Thursday, July 01, 2004

Beancounting

June was also a profitable month, as it turns out. Good enough that I'll probably figure out how to pay myself in the next couple of weeks. World Domination is still a good way off, though. So are employees.

The interesting thing about the accounting is figuring out how the different standards for calculating P/L work. For instance, I had to invest a decent amount of cash into the business in order to start it up (legal fees, filing fees, insurance, equipment and office supplies, furniture, security deposit on the space, etc.). I also deposited a cash cushion to guard against losses in the startup timeframe. This is something, of course, that a lot of companies far bigger than mine do as well.

But measured by that cash outlay, it'll be a while before I earn back the investment. So technically I'm still in the red overall. However, by measuring profit as simply generating a surplus against normal monthly expenses (an "operating profit"), I've now been profitable for two consecutive months.

I'm still putting out cash to pay for startup costs (for instance, my Dell systems), but that's because I was offered 0% financing terms on the equipment. So rather than send all that cash out of my hoard at once, it makes sense to pay over time and generate some interest on the cash required to pay it. But that doesn't work against my operating profit - that's another part of the ledger.

If I get more confused than that, I have a good real accountant.

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