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accounting

Growing up, my friends and I would operate a lemonade stand on hot summer days.

Back then a motorist or pedestrian would always stop and buy a cold glass of lemonade – cars were not air-conditioned so the cool lemonade was refreshing.

We used our mothers glasses from the kitchen cabinet. The glasses were the ones that jelly came in. I think we washed them after each customer – maybe.

Lemonade was a nickel and sometimes people left a tip. We kept our money in a cigar box. We started with a bit of seed money from our savings.

Money from sales went in and we used that money to buy lemons and sugar at the store. Ice came from our kitchen and water from the sink. At the end of the day we had made money or not – simple math.

To this day I try to always buy from kids who have the initiative to put up a stand selling just about anything – lemonade, Girl Scout cookies, Boy Scout Popcorn, you name it. They are the business leaders of tomorrow.

Make no mistake – nothing happens until somebody sells something – no jobs, no plants, no payroll, nothing. Sales drives it all.

Small business people can get overwhelmed and confused by all of the terms on the financial statements they receive from their accountants – retained earnings, amortization, EBITA, on and on it goes…

I established a simple conversation with my accountant years ago that he still calls, “Bruce’s Lemonade Accounting.” The question I asked then and today has not changed, “How much money in my cigar box?”

Cash in versus cash out. If you have cash you are king. You can get confused with all the mumbo-jumbo if you like, but I just want to look in the virtual cigar box.

That worked for me over 60+ years ago in my neighborhood lemonade stand and it has worked for me ever since.

Lemonade stands do not need an accounting system, but small business needs to think like a lemonade stand sometimes to make sure they know the reality of their financial condition and are not confused by their accountants complicated reports.

What do you think? Can you pour over balance sheets for hours or do you just need a simple lemonade model?

As always, the conversation starts here…