App Trillionaires: How To Become An App Developer: Enjoy Life, Make Money, and Live Your Dreams! (2013)

17. APP BUSINESS ACCOUNTING BASICS

Are you serious? You really need to know accounting?

YES! For any business, whether it’s an App Business or a Clothing Store, you will require accounting to help keep track of sales revenue, expenses, and even paying your own payroll! Most Governments around the world have an internal body that governs the taxes we pay on the income we earn and in turn help local communities, such as your own, to build and grow. Your taxes therefore are the reason why you experience better roads, safer communities, higher education and many other great benefits depending on where in the world you may live.

That being said, there are two MAIN reasons why we want to keep track of our transactions:

To figure out the taxes that we will be required to be paid at the end of the year

1. To see where we are spending our money the most so that we can make future business decisions based on what we see from the numbers.

2. To help secure various services or loans such as bank loans, asset insurance, mortgages on property, etc.

A great statement that is often stated is that, “The numbers don’t lie”. At the end of the day you can see positive cash flow coming in, however if you don’t track your expenses, you may see the money leave as fast as it comes in. You may think you are making money, but if your “BOTTOM LINE” (This is the number calculated after all costs are subtracted from all the income basically) is not positive, you’re LOOSING MONEY and you do NOT have a profitable business. Therefore tracking where your company is spending can help determine where you can possibly save money in the future.

Other reasons why we want to learn both accounting and taxation is due to massive savings in your App Business! You could be loosing MASSIVE MONEY just because of not knowing some very basic important tax laws!

TIP: If you are an international developer like myself who is outside the United States of America, then make sure you setup a US EIN number also known as an Employer Identification Number. This will require you to fill out US Taxes yearly, however that will save you a withholding fee of 30% that the IRS will take from your earnings if you do not have an EIN and fill out US Taxes.

For more details on how to obtain an EIN visit

http://www.irs.gov/businesses/small/article/000030003id=98350000300.html/

FINDING AN ACCOUNTANT

It is highly recommended that you go out to a local college or university and take a single crash course on Accounting 101 or Accounting Basics. In it you will learn basic book keeping as well as generating reports. The basic difference is that book keeping is focused just on inputting information (Like receipts and invoices), but accounting focuses on taking that information and generating reports and charts and analyzing that information so that end users such as business owners or various entities can make DECISIONS based on that analysis.

For example, you hire a BOOK KEEPER to help you put all your receipts into your accounting computer software. Your accountant then goes ahead and generates various reports to show you and advises you on various directions the company can take. You as the business owner would then decide on the actual directions to take based on that info.

Do you cut down on office supply spending?

Do you increase in marketing to generate more sales?

Do we have the money to hire another staff member or do we need to start making cuts to staff?

AN ACCOUNTANT can help you determine this by generating reports from your BOOKS.

So learn that distinction well! Too many people believe that a book keeper and accountant are the SAME thing. They are not and they both have a very different purpose. A book keeper will not be able to tell you these things, their main purpose is to enter in receipts and invoices and make sure that that information is up to date.

There is a THIRD type of accountant is a TAX ACCOUNTANT. Once again we end up assuming that any accountant is capable of taxes as well. A regular accountant may only focus on helping a business owner make decisions by showing them reports of their books, but a TAX ACCOUNTANT focuses on tax savings and tax obligations. The Tax accountants role is to help in planning to save on TAXES or to help reduce the taxes paid by educating the business owner on new government programs that may be available or other things that can help in taxation.

In your business you will be dealing with all three levels of Accountants. You may ALSO learn how to do a few of them yourself. For example, you may go to a basic accounting course, obtain a book keeping and accounting software package like Quick Books or Simply Accounting and then enter the books yourself and generate reports yourself using the software. That is also a possibility and would then require you only to focus on finding a good TAX ACCOUNTANT.

Knowing this distinction between the types of accountants can help save you a lot of money and headache by not hiring accountants without understanding their function. Too many times in the past I would hire accountants thinking that they all did the same thing, and ended up paying them money for only 1 part of the job when I thought they “DID IT ALL”.

Don’t make that mistake on your own, get the RIGHT type of accountant for your needs!

So how do you find them? WORD OF MOUTH! Ask your friends, ask your family, ask local business owners if they know a good accountant. Go to various businesses that you know are succeeding and ask them who their accountant is and if they would be willing to take on a new client.

“Success happens by taking action on the big dreams by putting it into a calendar…otherwise it is just a dream and will always remain that way…”

— Abhinav Gupta