Old Farts
Old Farts
2024/09/06
Today an older Tile Contractor I walk with from time to time named Dave stopped by with his dog Spot. Mufassa was outside on a chair so spot was able to come in with Dave. I asked him if I could show him this work. Dave was a successful Tile Contractor for 40 years. Dave knows his bookkeeping and accounting systems well. His wife did the details in spreadsheets for him for years but he understands the ins and outs of all the systems well. His father introduced him to an Accountant in the 1970s who guided him generally well given the learning systems available then.
In a conversation less than 15 minutes long , Dave was able to understand another way to have viewed his needs that was far simpler. the first comment he said was "this needs to be in every school". I chuckled and said, "Yes. It does. But they won't put it in them and that's okay. I don't believe the Department of Education nor the alternative schooling in place today will be around much longer. Given Bill Gates also has his hands in the alternative education space too, we may need to be more creative there as well.
Below I'll try to hit the high points for our dialogue. After a very short start in one direction I went another and made very fast progress.
Bryan - "Dave, we've developed the Rosetta Stone for teaching Bookkeeping and Accounting for Small Business. Can I try to share it with you?"
Dave - "Sure"
Bryan - "With your prior business, let's pretend you had a workign checking account and a dedicated credit card for expenses".
Dave - "Sure, okay. I did and we tracked things in a spreadsheet"
Bryan - "When your wife categorized your expenses, what categories did she use and were they different from what your tax guy wanted?"
Dave - "I had her categorize my materials separate like grout and tile and underlayment's, but the tax guy always told us to bundle them all together, but that didn't get me what I needed'.
Bryan - "Perfect. that's the first problem most small business people encounter, and it's a frustrating thing to work around. In theory they take those separate categories and smash them together for their reporting but then it can be hard to make sure they didn't make any mistakes or omissions. There was a better way to do this that was available to you decades ago"
Dave - << quizzical look on his face >>
Bryan - "Let's pull up the Schedule C online. -- < keyboard tapping > -- That top section is for income. It's just a blob of income. No customer breakdown required. Do you know where the best place to get that value is?
Dave - "Well I track it for all my invoices"
Bryan - "Wrong place. the place that number needs to come from is your checking account deposits only. Whatever goes into yoru checking account is what you sold. Nothing more and nothing less. This is how the IRS does it and it's how you needed to do it too. They didn't care what any of your spreadsheets said because those could have been made up. The only thing that mattered to them was your bank statement. They had no way to audit your cash sales or any checks you cashed easily and they didn't try to.
Dave - "interesting. I hadn't thought of it that way. You're right".
Bryan - "now, let's look at these expenses on the Schedule C. Generally speaking, they are mutually exclusive , meaning it's not hard to pick a category for a transaction. Let's read them all just to refresh ourselves << we read through them quickly>>. Do you realize there's nothing on that list that would let the IRS or anyone else know if you had a tile company or if you were running a tanning salon or a brothel for that matter?"
Dave - "Hum., I never thought about it before but yeah. i can see that now easily. It's just a generic list.
Bryan - "Exactly. Also do you know what happens if you miss categorize something?"
Dave - "Yes. I do know that. They don't care. It doesn't matter to them. As long as it's a deductable expense it doesn't matter".
Bryan - 'Exactly with one exception. Remember that meals and entertainment only get a 50% deduction, so other than that it just doesn't matter. And if you used your dedicated credit card or your working checking account for all your expenses, you wouldn't need to track individual receipts for any of this right? Everything you'd need for your expenses would also be on your bank statements right ?"
Dave - '"Oh shit. I think I see where you are going with this... "
Bryan - <<smiling>> "Yes but before we get there lets look at page 2 for a second and talk about inventory. Did you ever have inventory to report?"
Dave - "Oh hell no. My inventory was zero at the start of the year, zero at the end and and everything I bought I installed, be it true or not true".
Bryan - "Pefect. You know how that game works, and here's a question for you. Could they ever easily have audited your inventory given you would have reported a status of it months or years before an audit?"
Dave - "No way".
Bryan - "Exactly. So even if you wanted to claim some inventory at the beginning or end, for some reason, it only had to be aggregated reporting and it was an honor system anyway".
Dave - "Yup"
Bryan - "So can you see how you could have done your bookkeeping for tax purposes easier? "
Dave - "Holy crap. We could have just downloaded our statement data from the bank, categorized the transactions with these categories only and been done with what the IRS needed in an hour. "
Bryan - "Exactly. No Bookkeepers required and no Tax Filer if you felt comfy with it. AND you would have had a perfect bookkeeping system ready for an audit given the IRS people only use your bank statements for audit purposes."
Dave - "But what about my project accounting?"
Bryan - "You could have done that any way you wanted to on a spreadsheet that was NOT related to your bookkeeping for taxes. You could have done it from receipts. You could have taken the same data you downloaded from your bank -- put it in a separate file creating two sets of books, and then only categorized the stuff you wanted to track. There were two mistakes people made . 1) they forgot their sales details and deposits didn't need to be detailed for the IRS and 2) they didn't think about keeping two sets of book in a way that they may have thought would duplicate work but in fact, it's the perfect way to have done it. Can you see how easy this would have been?"
Dave - "This needs to be in every school. "
Bryan - "I know. but truthfully, it probably doesn't because we just covered 60% of the logic process already!! << turns to computer >> Now. here's a website that has a cloud spreadsheet template on it to help with organizing the bank statement data. if you click here and here -- and then do that -- did you see that new tab open up ? I just made a copy of a spreadsheet template. It took 10 seconds an we are giving it away for free. It has sample data in it for education and then the user deletes that, puts in their own data and away they go. That template can replace QuickBooks for life for most people. "
Dave - "Oh holy smokes man... "
Bryan - << chuckling >> "Yes. The goal is to destroy their business, and put most of the bookkeepers and CPAs out of business. We've been sitting on this for a few years. There's some folks that know about it. We've been trying to gather a crowd, because it could get ugly when this stuff rolls out... " <smiles>
Dave - "Oh my. Okay. --- How do I get my data into that spreadsheet, do we type in in from the statements? "
Bryan - "Oh no. You just go to your bank website and download it in spreadsheet format. Then you copy and paste into worksheet here . << like here >>. These columns get setup to match your data -- but we need them organized differently so we have a simple column mapping process here to get them how we want them -- and then you copy and paste them into your journal for categorization like this << keystrokes , ctrl-c, ctril-shift-v) >
Dave - "Oh my. And what about the reporting? "
Bryan - "Here's the income statement that aligns with the Schedule C. it doesn't have depreciation and such in it. That is easier to track in a separate spreadsheet and just compile on the Schedule C but you can make journal entries to make it show up here as well. Here's the Balance Sheet And here's the Statements worksheet which we use to make sure not a penny is missing. It auto checks the download data against bank statement summary data you enter to make sure you got all the transatcions for each statement down to the penny and it tracks it all in real time all the time so if anytyhing int he data changes by accident you can see it. It also does auto backups so you could recover if something happened."..
Dave - "Who owns the copywrite on this? Do you own it? "
Bryan - <smiling> "Yes, I own it. There is some programming in the back that is pretty unique to make this work. In theory, this could have been done by any Accounting Pro or Professor for the past 30 years, but they didn't do it for some reason, so I did it."
Dave - "Can they copy this and modify it enough to claim it's theirs? "
Bryan - "Not really. It's pretty unique and pretty tight. There's not a lot of room for rewrite. And given there's no money in it, there's not really much reason for any to try it. If they do, we'll call them out".
Dave - "This needs to be in every High school".
Bryan - Actually I believe it belongs in 6th grade. Right after addition and subtraction and certainly before algebra My thought is this can be used as the hub for an entirely new learning system. The kids pick their own imaginary small business. and then classes related to science, history, social studies, government, civics, math and creative arts all spin from the story they can engage in while trying to engage in their small business. They can start out simple with lemonade stands and car washes and then get more complex each year".
Dave - "That's a very interesting thought."
Bryan - "I thought so too. Looks like Spot is ready for her walk home"
Dave - "Indeed she is. This is really good stuff. There's a lot that can be done with this. I wish someone would have shared this with me 40 years ago. "
Bryan - "Me too".