, three G's to somebody for this stupid service that we didn't want? And he says, well, yeah. And I said, what do you mean "yeah?" He's like, they told us that they called and said they wanted to know if we were going to go ahead and make payment on it. And I figured since they sent me an invoice,
-I should probably pay it.
-I went, No!
-That's using these-- this knowledge for evil.
-No! So then, I call up the company. I say, hey, I want a statement of how much money I have paid you. I want a statement of how much I have paid. That right there is what you want. A statement is just, how much money have I paid you? How much is unpaid? And then I looked at and I said, whoa, whoa, whoa, lady. No!
-I have-- I don't recall agreeing to paying you this much. And I contested it by looking at the statement. But a statement is how much money you've basically paid or how much is unpaid. It's your total summary for the-- basically the year of your account and how much money's been paid or still might need to be paid.
-But this seems kind of tedious. Why-- why do I really need to do this?
-If you are building a business that's large-- let's say you're a builder. The guy who's building out this set right here--
-The other day, I paid him ten--
-The wizard of sauce. He's a beautiful man.
-I spent $10,000. I paid him for-- I think we're putting in these bulbs. These bulbs, they're priceless but they cost about 10 G's for the whole set here.
CALEB: Ha ha!
-So I paid him about 10 G's to set it all up and apparently, the costs were a little bit higher than we estimated because of some things we had to add on to the set.
-Well, I asked, well, can I have a statement of how much money I've paid so far and how much I owe you in the future? He said, absolutely. Sends it over-- boom. That's fairly helpful.
CALEB: Yeah, that is.
-But I would bet you 95% of every-- of contractors I've met and I'd say eight out of 10 contractors on the planet, contractors, builders, have no idea how to produce a formal statement.
-And therefore, when you go-- if you're a builder and you tried to make inroads on some big accounts and you're-- say you're working with a big client and he says, well, could you send me a statement? You would feel ignorant and the customer would lose trust in you if you could not produce said statements.
-So what action steps do I take right here? What's-- what's the next thing I do?
-You want to-- you want to familiarize yourself with a program called Quicken. Quicken is a great book or a program called QuickBooks.
-Quicken or QuickBooks.
-Yeah, those are the two programs you want to use. If you use something else, that's fine. If you're a start-up and you're starting a company to compete with those two and you feel like that, well, why is he always recommending the big companies? Because I'm stupid and I only know the two big ones that work. But the point is, those are two great companies that you can go with or you need to hire a bookkeeper. I recommend you hire a bookkeeper.
-And you focus on your core skill.
-That's worth my time and money? Or my money, I guess. It's saving me time?
-It's absolutely worth your time and worth your money. It's the best investment you can make. And I don't care if you're teaching ballet classes, you're teaching ice skating, you're teaching any type of education or if you're a painter, you're an artist, you're an architect-- you need to have a bookkeeper that can help you keep a statement at all times for your clients.
-Good. Well, Clay, I just would like to make a statement right now and say you're a beautiful man and a great American.
-I have nothing to
say to you.
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