What Is Toilet Money?

Toilet money is when small business owners take their hard earn money & flush it down the drains due to having poor bookkeeping practices. Building a solid financial foundation is important for the success of small businesses. According to the New York Times, poor accounting practice is listed in the top reasons why small businesses fail. Issues in this area can destroy the company over any other aspect of the organization. Nevertheless most owners pay tiny to no attention to this area.



One. No organization of supporting documents. All documents which includes but not limited to receipts, bank statements, machine & equipment purchases, worker knowledge & customer invoices ought to be available & organized at all times.

Two. Commingling personal and business funds. Most small business owners think it is perfectly all right to buy business items with their personal funds and buy personal items with their business funds. Most owners do not open a separate business checking account. There is an correct way to make use of personal funds for business purchases. However must owners are not aware of the proper way to handle this type of transaction. This is a nice reason to hire an experience bookkeeper.

three. Mis-categorization of Expenses. Not having knowledge of the Usually Accepted Accounting Principles (GAAP) most business owners' categories expenses incorrect or generate far or not expense categories. GAAP includes the standards, conventions, and rules accountants follow in recording, summarizing, and the preparation of the Chart of Account.

4. No understanding of financial statements. There's important financial reports that majority of businesses will use in the coursework of the life of the business. Income Statement (Profit & Loss Statement), Balance Sheet, and Statement of Funds Flow. Most owners must understand what each statement means to better understand what steps are needed to maintain longevity and build a successful business. Again, this is another great reason to hire an experience bookkeeper.

5. Doing the books themselves to save funds. I found that lots of business owners are under the false belief that finishing the recording aspect of their business will save them money. Wrong!This then leads to pricey mistakes, IRS payment penalties & feasible closing of their business. A competent bookkeeper would not only save you money but will also know the guidelines & how to keep away from pricey errors.

With proper bookkeeping practices you are placing your company on the road to financial success.