Learn

Maximum Time: 60 Minutes

1. Helping Both My Business and My Family

Watch:

“Opportunity of a Lifetime? Part 1,” available at srs.lds.org/videos. (No video? Read the script at the end of this section.)

Discuss:

Mark wants to help his sister, but he also wants to expand his business. What do you think Mark should do?

Read:

Last week we discussed the importance of keeping a daily record of our revenue and expenses. Developing this habit is essential to creating a successful business. As this chapter will explain, another essential habit is keeping our business money separate from our personal money.

2. Separating My Business and Personal Money

Watch:

“Opportunity of a Lifetime? Part 2,” available at srs.lds.org/videos. (No video? Read the script at the end of this section.)

Discuss:

What do we learn from this video about keeping our business money separate from our personal money?

Read:

Pay yourself. As your business begins to earn money, you need to decide how to pay yourself. Many business owners start by paying themselves a small salary, which can increase as the business grows and becomes financially stable.

Keep separate bank accounts. The money you pay yourself should go into your personal bank account. This account should be separate from your business bank account.

Don’t rob your own business. Successful business owners do not take money from their business bank account to give financial help to family or friends.

Watch:

“Opportunity of a Lifetime? Part 3,” available at srs.lds.org/videos. (No video? Read the script at the end of this section.)

Discuss:

• Do you think Mark did the right thing? Why or why not?

• What have you learned about saying “no” that will help you as a business owner?

Read:

Successful business owners understand that they need to save money in case any problems or difficulties arise and to help their businesses grow. When considering helping someone financially, we should use wisdom to determine reasonable limits and conditions. We should rely only on discretionary personal resources and should never use business funds. Above all, we need to make certain that our business is a “house of order” (D&C 88:119).

3. Paying Tithing on My Income

Read:

We receive great blessings from paying tithing on our income. If we keep our business money and personal money separate, it’s easier to calculate our tithing. Remember these principles:

1. Keep business and personal money in separate bank accounts.

2. Pay tithing on personal income (such as salary) that you receive from your business.

3. Money in your business is not tithed. You should use that money to pay for business expenses, salaries, and business growth opportunities.

4. Keeping Separate Records

Read:

In addition to having separate bank accounts for your personal and business money, you should also keep separate records. Mark Bailey keeps daily records of all the money that comes into his business and all the money that goes out. He also keeps daily records of all the money that comes to his family and all the money that goes out. These records are called revenue and expense logs (for business use) and income and expense logs (for personal use).

Activity (5 minutes)

Complete the following activity as a group.

Step 1: Mark Bailey keeps a revenue and expense log for his business and an income and expense log for his family. Review Mark’s business revenue and expense log below. Notice that on August 14, the day Mark’s sister asked him for a loan, Mark’s business had 28,500 in its bank account.

Mark Bailey’s Business Revenue and Expense Log: August 14–20
Date	Description	Expense	Revenue	Balance
Business Account Balance				38,600
8/14	Stadium’s share of weekly ticket receipts	-9,000		29,600
8/14	Brochures	-1,100		28,500
8/15	Ticket receipts		4,200	32,700
8/15	Snacks	-500		32,200
8/16	Ticket receipts		4,200	36,400
8/17	Ticket receipts		5,100	41,500
8/18	Ticket receipts		5,100	46,600
8/18	Mark’s salary (paid every other week)	-3,000		43,600
8/18	Tour guide wages (paid every other week)	-4,800		38,800
8/18	Stadium security	-2,000		36,800
8/19	Ticket receipts		5,400	42,200

Step 2: Discuss the following question: What would be the consequences to Mark’s business if he were to loan his sister 25,000?

Step 3: Review Mark’s personal income and expense log below. Circle the entry that shows his salary payment as income. Now refer to the business log above and review the entry that shows his salary payment as an expense to the business. Notice how when Mark logs his 3,000 salary as a business expense, he also has to log 3,000 as personal income.

Mark Bailey’s Personal Income and Expense Log: August 14–20
Date	Description	Expense	Income	Balance
Personal Account Balance				12,050
8/14	Gas	-80		11,970
8/14	Groceries	-350		11,620
8/15	Piano lessons	-100		11,520
8/15	Utilities	-200		11,320
8/16	Lunch	-10		11,310
8/17	School activity	-20		11,290
8/17	Movies	-20		11,270
8/18	Mark’s salary		3,000	14,270
8/18	Tithing	-300		13,970
8/18	Savings	-200		13,770
8/19	Car wash	-15		13,755

Activity (10 minutes)

Now let’s practice separating our business and personal money. Work together as a group to complete this activity.

Facilitator: We have been learning about keeping our business money separate from our personal money. Now let’s review this with Trenton, who is a locksmith. He makes 100 for unlocking a vehicle. That’s business revenue. Once a week he goes to lunch with his best friend, Charlie. That’s a personal expense. On his way back from lunch, Trenton occasionally buys a box of blank keys. That’s a business expense.

A list of Trenton’s daily activities is provided below. As a group, take turns reading each line. Next, discuss where to enter the line on the chart below. Then, individually record the activity as a business expense, business revenue, a personal expense, or personal income. Afterward, check the answer key.

Trenton’s Daily Activities

Unlocked 2 vehicles: earned 200

Bought lunch with Charlie: spent 10

Bought 30 blank keys: spent 30

Paid for 5 deadbolt locks: spent 40

Made 15 new keys: earned 45

Installed 2 deadbolt locks: earned 300

Paid house electrical bill: spent 120

Paid personal cell phone bill: spent 80

Purchased gas for work van: spent 50

Bought pizza for son’s baseball team: spent 90

Provided after-hours customer roadside help: earned 150

Paid himself a salary: 1,200

Trenton’s Revenue and Expense Chart
Personal		Business
Income	Expense	Revenue	Expense

Facilitator: Let’s review the chart. Trenton’s business account should show both revenue and expenses. His personal account should show expenses and one income entry. How did you record Trenton’s salary of 1,200? His salary should be recorded as income in his personal account and as an expense in his business account. If you need to correct how you’ve entered his salary on the chart, do so now.

We can add up the columns in our business account and see what our revenue and expenses are for the day. We can do the same for our personal account. It’s easy to subtract our expenses from our revenue to determine our business profit—or loss—for the day.

Do this for a week and see what you learn about your own business. Did your business make a profit? Is there enough money to make improvements to your business or save for the future? Are there opportunities to increase revenues or reduce expenses, allowing you to increase your salary in the future?

Answer Key

Trenton’s Revenue and Expense Chart
Personal		Business
Income	Expense	Revenue	Expense
Trenton’s salary: earned 1,200	Bought lunch with Charlie: spent 10	Unlocked 2 vehicles: earned 200	Bought 30 blank keys: spent 30
	Paid house electrical bill: spent 120	Made 15 new keys: earned 45	Paid for 5 deadbolt locks: spent 40
	Paid personal cell phone bill: spent 80	Installed 2 deadbolt locks: earned 300	Purchased gas for work van: spent 50
	Bought pizza for son’s baseball team: spent 90	Provided after-hours customer roadside help: earned 150	Trenton’s salary: spent 1,200

Activity (15 minutes)

Now apply what you’ve learned from the previous group activity to a more advanced example. Individually follow the five steps below. Use the forms below to separate Trenton’s business and personal money. Once you’ve completed your work, check the answer key (under “Resources” at the end of this section).

1. Look at Trenton’s business revenue, personal income, and business and personal expenses for each day of the week.

2. Record Trenton’s business money in the business revenue and expense log.

3. Record Trenton’s personal money in the personal income and expense log.

4. Create a business income statement from the information in the business log.

5. Create a personal income statement from the information in the personal log.

Discuss:

• What aspect of separating the business and personal money was most challenging?

• What insights can you gain from these business and personal income statements?

Read:

Successful business owners keep daily records and use them to make informed business decisions. While many business owners don’t enjoy keeping records, they make it a habit and a priority because they know that having accurate revenue and expense information will help their business succeed and grow.

New business owners often use spreadsheets or simple online tools to keep their records organized. As your business grows, it will make sense for you to invest in a more sophisticated accounting solution or hire an accountant to meet your business needs. Even though you have a tool or an accountant to manage your financial records, you need to have a working understanding of the details in those records and continually review them.

We will work hard this week to keep separate accounts and to avoid the common mistake of getting so busy with business tasks that we get careless with critical, daily record keeping.

Activity (5 minutes)

Step 1: Think about what challenges or obstacles might make it hard for you to keep separate records each day. Individually write your thoughts below.

Step 2: Having a record-keeping plan will make the task of keeping separate records each day be easier to manage. For example, you might want to review your records at a set time each day. You could also make a plan to create daily reminders for yourself. Think about what would work best for you and write your plan below.

Resources

Opportunity of a Lifetime, Part 1

Mark Bailey, who started the stadium tour business in chapter 2, is approached by his sister Michelle after he’s been in business for nearly a year. Choose two group members to read the following script.

Mark: Hey, sis.

Michelle: Hey, Mark. It looks like your business is taking off!

Mark: Yeah, it’s been crazy!

Michelle: That’s great! And you really seem to enjoy it.

Mark: Yeah, I feel pretty good about it. You should take a tour sometime and see how it all works.

Michelle: That sounds like fun! And I’m so happy for you. By the way, I’m looking foward to launching my own venture.

Mark: Really? That happened fast.

Michelle: My old friend from college approached me. She just obtained a patent for a groundbreaking product, and she wants to put me and my marketing skills into it. She wants me to be her business partner.

Mark: That seems a little risky, but with enough hard work you can do it. You certainly have the talent for it.

Michelle: Well, that’s the catch. I actually have to buy into the partnership.

Mark: How much is that going to cost you?

Michelle: 25,000 for a 50 percent share of the company.

Mark: Wow, that seems a little expensive. Do you think that you can afford that?

Michelle: That’s actually one of the reasons I came here to talk to you. I haven’t been able to get a loan from the bank, so I was hoping you could help me out.

Mark: It sounds like you really believe in this.

Michelle: I do. Enough to quit my job.

Mark: You know, I’d love to help you out. But I’m preparing to expand my own business this year, and it’s not going to be cheap. I really need to be sure that my own expenses will be covered.

Opportunity of a Lifetime, Part 2

Choose two group members to read the following script.

Mark: Rich, I’ve got a problem I need to talk to you about.

Rich: Let me guess: you’ve got a million people waiting in line for your next stadium tour.

Mark: Pretty much. My business is exploding, and I definitely need to invest more in it.

Rich: It seems like you’ve been good about saving some of your profits. Do you need more than that?

Mark: Actually, my savings should cover it.

Rich: So what’s the problem?

Mark: My sister wants to start a new business with one of her friends. She needs money to buy into it. She’s asking for just about the same amount that I have in savings.

Rich: Which savings? Your business account or your personal account?

Mark: Well, it’s my business, so what is the difference? I mean, I only want to worry about one account.

Rich: You need to have separate accounts so you don’t use your business money for personal expenses. I’ve seen people get into trouble by trying to use just one account. Keeping separate accounts will help you keep your money organized.

Mark: So how do I get any money from my business account to my personal account?

Rich: It’s your business, which makes you the owner. But you also do all the work, which makes you an employee. As a business owner, you have to pay your employees, which, in this case, is you. The money goes into your personal account. You can even make yourself “Employee of the Month.”

Mark: Good idea, I’ll make up a plaque.

Rich: Look, if you were working for somebody else—say, a restaurant—and your sister needed a loan, would you take money out of the cash register and give it to her?

Mark: Of course not. That would be stealing.

Rich: Same thing. You don’t want to steal from your own business. The only money you can loan to family members is the money that’s yours. You’re paying yourself a salary, right?

Mark: I only take out what I need to live.

Rich: So it’s not a set amount. Can you see how mixing accounts can be a problem.

Mark: I can now.

Rich: The money in your business account isn’t for you to spend on personal expenses. You need a separate, personal bank account where you deposit your salary. Keep your salary low until the business is doing well enough that you can give yourself a raise. Anything in your personal account is yours to spend however you want.

Mark: Thanks. This has been helpful. I need to get better organized before I can even think about helping my sister.

Rich: Well, it’s a tough spot. She needs your help.

Mark: And I want to help her. She deserves the chance.

Opportunity of a Lifetime, Part 3

Choose two group members to read the following script.

Mark: I’m really glad you came to me about this, Michelle.

Michelle: Really?

Mark: Yeah, it’s made me think about my own business and how it needs to be structured better. I realized that I need to keep my personal accounting and business accounting separate. And I need to pay myself a salary. You should really think about that when you get your own business started.

Michelle: So does that mean you’re going to be able to help me?

Mark: Well, I can’t take money out of my own business to loan you. I wouldn’t be able to grow my business this year if I did. But my wife and I went through our personal finances, and we feel we can scrape together 5,000. That should help you out and give you a little leverage with the bank.

Michelle: You’re a good brother, and I know this is such a big sacrifice for you.

Mark: I also have some other ideas that might help you raise the rest of the money too.

Michelle: Thanks, Mark. You’re a lifesaver.

Mark: Glad I could help.

Answer Key