 Tommy here from Lawrence systems and let's talk about money more specifically how we process money and how the Inflow of money comes in and how that hits different applications and then turns into data So we understand whether or not we lost money or made money any particular month or given any particular period Now this is something that came up when me and Brett the other day did a video Which I'll leave link down below talking about profit loss and you know whether you're shuffling money You're making money, but of course without the tools to really dive into and dissect all those transactions You don't really know that answer and me being an open source advocate people that are some open source tools You're using for that and yes, I am now. This is not saying these are absolutely the tools for you Maybe the process though will help inspire what tools fit better into your business Businesses well diverse and not everything is for everybody. I found a flow that works for me. This is what we're doing now It's not what we've always done and there's gonna be a time in the future when we're doing something different as well But this at least as long as you have a guideline of what you're doing in the process You could always swap out different applications that may fit So sometimes I like to think about it from a concept and maybe this concept will help some of you that are starting out Think about how you're gonna process money and how you're gonna take those transactions So you can work with and I do highly recommend an outside accounting firm working with an outside accounting firm and Having them understand your process so they can integrate within it I will do a short disclaimer here and that disclaimer is really simple Please follow whatever regulatory laws are in the region and areas you're in This is not any type of legal advice and I can guarantee one thing though. No good defense I've ever seen started with but this guy on YouTube was saying so yeah Go ahead and talk to someone about legal advice as far as how you process your accounting It's why we use an outside accounting firm and I'll cover that little aspect of what we do internally versus what they do in This topic as well and when I say process and flow, I do mean a flow chart That's how we're gonna explain this now. This is diagrams net leave a link down below to this tool Everyone always ask what tool you're using It's the one down in the links and we call this the money ingress process first Let's cover something. What do I do and how do I make money? That's an important aspect for any business and hopefully you are past the part of understanding what you do to make money Because this is about processing it But what we do here is we bring in money via managed service provisioning contracts that we have So those are recurring revenue contracts where we are paid to maintain Computers and technology for other companies outside AT services. That is processed through invoice ginger We do a lot of project work. Someone says hey, I'd like you to do this wiring project Or we'd like you to upgrade these servers That's also work we do where we quote it and bid it and we use invoice ginger for that I've got plenty of videos a link down below on invoice ginger It's all based on v4 invoice ginger v5 is out. We have not migrated to it yet That's coming soon as they only came out a little bit earlier this year But you can still keep using v4 but if you're starting out today invoice ginger v5 is available and yeah, like I said I got links down below to the invoice ginger videos. I've done still a great product. I'm gonna get to v5 soon Consulting bookings. That's another way we make money This is the booking links as we call them where people just want someone off consulting with us There's a hires button on our website. That's where it takes you to is that beginning of that process where we send out a booking link Pretty simple. That's one of the income methods. We're specifically right now in December of 2021 using you can book me That's what accounts to that now both of these tools Consulting bookings and invoice ginger Invoice ginger connects to multiple but among the things it's connected to is Stripe So we use Stripe for our back-end payments also for contract as I said MSP or IT contracts that are I'm recurring if people want to pay us with not just credit card, but a CH That's another option. That's also tied into Stripe. So that goes invoice. They choose the payment method They can choose Stripe secondary payment method They could choose is PayPal invoice ninja allows you to have more than one payment processor available in it So that's a really cool feature of it the consulting bookings have a tie-in with Stripe So same thing both of these Inflowers of money that come in both hit Stripe then we have YouTube ad sense Hey, I'm a youtuber who does monetize this channel. So that is money that comes in there affiliate commissions There's affiliate links down below to get you deals and discounts and products we talked about on this channel I've you know said that plenty times. That's where that money ends up going eventually a lot of those affiliate payments Not all of them But a lot of them will tie to bank accounts the other side over here is affiliate payments do come into my PayPal account This some companies prefer to pay one way some pay the other make it easy for them whichever works for them any other income any other random Reasons I get money for one-off things. I do that all just lands into bank account and it's anything I do as long as technologies Which includes all kinds of weird one-off consulting jobs. I've done where people just want to Buy time for me that happens as well Most of time will send them an invoice your invoice ninja But occasionally some companies have different structures where they just want to write a check to buy my services and not like in a normal hourly rate But that's really any other income that just calls. That's why it's called that that's other ways make money And then other people just camp time. Can we just pay you pay you some money? Yes, we can I've had people that literally just want to say thank you with some money Thank you for all the people that have said thank you with money because hey, that's great And that comes right to PayPal as well We actually got a button on our website under our affiliate links for people that said can I just send you money? It's odd that enough people ask for that. That's why that's there I don't beg for money, but people that just want to say thank you. It's a great way to say. Thank you I'm just I'm throw it out here. I didn't mind that. All right Transfers between these accounts do occur back and forth That's definitely happening and then downloading of monthly data That is once a month every 30 days at the end of a bank cycle I download that months account and this is how we start processing that data now It's just a simple QIF download most any bank account no matter what bank you use We've switched banks a couple times. They pretty much all have a QIF download PayPal supports it as well But other ones will support CSV so I threw that on there But right now our banks that we've used and PayPal have both have CSV there was actually a bug for a little while in the PayPal's QIF download and I hand it downloaded to CSV They seem to have fixed that that happened about a year ago But either way both of those land in a tool called K my money now, I've got an old video I did on this it really hasn't changed much just as a cross platform application K my money org I think is the website. I'll leave the absolute link down below to the website if you're looking at product We say Crest platform Windows Mac Linux and pretty easy program It's not nearly as robust as something like QuickBooks. It does not do any invoicing for us This is simply ledger transaction So we're trying to sort out all the ledger transactions that have come in All the outgoing money and all the incoming money because while all this is income There are still money that goes out and we track in ledgers in terms of percentage all in K my money To understand that most of the payments to go out. It's not like there's so many We buy parts off Amazon and a few other vendors So this is where that categories and really comes in so we're not tracking it like a normal Accounts payable. We just pay the bills as they come in wire the money because yes Some companies prefer wire transfer and yes, it's still using checks here in 2021 It's just how some companies like to receive money. I just I can't really I don't know We're not gonna go there. It always seems to surprise all my friends in Europe going really you write checks a lot Sure, do it's a popular thing here in the United States but all of that data is still coming out of the bank account and it's how we build the ledger for Understanding all the outgoing money that left here So while all these mention income for flow of data any of the money that flowed out also of course came out of the bank and From doing that we have this QIF file that we go in here Now we have to take all the transactions and the good news is about K my money once you learn how to use it You can tune it so the transactions line up because it knows that every time I've bought something on Amazon or anytime I purchased from a consistently the same place or like let's say my insurance payments, which actually do go out via Normal a CH it knows that as a category it has a ledger category that gets assigned to that So that's all fine with K my money So the majority of the transactions actually what they refer to is auto match and the auto matching of all of this works Really well, so I don't spend too much time downloading and parsing all the data My full audit of it roughly takes me an hour and a half a month to audit all of it I look at the bank account in between but as far as the transaction line by line audit, that's all done right here So once I have that it's lined up then to the profit and loss statement So that pretty easy to produce once you know all the transactions and then I create a Spreadsheet that's a categorized transaction list and all it is is the profit and loss statement, but instead of Being summarized into a series of ledger categories It's simply broke out into just every single transaction and what ledger I assume they belong to if there's questions about those Transactions, this is where it gets sent over to an outside accounting firm. We've been using them for a very long time They do very well on corporate accounting We send them all the data plus our bank statement and then they do a secondary audit This is something I'm paying for on a recurring basis where they go through each month and process all those transactions They look at what I have on my categorized transactions They make sure all those same transactions show up on each one of the statements that everything is correct That there was no questionable things that I didn't try to expend something that didn't make any sense to put it in that particular category They then I call it blessing of the books or however you want to refer to it They look at all of it and summarize it and say yes, this is fine and then they have to do a couple more steps This is a part I always recommend using a third party who understands the complexities of whatever jurisdiction you're in and in the u.s There's a series of federal and state tax laws that you have to comply with so they update the Files for the government send out all the tax payments to the appropriate authorities that need them because they also are processing my payroll So they'll send out the appropriate payroll taxes and everything related to those because that's how we do it here in the u.s And then they file all of the government forms at the federal level as well Whatever's needed sales tax etc all those little detailed forms and then they inform me how much I have to pay each month in taxes Which it is what it is. They also update my balance sheet now I'm not gonna get into that because it goes off topic and it's probably not something I'm the best to explain the balance sheet essentially looks at the assets of the company and determines what's on its balance sheet What assets it's owed or what money you may oh if you have loans or anything like that or your shareholder equity position But they maintain all of that they keep very good records of it So anytime I need to have a conversation my accountant has been watching all the inflows of money And outflows of money and anything I owe and we can have any intelligent discussion That's one of the reasons that again is important This is done monthly Because they want to keep in a line with the accountant because you got to talk about strategies because if you show a series Of too many profits you can say all right Should we rebalance what you're spending in certain areas or maybe it's time to give out More payroll more raises Because you have to balance what you'll end up owing in taxes on things. It's kind of a nuanced dance of back and forth There's not like an exact formula that works for everyone But it's something you're always trying to look ahead and discuss because you're not actually taxed on the total amount Your business does you're taxed on what's left over in profit and it's not bad to have profit But it's a matter of balancing it should I have too much profit here or should I then also give everybody a raise But if I give anybody a raise and I don't continue that trend of making more money You'll end up being at a deficit. So it's a kind of a constant balance. It's constantly being evaluated As it should be at any company and when companies lose track of this or Misjudge where the balance is going. This is what causes companies to go out of business and then from here the uh, Outside accounting firm they actually have all the payroll information. So they produce all the payroll checks and I say checks that can be wired into their bank account, but it's the payroll processing They take it out of the account send it to the staff. They take out the tax checks This is all the egress of money and then text debit paypal payments a ch wire a ch payments American Express cards and different Funds that we have externally just how the money egress is pretty simple But it's still part of all the transactions that would then be downloaded and keeps the kind of cycle going Now depending on where you are if you're starting out of business This may seem a little bit complex But it's not that complicated If you're a much larger company than me then you're going that's not enough because there's an entire team of people At larger companies not used to working corporate and we had so many people in accountings There's so many moving parts to process But whether or not you decide to use any of the tools I mentioned like invoice dentia invoice engine came by money or use stripe as your back end or any one of the other competing companies out there that offers You know processing services really comes down to you some people just choose to keep it all with their bank Stripe to me was just an easier integration same thing with invoice ninja We kind of had this homebrewed system that was well looking back for your terrible and not the best But using invoice ninja has been great because it's really easy to use It's easy for my clients to see everything like I said videos down below That's what we're using for now Like I said, there could be some time in the future where I see myself using something different But for now these are the tools that we use and hopefully the process makes you think a little bit about How the money should be flowing in and out of your company Like I said, it's all different stages. It really starts with process That way you can help evaluate what software you think works for you And once you have the process changing out the software in that process is a list of a big deal That way you're always thinking about the transactions And please take my advice on finding a good outside accounting firm because not filing any of those government Things that I don't even know all the names of I just know how much I spend on it And keeping up with the nuances of payroll changes. Don't get behind on that I've got friends who've gotten in tax trouble tried to save money and how many people work in tech Watching this channel also knew someone who tried to save money and not hire a proper technician to do something in a Pen disaster. I really feel accounting is the same way. It's another complex topic and Working internally though, so you have an understanding of it and your outside accounting firm handstand of it Will bring you I think to a happier middle. All right, leave your comments and thoughts down below Or have a more in depth discussion over in the forums. 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