The Money Story of Service Companies#
The "money" we use daily is more complicated than you'd think. The money you have is actually a mix of 'money that's truly yours' and 'money that belongs to others.' Today, I want to talk about the "flow of money" and "basic accounting structure" that anyone preparing to start a business or build a service should know.
The Basic Formula for Making Money#
There are really only two ways to make money.
- Sell products
- Sell services
Selling services means providing your skills, expertise, and time to others in exchange for money.
But here's an important truth: "Just because you sold something doesn't mean it's all your money."
No matter what you sell, there are costs involved.
- When selling products: Cost of materials + labor + other expenses
- When selling services: Labor is the biggest cost. Since services aren't products stamped out in a factory, 'people's time' is the main expense.
In other words,
Money earned - Money spent = Money you actually keep (Net Profit)
This simple formula is the essence of entrepreneurship. But hidden within it are countless choices and decisions.
Why Set Budgets Conservatively?#
When founders first set budgets, if they simply think "rent costs this much, payroll costs that much," they'll face major discrepancies once operations actually begin.
Why? Because making money is hard, but spending it is easy.
That's why companies set budgets conservatively. They need to prepare for situations where funds run short later. The moment expenses exceed income, the company faces an immediate crisis.
A Company's 'Face' = Financial Statements#
If people have resumes, companies have financial statements.
Investors, banks, the government (tax authorities), and business partners look at financial statements to judge a company's 'creditworthiness.'
They're essentially the only official documents that show how well a company earns, how much it has, and how healthy it is.
For listed companies, you can visit the Financial Supervisory Service DART system (https://dart.fss.or.kr) to view 'audit reports,' 'business reports,' and 'financial statements' -- they're publicly accessible. A company's entire money flow is captured there.
How Should a Service Company Spend Money?#
Looking at the financial statements of service companies like Kakao or Naver, you'll notice common patterns:
- Development labor costs are a large portion,
- Server and system maintenance costs are significant,
- Marketing spend is steady.
In other words, service companies have a structure that invests in people rather than production facilities.
So when spending money early on, the priorities should be talent acquisition, technology stabilization, and service quality maintenance costs rather than equipment.
Why Do Companies Fear Audits?#
An audit is the process of verifying that a company's numbers are truthful.
If you've handled other people's money (investment capital, customer deposits, etc.), you naturally need to be verified.
But some companies commit accounting fraud to 'look good.' If you make it seem like you're earning more than you actually are, you can deceive investors.
But ultimately, accounting is the language of trust.
Money can't exist without trust, and the moment trust is lost, a company loses its place in the market.
So Where Should You Learn This?#
- Open the DART disclosure system and look at actual listed companies' reports.
Structure: Read in the order of Business Report -> Audit Report -> Financial Statements. - Early-stage founders benefit from consulting with accountants and tax advisors to set up accounting systems suited to service companies.
- And the best way to learn is doing it yourself -- try running hypothetical budget simulations.
Money isn't just numbers -- it's the language of relationships.
If you learn to distinguish between 'your money' and 'others' money,' and understand how to spend and how to retain, accounting will no longer be a difficult field but a living strategic tool.
The truth is always exciting. Speak it, then. Life is dull without it.
— Pearl Buck
