Triple-entry accounting: a hazard of consulting

(Nothing to do with accounting; just my favourite video about the number 3.)

I know very little about accounting, but I’m content to do sustained damage for a while longer before I dump a big box of mayhem on some bookkeeper’s desk.

One of the joys (and incredible dangers) of consulting on a fee-for-hire business, which still makes up the bulk of my company’s revenues, is the shift to what I call triple-entry accounting, which follows three key stages in the project life cycle:

You get the gig. Usually with a quote, either real or just estimated in your head. Ca-ching! Same as cash baby! That’s entry number one.

You do the work. That means the client now owes you that money that you’ve already spent, mentally or literally, from entry one.  That’s OK, new money’s about to come in.  Wait, isn’t this the same as–Ca-ching! Entry two.

You send the invoice. Often this comes a few days after the work is done, due to signoffs, etc.  But it’s kind of like a new entry, because Ca-ching, entry three! That cheque is surely in the mail!

And you (usually) get paid. This isn’t actually an entry in the lifecycle, not just because “quadruple-entry accounting” sounds lamer somehow, but because by now you’re so broke from having spent that money three times over you’re just happy the long nightmare is over. Until the next gig, which is hopefully well underway by now.

In his E-Myth series, Michael Gerber talks about how important it is for business owners to split their tasks into actual jobs that eventually other people can fill.  In our little workflow above, that’d be sales, execution, and, uh, money guy (I’m drawing a blank on the job that does the invoicing and cashing – owner?)

Beyond planning for growth, this is a context where a little self-induced schizophrenia can be an advantage, so at least you’re (hopefully) not spending the money 3 times before you even get it.  That said, a triple payday is often a huge motivating factor, even if it’s 66% imaginary.


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