Understanding Accounting: Part Two: Expenses vs Investments
A word before we start talking about expenses.
Expense has a bad ring to it. Expense is something we want to cut. Something that should be as low as possible.
But all expenses are not created equal.
Once you have a facility, you want to keep it in shape. If you’re selling a quality product, you don’t want duct-taped benches and scratched paint.
And companies that skimp on marketing are companies that don’t last.
For all these reasons, you should think about “expenses” vs “investments in your business”. Not investment as in buying a stock. But as money you have to put in to the business in order to get more out of it.
Indeed, some business owners get the distinction exactly backwards. They’re totally cool with spending on fancy cars and fancy meals (which they can “write off”). But get super cheap when considering marketing, training, or upkeep.
As we go through the next post on expenses, we’ll keep coming back to this expense vs investment distinction. Because sure, no one cares what your credit card processor charges you. But they do care that your space is super clean and fresh.