Monday, January 16, 2006

All business is accounting

While sitting here in the Baker Bros. American Deli in Addison, Texas, I'm drawing more than a few uncomfortable stares. My father's 21" laptop is not built for stealth, I'm afraid (and neither is it built for a bad back, but I don't want to whine).

This deli is a nice find and a good escape for me from this morning's brain churner. I realized what I need is not software training, rather, I need accounting training.

The software is fine. Most of us in the class -- some who have been doing this for 20+ years -- didn't know why things went where, how, and when. One woman from LA was downright adamant her practice of discounting rent for services to the property by the tenant is acceptable.

In fact, it's illegal by federal law. The IRS says so.

The woman was correct -- if you discount the rent or simply pay the tenant as a vendor -- the bottomline remains the same. What changes dramatically is money changing hands. The first way skips a taxable event.

Knowing this and realizing I was thinking in terms of something other than real estate, it dawned on me that all business is accounting.

Most of us go into business to make money for ourselves and our clients. If it were that simple, we'd have chaos. So we have laws of practice, laws of profession. Even if only those were in place, business would be a pretty straight forward endeavor.

Put tax law into the mix and now you have a different beast. Most people still want you to help them make money, until they make too much money and have to pay lots of taxes, then they want you to make them less money, and in some cases they want you to lose money.

So because business is not about luck, pluck, and skill, like they told you in high school economics, you sometimes field this phone call:

Investor: "Do you have any dogs for sale? Preferably dogs with fleas? I want the ugliest home in the worst neighborhood next to a trash dump. I want to make sure it will always be a dog and I could never possibly turn a profit on it."

Agent: "We're all out of dogs with fleas, but I have a fixer-upper in an aging market that will probably stall income in two or three years."

Investor: "No thanks. I'm trying to lose a lot of money real fast here and I can't take a chance the house might appraise for more than I pay for it."

Such is the business of accounting and the accounting of business.

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