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Accounting for Mental Accounting

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I am sure I am not alone with my dislike for accounting. Nothing bores me more than doing tedious accounting journal posting. So much so that it is something I always put at the bottom of my todo list. Recently I internalised a deeper psychological reason for my dislike for the double-entry bookkeeping system formally documented by friend of Leonardo Da Vinci friar Luca Pacioli in 1494.

If you understand a startup business, you will notice something very unbalanced; there are only outgoings in the profit and loss statement, a startup is bleeding to death every day in its pre-revenue existence. In the beginning you have all the excitement of your new idea that is going to revolutionise the world, until each bill is presented for payment taking you a step closer to non-existence. With this in mind don’t you think it is fair for ones psyche to handle the cognitive dissonance of approaching “death” with whatever defences it can throw at the threat. Mental accounting steps up to the plate here with some creative examples……

Having identified a strong motivator for blocking the need to keep up to date with ones accounting doesn’t excuse the behaviour. As a startup the need to be on top of your finances is absolutely vital, and especially if you want others to invest with you its imperative that you can show them how their money is being spent in a timeous organised manner.

This is not an advertising commercial but rather me expressing my gratitude towards the perfect solution I have found in Errol Sandler from Rimon Advisors my outsourced CFO. I think finding someone competent who is able to think for themselves, and gently but clearly request answers to outstanding queries is a major step in the right direction of unblocking the mental accounting we startup entrepreneurs so often experience.

Pacioli

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