Recordkeeping not a bank balance is the real indicator of an indie's financial status.

Visionary Accounting For Entrepreneurs said...
June,

I love your book. I love your passion. However I politely disagree with your advice to have one bank account. Business owners need clarity with regard to the distinction between business and personal. Commingling funds should be avoided if at all possible. Maintaining a separate bank account for business activities enables this to occur for most all transactions. Loans between the owner and the business can be tracked in an Owner's Draw account, to be reconciled at year-end. Keep up the awesome job! You rock !

August 20, 2009 5:22 PM



Hello Visionary!

What a great name.

Thanks for your generous comments about Self-employed Tax Solutions. And, I don't know if I "rock" but I sure love rock 'n' roll and I love to dance.

Regarding a business checking account, keep in mind that I am talking about only sole proprietors who are not LLCs.

They include writers, graphic designers, poets, musicians, composers, web developers, handy men -- and women, astrologers, psychologists, photographers, landscapers, theatre critics. To name just a few of the independent professionals I work with. They are not small businesses. They are not widget makers.

They typically do not have funding for their professions. What do they do? They write. They sculpt. They photograph. They advise. They cut grass.

For many of these people their lives are their work. My goal is to help them distinguish between personal and business. That is a learning process and not one that forces them to make a decision, at a bookstore for example, as to whether the book is being bought for private leisure reading or as a business purchase. That decision can be made during the recordkeeping process.

In a sole proprietorship the owner is the business. The business is the owner. One's money is no different than the other's. There is no loan from one to the other because there is no other.

There is no owner's draw for sole proprietorships. There is for corporations. There is no reconciliation. It is not the balance in a bank account that is the determining factor. It is the recordkeeping that determines the profit or loss and that gives indies the information they need when they need it.

Depending on how timely he or she wants to be, the indie can keep records on a weekly basis, a monthly basis, or once a year on an annual basis. As to method, he or she can keep those records manually, or use software like Quicken, or have the records kept by a bookkeeper. Timeliness, recordkeeping method and of course accuracy are what provide an indie with the information needed to determine where the venture is financially.

Thank you for contributing to a discussion that is worthwhile to indies.

Best,
June