Feb 8, 2022
In Order to Be Successful in Your Business, Understand the Numbers Featuring Ean Price Murphy Everyone does get the same opportunity to learn about money. Most of the time these days it is not until you get on your own you are forced into paying attention to money and its involvement in your life. That’s why as an entrepreneur you can reach out and get help. Do what you do best and leave the finance and numbers to someone else that can really add value to your operation.
About Ean and Moxie Bookkeeping and Coaching
Money scares many people. But it doesn't scare me. I don't want you to have to worry about your “crazy” finances anymore! If you're nervous or confused about money, I will help you become confident, comfortable, and knowledgeable around money.
I wasn't born a bookkeeper. I learned it slowly. In fact, I graduated with a Liberal Arts degree, so it wasn't until my 20s that I started becoming educated about money. After all, it's just another language, and with a little guidance, you'll be fluent, too.
So if you're overwhelmed or even embarrassed by where you're at - fear not! I want your business to be successful, and I will do everything in my power to make it so using my experience as a bookkeeper, business coach, and fellow small business owner.
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In Order to Be Successful in Your Business, Understand the Numbers Featuring Ean Price Murphy
Fri, 8/27 6:06PM • 54:39
bookkeeper, people, money, pay, business, bookkeeping, numbers, expenses, spend, profit, small business owners, buy, client, started, irs, bank balance, quickbooks, tax accountants, question, software
Ean, Roy Barker
Roy Barker 00:02
Well, hello, and welcome to another episode of The Business of Business Podcast. I'm your host Roy, of course, we are the podcast that brings you a wide variety of guests that could talk about a diverse set of topics we'd like to maybe point something out that you haven't thought about or if something is keeping you up at night, we definitely want to provide you with some information and professionals in that field to, for you to reach out to and get some help, we want to see everybody be as successful as possible.
And today, we we've got an awesome guest that's been waiting for an extended period, so we're gonna give her a big checkmark for patience and persistence that we finally got her on. But Ean Price Murphy founded Moxie Bookkeeping and Coaching in 2003. To work with creative businesses and non for profits. Companies deeply engaged with their work, but frequently not comfortable with the numbers. When the money makes sense, organizations thrive and so when they do, and so do their communities.
Unlike other consultants, Ean isn't a wall street or corporate escapee. She has decades of firsthand knowledge of the challenging of being small business owner with staff is a Certified Mastery Level Profit First Professional, Certified Fix This Now Advisor, Zero, Platinum Partner, QuickBooks Pro Advisor, and a Certified Business Coach. Wow, that last one was, I think I got them all.
Got them all. You got them. All. Right.
Roy Barker 01:37
Thanks so much for taking time to be with us. And we certainly do appreciate it.
Yeah, thank you for having me.
Roy Barker 01:42
So Well, first off, before I jump in, let's talk about how you got here. Has numbers of numbers always been something that interests you? Or did you have one of those career path changes at some point in time?
Good question. I numbers definitely did not interest me, I hated math growing up, I'm still not a huge fan. Got a liberal arts degree, you know, and started bartending with it. And what what got me interested in numbers was the deep negative consequence that it had on my life, not understanding that I grew up with, you know, a family that always had enough, but not a whole lot extra and was always told, no work hard, and you'll succeed, follow your passion, and the money will come. And, boy, neither one of those were true for me.
So I was chronically under earning, I had no idea because I didn't know how money worked. And so, you know, I ended up just by putting my living expenses on my credit card to make it from one paycheck to the next. And actually had a boss where we all had to run across the street and try and cash our paychecks before they started bouncing. That I found myself 10s of 1000s of dollars in credit card debt, which is the most expensive kind of debt you can have. And, and I was actually pushed into a point where I wasn't gonna be able to pay that off in my lifetime, and declared bankruptcy.
And that felt like, like losing it life, right. And, and I've always considered myself a person of their word. If I say I'm going to do something, I'm gonna do it. And and so it just felt like a huge failing and a betrayal of my own integrity. And so the deal that I made with myself, when that happened was, well, I'm never gonna do that again.
Roy Barker 03:44
lesson learned you Only you don't got to tell me that one more than once. And, and so that really motivated me to start figuring out how money worked. And and I had some skill as a bookkeeper and realized that was a skill that not a lot of people had. And so I had a whole lot of motivation and enough aptitude to make that my business.
Roy Barker 04:08
Yeah, that's awesome. And, you know, we're in a lot different age category. So I will ask you did when you came through high school did, did they even talk about money or anything like that?
No, my sister got home ec and shop. But by the time I got there, that was gone. And I mean, I think we're seeing the consequences of that now as well you know, with kids at home and schools be an iffy and, you know, the generations between those of kids who don't know how to change a tire they don't know how to cook an egg or you don't know how to mend a patch on their jeans and or you know, or or make jellies or any of these things that are really simple. If you've had someone show you how to do it, right. And and I think it's a tragedy, that that is not part of our education system.
Roy Barker 04:59
Well I will give my age away and say that, you know, we had a class that was like bookkeeping or business systems, or it was simplistic, but they did make us learn how to write a check. And I think that we did take a stab at budgeting. But really, that it was, that was kind of a sidebar of what the class was just because the teacher felt like we needed to know and, you know, even myself, when I first moved out on my own, I was thinking the rent was the worst part of this, but, you know, nobody ever explained the, you know, the electric bill, the gas bill, the groceries, you know, soap, the deodorant off the things that you've got to have.
And that was a huge eye opener to think, wow, you know, okay, here's all these other expenses that you really never thought about. So I do feel bad that we don't have more of an education. And, you know, if we, if we would even train or give them a, you know, we don't have to train them to be business to be, you know, accountant types, but we give him at least the underlying skills or knowledge, that would be so much more helpful.
And, you know, maybe people would make the decision because I, you know, I know a lot of people that I used to work for, I did some work for not for profit in the man, the director over the program, whenever I would show her spreadsheet out, always have some, like smelling salts with me too, because, you know, I could see her eyes start going or Head Start swirling, if there's more than, you know, three numbers in a row, she just couldn't stand that. So it's definitely a challenge. And, you know, we were talking a little bit earlier.
But I think the biggest thing to you know, maybe that we could touch on to start with is that, if you're good at something, you want to spend your time doing that. And if you're, you know, a tradesman, plumber, electrician, even if you're professional of some sort, you're good at what you do. But that doesn't necessarily mean you're going to be good at keeping the books. And again, you know, kind of go into your example, at the end of the year, when you owe taxes when you owe employment taxes, if you have people working for you.
Those can be very enlightening moments. You know, a lot of people just don't think about like the, when you're self employed, paying, you know, that quarterly estimation, Oh, my gosh, I was told that at such an early age, that it's helpful, because, you know, it's like, I just opened up a separate bank account, when I would get revenue from clients, you know, I just cut it what I needed and pushed it over there and just let it set. So there was no temptation, you know, to be like, Oh, that's a big old balance, I see. Now just go ahead, and, you know, buy this little extra thing I need.
And that's the secret right there. Right, just peel it off and put it in, put it in a jar where you're not looking at it.
Roy Barker 07:53
Now, because we've had a, it's unfortunate, pre pandemic, probably 2017 or 18, the area I live in, we had a couple of restaurants that actually went out of business because they could not pay their payroll tax. And, you know, the government, I don't know how that works, but they came out foreclosed on them and shut the business down at some very, you know, it was I don't know how it was run on the back end, but they had a lot of business, it wasn't that they were hurting for anything. So
right. And that's the terrible part, right, is that so many of us are taught that it's the sales number. That's important, right? Not the what you keep and take home number that's important. And that the government taking their cut doesn't count as part of what you get to keep. Right. So they I mean, there's a shocking number of wildly successful businesses in terms of demand for their product and love for what they do that that are barely scraping by.
Roy Barker 08:53
Yeah, cuz that's another kind of a joke. People always say, Oh, I got a, you know, I got a $5 million company. And it's the you know, my question. I know, I'm not that abrasive. I don't usually ask it out loud. But my, you know, my next question would be, so does it take you 10 million to earn that five? You know, does you have to spend 10 million to get that 5 million is like that. Whatever flows down to the bottom line, that's the most important thing for surely
I probably am that abrasive. The way that I phrased that question is, Oh, is that gross or net?
Roy Barker 09:24
Yeah. Like glassy eyed and Yeah,
I know. It's and then I know it's gross. As soon as as soon as they their face goes over it.
Roy Barker 09:35
Yeah, likely. Yeah, it just, again, it's like live like I was saying that example. There are so many other expenses that we really have to know about. Think about keep up with and I think this is an interesting time because I think we're gonna have a lot or I think we do have a lot of new minted entrepreneurial type, because they had to do either their side hustle or figure out something Then to kind of make it through this pandemic. But you know, if they want to flourish and keep on going, definitely going to have to pay attention to expenses.
And well, we can even back up and say, even pricing, because, again, I've worked with people that, why do you charge this amount? Because a guy down the street charges $5 more. So we're just cutting more, do you know what's wrapped up in that, and so working through everything that goes into whatever that unit of pricing is. So anyway, that's where people like you could really help, especially some new entrepreneurs or new businesspeople, that's where you would be really helpful to make sure First off, we get the pricing, right.
Yep. Yeah. And, you know, to me, there's sort of this leapfrog of the financials, the marketing and the financials, where you want to have that strong foundation where we say, Well, this is what you need to charge. In order to have the life you want to have you know, I love starting with the question, what do you want to take home? Like, what, what's what salary do you want? Yeah, you know, what's the minimum? what's what's sort of a little bit above that that's comfortable? And then work backwards from there to figure out how much you have to do in sales? And then how many sales Do you think you can reasonably do?
And great, there's, there's your There's your bottom price, right? Right. And then you go to marketing to figure out how do I differentiate myself from the guy down the street, so that price is not the thing I'm competing on? Right? So even if I'm four times as much as him, people are saying, You're the one I want, though, because some of its to the perception of the price.
You know, if I'm getting some for five cents, I'm assuming that it's made of plastic and in a factory and mass produced, right? If I'm paying 500, for something, It better not be. Right, right. And so there is something about that, where you need to decide, who do you want to be working with? Who do you want to be selling to? And does your price not only meet your minimum?
But does it resonate with the people that you're, you're trying to attract? And if those don't line up? Well, you got to work on your marketing and your messaging some more. And then we get back to the numbers and say, Great, now, how do we how do we optimize this? Yeah,
Roy Barker 12:17
yeah, and that's a couple important parts that you mentioned. value, because, you know, if you always if you just want to win on price, it's going to be a fight, because the next guy that comes along, he's gonna undercut you. And it just becomes a war where, you know, I like to take it that if you provide a service or product that has value, you need to, you know, you market and that's how you get business off the value that we provide it sometimes to low price can be, you know, some people will be like, that's a low price, that's probably low quality. So we're just moving on anyway.
There's a Benjamin Franklin quote, that says, there's always somebody willing to go out of business faster than you.
Roy Barker 12:58
I've never heard that. I like that. Yeah, so yeah. Thinking that through how how we, you know, what is our messaging to make sure that we are that them value, not that we don't need to keep up with pricing and what's going on in the world. But, you know, sometimes we just have to stay in our own lane and do our own thing. And if we've got the right business model, the right product and service, it'll work. Yep.
And the other thing I had written down was the trust factor, because, you know, I will pay a premium to do business with somebody that I trust. And so that's the other thing, I think we have to, you know, kind of on that marketing side, and sales and service and follow up and all that whatever your business model, you really have to provide that level where people trust you. Yeah, absolutely. Yeah. Because they can relegate you to the, you know, the low end if you don't have a trust, and you're going to have to be the low cost leader, and sometimes to those can be more challenging clients.
Maybe I don't know if you found that to be Oh, yes. You know, in the early days, when it was like, we'll take any business anybody can send, then you start learning, the people that beat you down on pricing the most are the ones that you are going to probably lose money on and have the most, you know, they want more, because they will continue to ask for more.
Yep. Yeah, just becomes a battle, right? They're going to try and beat you down on everything that so those are the people texting you in the middle of the night or asking for something, you know, or just making you feel bad about what you're what you are providing. Right, right. Yeah. And, And to me, that's, you know, that's sort of one of the fundamental questions that we have to ask ourselves is, would I tolerate this bad client if I worked for anybody else, like if my boss treated me the way that this client is treating me, then I'm working for the worst boss ever, which is me. Right? Exactly. I'm treating my best employee the worst, which is me.
Roy Barker 15:04
So, you know, there's an old adage about, you can't save your way to prosperity. I mean, you see, yeah, you can't cut your expenses to prosperity. But I'm a firm believer wrong, we have to keep up. And we have to manage those because they get out of control. It's like, you know, some things that I've done before where it started out as a reasonable price, but it escalates or technology changes. But yet, we're still paying the higher price or doing that same old thing. And so I assume that's another great place where you could come in handy is to help people, you know, with the expense control?
Absolutely. I mean, I think that there's a huge difference between an expense and an investment. And so people sort of see all expenses as equal, and they're really not, your people are an investment, marketing as an investment. Now, you need to make sure you're getting a return, that it's a good investment. But that's different than buying a pack of pens, you know, that are going to get used up and go in the trash.
And now we're done. So, so being really clear, where are the things that when I spend more, I can make more because I've got better quality to deliver? versus what are the things you know, and a lot of us are finding out turns out, that's our office rent, that the money's just gone, and I didn't really need an office, sometimes we do. But a lot of times offices are sort of vanity projects. Right? And we've found ways to get along without them.
Roy Barker 16:35
Yeah. Yeah, kind of off the subject a little bit. But I've actually found that this has been better, because you know, you don't spend time driving from one person or one place to the next you could do it. And it's, it seems, when you're in person, things may, the time gets away from me. And you know, whereas when you're zooming or teams, it's like, you know, the time is there, you quit and you move on. So it's like, kind of a time management tool, almost. Oh, yeah.
I used to only be able to service one, maybe two clients a day. Right? That's nuts. Now, can you imagine? Now I can get like six in no problem.
Roy Barker 17:17
So I like what you said about investments and employees, because that's another important part. And you probably are well aware, this, this link to that. The CFO comes to the CEO and says how can we continue to spend money training these people when they just leave? And the CEO says, How can we not train them and have them stay?
That's an important part is that, you know, we have to, and again, everything has to make sense. We don't want to be reckless with that. But you know, we do want to find ways to continue our training that fit within our budget, which gets back to is it within our pricing, because we want to keep up with everything. So I think it's a lot more complicated, sometimes building the right pricing in based on, you know, our expenses that we're either projecting, or that we've been able to see.
But, you know, it's always, that's fine. We want to have a margin, if we didn't need to do all these things. I guess we would just break even at the end of the day, but we need to make these continue to make these investments as we go forward.
Yep. Yeah. And so I think that, you know, the challenge for most small business owners is, okay, I get that. But how, how do I do that? Right. I mean, same thing with the whole. I don't pay yourself first. Right. Right. We all know that. That's not news. But how do I do that? Right. And, you know, that was what drew me so strongly to the methodology in the book profit first by a guy named Mike mccalla wits. You know, I mean, I remember reading the E myth, Michael Gerber classic text that fundamentally transformed the way that I thought about business.
And not just, you know, systemization is kind of what he's remembered for. But this idea of three personalities, there's the technician, the manager, and the visionary. And a lot of times, that's all got to fit in you. Right. And so just being conscious of Well, which one of those do I default to under stress, right, helps you fill in the gaps. So that was a big that was a big leap forward for me that book then the next big leap forward for me was profit first by Mike McCalla Wits because same thing, you know, here I am. I'm a freelance bookkeeper. I know I'm supposed to pay myself first.
But when the expenses are that high, how am I supposed to manage that? And so what Mike does is he takes the traditional accounting formula, sales minus expenses equals profit, and flips it. sales minus profit equals expenses. Now you have a natural budget, you don't have to worry about line item, being How much do I project I might spend on office supplies? I don't know, when am I going to run out of ink? I don't know. Right? And lets you just kind of look in a very general category of this is how much I'm spending.
Now. He also gives a very clear outline of how much is how much does a healthy business spend on overhead? How much does a healthy business set aside for profit? How much does a healthy business pay its owner? And so that gives you the framework to say, Okay, well, my overhead right now is 70%. But according to this chart, it should be 30%. Well, that gives me a whole lot of information, and tells me, I need to get creative and strategic and wily about how I'm spending my money to see if I can get down to below where I'm at now without cutting into that muscle of quality.
Right. And so that just simple framework, you know, that's the frame of the house. Now, it's solid and sturdy. And now you can paint it whatever color you want, put whatever wallpaper you own, make it yours. But you still have this guideline to stay within that that really helps small business owners who hate accounting and hate spreadsheets and hate math. answer that fundamental question of Am I gonna be okay, right?
Roy Barker 21:26
Yeah, that's a, sometimes we have to answer that on a day. So when you when a new client comes to you, what are some things that you're seeing? I mean, what would I guess what is that first thing that you target or something that just really rises to the top that you can see that needs help and attention?
Usually, the first thing we do is we look at their Chart of Accounts. And the reason that we do that is because people come to us saying, I've got a decent business, but I feel like I'm flying by the seat of my pants. I don't really know what's going on. I keep depositing money, keep spending money, am I okay? And so when I say, Well, you know, do the reports make sense to you? Most of the time? They say i don't i don't really look at those.
I Oh, well, let's maybe we should start there. Because if you I don't even have a metaphor for that, if you have all of this rich data. Yes, I do. I have a business coach friend mentioned McDonald, who loves to say, Don't Starve at the barbecue. All of this information is laid out in front of you. But if you don't know how to go fill up your plate with it. Right? What are you doing? So so just saying, Let's change the categories in the chart of accounts, let's change what you're calling things.
So that it makes sense to you. Right? Your accountants job is to translate whatever happened in the real world, to whatever the IRS wants to hear. That's a crazy language in and of itself. Your tax person is your interpreter. Let me be the interpreter for what really happened in the real world into your books, and teach you the kind of get around phrases so that you can answer those questions. How much did I make? How much did it cost me to make that? How much do I have leftover to spend on my overhead? What is my overhead? And what do I got at the end?
Because if you have the categories, right when my favorite is dues and subscriptions. Nobody knows what goes into subscriptions. But everybody tries to use it. They go, Well, maybe that's my software subscriptions. And maybe that's my iTunes subscription. And maybe that's my newspaper subscription. And maybe that's my membership. And then they get this big number and they go I that doesn't mean anything to me.
Of course not. Because you don't know what goes in there and what doesn't go in there. Right. So let's, let's call it what it? Is it software subscriptions. Great. Is it memberships? Great. Now, you know, and so that just clears up so much of the confusion, because now it reflects the way that people's brains work. Great.
Roy Barker 24:09
Yeah, cuz I think, you know, sometimes you get that, what are your chart of accounts? And, you know, that's when you get that glazed over? Look, that's a definite sign. Because, you know, I've seen that before. It's like, I don't know, but I don't know, we had $100,000 in expenses. And that's what it says that the bottom line, you know, because my bank balance, you know, fell from this to that, and that's why it was spent.
But it's hard to pinpoint, okay, how can we change what can we change? Is there anything we can change? Sometimes there's not sometimes it is what it is, we may have to go back to that pricing structure. But if we see something that's way out of line and these expenses, it's easy to go fix that in. A lot of industries, have publications where they have some benchmarks that are helpful. You know, I always have the footnote The benchmarks because that doesn't mean you're wrong.
You don't know what people you know, everybody chooses to drop things in different categories. But what I always do is look at it say, if I'm close, it's good. If it's way out of whack, then either there could be something wrong maybe needs further investigation.
Yeah. And so for me that you know, the chart of accounts, for anyone that isn't, doesn't know what that means. The chart of accounts is the definitive list of all of the ways that your money can come in, go out, move around, or hang around. So it's not just that, you know, what I earned? What should I spend, but all the other stuff, too? How much do I owe? have I taken a loan? Did I make a loan into the business? How much have I put in? How much am I taking out? What's my credit card balance? What is my bank balance?
And a lot of people don't understand why when they look at a profit and loss statement that hopefully profit at the bottom sometimes doesn't equal their bank balance. And to be able to explain to them, well, there's a bunch of other stuff happening with your money, which, again, is why profit first is one of my top Recommended Business books ever. And why I believe in the system so deeply is because it looks at what is the cash you actually have? And what does it need it for? So that loan payment, which won't show up on your p&l statement, we count that as an operating expense because cash is needed to operate. Right. A
Roy Barker 26:28
lot of complexities, a lot of them, if you brought up something earlier, I wanted to touch on for a minute about taxes. So well, this is one thing why I don't do my own taxes, even though I like I like numbers, and I could probably muddle my way through it. But the IRS sends out how many tax bulletins every year? hundreds, probably?
Probably hundreds. Yeah. Sometimes several a day. I think, with the PPP, it was changing daily. Yeah.
Roy Barker 26:57
So those are things to you have to look at the kind of that the knowledge component is that I could plug some numbers in here. But as these rules laws, as everything is changing, you have to stay up on that. And that's why, you know, unless you do this for a living, if you're, like I said, trade, the professional that's not in numbers, then it's that's why it's beneficial to have someone like yourself to help because you stay up on all of that. It's easy, because you have a lot of clients, you can spread that cost of education, I guess you could say across all of them.
Where if it's just me, I've got to find time, you know, Sunday afternoon, instead of watching the football game, I'm now breaking out some IRS regs to look at our bulletins to look at see what's changing. So from that standpoint, you know, I guess let's talk about the importance of that just a little bit.
Yeah, I mean, I think to me, the importance of that is the important outsourcing. And it's again, another trap that a lot of small business owners get stuck in of, well, why should I pay somebody else to do it? If I can do it myself? And my answer is, is it making you money, right? Because if it's not making you money, and if someone else could do it, the and you think that you could go use that time that you save to either get a good night's rest, so you're back doesn't kill all the time, right to play with your kids.
So they're, you know, your wife's not mad at you? Or, you know, or, or just sell more of what you do, then you're holding yourself back by trying to get it all done yourself, you know that? That is one of the most dangerous myths that pervades our culture of this, like I did it myself kind of a thing? Like I'm sure you did. But Wow, you probably could have gotten it done a lot faster. And a lot better if you just ask for a little help.
Roy Barker 28:52
Yeah, yeah. Because there's Oh, there's so many things like working from home, you know, there's a square footage allotment, I don't know, that has changed. But you know, that percentage of utilities I think used to be part of I mean, there's these all these equations that have percentages or square footages, or whatever attached to them. So the law doesn't necessarily have to change, or the regulation change that you can't write your home space off. But the square footage could change. And so those are just little nuances. And again, I don't know if this is still true, but used to working from home. Probably one of the bigger triggers to get the IRS up in your business. Yeah.
Yeah, I mean, I think last year may have changed that. But that's that is definitely true.
Roy Barker 29:41
So again, you work from home, you definitely want to have your business in order. Okay, see come knocking on your door, you know, on be charging off 10% if it's only 5% now, or you know, whatever these little changes because it doesn't matter. The small you know, even if they find something small, it just makes them look harder to see hey, He messed up on that. Let me just rip this whole thing open and see what we got going on.
Yeah, I actually had a client once who correctly wrote off her home office space. And then they moved. And when they moved to their new house, the space changed. She had a curtain instead of a door, and she stopped writing it off. Well, the IRS came to her door, she foolishly let them in because you don't have to let him in. You can meet him at your your accountants office if you have an account. And the assessor looked around and said, That's not an office and disallowed it.
And she said, it's not the same address. He said, I don't care. I'm disallowing it. She's like, but I'm not writing this off. He said, I don't care. I'm just allowing it. Oh, my gosh. And she had to decide whether, you know, a couple 100 bucks was worth escalating this and she decided it wasn't. And so like, what a what attracts so many levels? Yeah.
Roy Barker 30:58
You know, well, if what I'm seeing that's another great thing is the advice that you can give, you know, if if, I guess if he had called and said, Hey, this guy's here What now? You know, yeah. Don't let them in. And yeah, don't let him in. Yeah. So those are other great things that because you
don't want to not take that. Yeah, I was gonna say you don't want to not take that deduction, you don't want to be scared of taking the money that is rightfully yours. That's a real deduction. You know, that's the tax accountants job is to help you pay them out the least amount legally possible. And they know all the tips and tricks.
Roy Barker 31:33
Yeah. Well, and that representation that you could provide, even if they do start looking through, it's nice to have an educated professional in that space to say, you know, this is why we did it, I can show you the, you know, I guess all the paper trail of law, we would do something like that. It makes it much easier to personally to defend, you know, the, what is the saying that guy is a lawyer that represents himself is the, I don't know the words a fool for a client.
You could kind of say that probably in the in the bookkeeping round, too. If you're sure not a bookkeeper, then you definitely don't want to be representing yourself if something does go, if you do get audited doesn't necessarily mean sometimes they come out, just spit them out for other reasons. But
yeah, one of my I mean, there's there's a random selection as well. But again, that, you know, they will take you more seriously if you've taken yourself seriously as a business right now. And I actually don't represent people in front of the IRS because I'm, I'm not getting in that pool. Right. But I do make sure that everything is clean and clear, so that you understand what's happening and what your taxes are going to say, well, and that the person signing your taxes is in agreement.
Roy Barker 32:48
No. Yeah, definitely. So let's talk about setting up. So if I just brought you my, my shoebox full of receipts and just dumped it on, you know that I mean, the first thing is like, Okay, let's go back to the chart of accounts, we need to figure out how we drop all this stuff in here. But again, I think this is why if you get out in front of this and get some help before you got the shoe box full, it makes my life much easier on everybody.
Yep, yeah. And so I actually, when when people come to me with a shoe box, I say you're not ready for a bookkeeper yet. What you really need is you need an office assistant, right? To go through and figure out, you know, are any of these not on your bank statement? Did you pay cash for those, because I don't want to enter everything we can import in from your bank, like there's so many leaps forward in technology that lets bookkeeping be automated and set up, right.
So there's way less that you have to do way less that I have to do, and you don't want to pay me an expert rate to be, you know, reading receipts that are faded, and that a six or an eight or a three. Right, so so I just say let's, you know, take your best guess work off your statements and get you set up right going forward? Because I'm not touching those soggy things.
Roy Barker 34:13
Yeah, because it's, well, like you said, we don't know if you get it, you know that it's time you spend, is it cash? Is it not even isn't even a business expense? Or was that a you know, some new pair of shoes or whatever, somebody may have button? And it just got lumped into that? So definitely, those are calls that the, I guess the potential client needs to make before.
But okay, so we the next step would be okay, let's go get some software. And there's a ton of software out there. And nowadays, I guess a lot of it's moving to the cloud, but are different ones better for different industries, or can you give us a little bit advice on how we would want to choose one for us?
Yeah, I think more than industry, it's about what do you plan to do with To your business. So the only software out there that I know people use, and it just makes me cry a little inside when I hear that they use it is QuickBooks self employed. That's the only one I just can't. And the reason is, in my opinion, they shouldn't be charging for that software. There's a version by a different company called wave like a wave in the ocean wave apps calm. Okay?
That does everything QuickBooks self employed does, but it's free. Okay? So the fact that Intuit feels good charging you $10 a month for a piece of crap product, right? And I say, I'd say piece of crap. From my perspective. It I think it works wonders for the people that use it. They just don't know they could get it for free.
Roy Barker 35:51
Yeah. Well, And that, to me, it was a little different, because I've always had some form of QuickBooks, you know, basically old wooden, where it was on a computer. And it was pretty good. But when I tried that one, I feel pretty technical. I'm gonna say I'm average technical. And I don't mind trying, I could not figure it out. I mean, I ended up having to go back and buy the old computer based version, because it was just, it was too difficult to enter stuff for me, but then I never could get the reports that I was looking in. I'm not saying they're not available.
I'm just saying it was just difficult. Very difficult. That's what you're saying that the self employed, or you're talking about online? Yeah. Yeah. The online. I think it was self employed online. Yeah. It was just like minimal. I guess they're trying to make it easy. It was minimal entries, but minimal entries, equal minimal information coming out the back end as well.
Right. And so it would make perfect sense to me that that would be their entry level product, and that they would charge for it if it upgraded to a different QuickBooks. Right, right. But what happened, I suspect is that they bought somebody else's product and packaged it as their own and sold it. And you can't go from QuickBooks self employed to a better version of QuickBooks.
And so that, to me is like Well, come on, guys. Like everyone why anyone that bought QuickBooks self employed would assume that you would be able to upgrade it and keep your history. No, no, no. So for those levels for QuickBooks self employed, and for wave apps, and I normally would put fresh books in there too. But I think freshbooks is getting a little different, they actually don't have it's not true double entry accounting.
When you make a transfer the categories just called transfer, and it doesn't matter where the money went, we just know that your transfer. So if something goes wrong, I as the outside bookkeeper, have no way to say, Oh, I see where the problem is, you said that you used this money to transfer to this bank account. But actually, it went to this other one. And so when you choose the, the sort of do it yourself versions, that's what you're committing to doing it yourself, right? And if there's a problem being like, well, I don't know.
Let's just make it work and who hope it isn't a big problem. So I tend to to only do very minimal consulting with people who are using that because again, what they're saying is I've chosen, you know, it's like buying a bicycle and hiring a driver. Well, I can't, I mean, you can ride on the handlebars or your own bar bike, but I don't know why you're paying me to paddle because you could be doing this.
Roy Barker 38:35
So if you want to work with a bookkeeper with someone who can help think do things for you, and help make sure that the starting and ending balances line up to your bank and that the books are good, you're going to need to upgrade. And and the two ones that I like, are both cloud based QuickBooks Online and a software called 0x. Er, Oh, okay. And that's because, you know, unless you live in a rural community where your Internet's real bad, no, I know you're out on the road. I know you're doing 20 things at once.
I know you're running around like a chicken with your head cut off and trying to make the most of your time. So if you've got something that you can take with you on your phone, snap a picture of a receipt, say this is what it was right now. Throw that receipt away. Great. Right? You know, and if you plan to grow and expand, you want your people to be able to do that too. You want to be able to send an invoice when you're done with the job right there.
Roy Barker 39:37
So the next thing is let's talk about getting with you because the other good thing if you use some kind of a an electronic version, you can just usually send the file to whoever's helping you do tax prep at the end of the year. So but, but give me a chance to get up on your soapbox, I'm sure is that transferring that file April 14. At 530 in the evening, probably not the best, probably not the best strategy to be able to file on time,
not the best strategy. So, here's, I'm gonna, I'm gonna make a little distinction here, okay? A lot of people don't know the difference between what a bookkeeper does what an accountant does and what a tax person does,
Roy Barker 40:22
When when we say accountant, we meaning us here in the financial world, what we mean is kind of anything that has to do with money. So, in some ways, it's like saying, Doctor, Well, okay, ear, nose, throat doctor, joint doctor or professor of philosophy, Dr. liveweight, where are we going with this? Because I want to know what kind of doctor I'm going to if I have a particular problem that needs to be solved.
So a bookkeeper handles everything from the data entry of the information about the transaction by transaction through reconciling, which is making sure that what you have in your software matches to the bank through producing the reports and saying, Do those numbers look right to you? Or has the mistake been made? Once you start talking about interpreting those reports, okay, this is what it says, What do I do about it? Now you're in this weird gray area that traditionally has been filled by CFOs. Right.
But most small business owners don't have a CFO. And then on the other side of that gray area is your tax accountant, who is there again, to help you stay in compliance and pay the least amount of tax legally possible. And so most people do some of their own bookkeeping, or have a bookkeeper, that they don't oversee, that they never double check. And they send the file direct to the accountant.
So whether they're sending it on April 14, or even months ahead of time, if you as the business owner have never looked at that file, you are likely sending over some pretty messy stuff. Because the bookkeeper has been working without any direction, guidance or supervision. And that's not the tax accountants job.
So. So we actually don't file annual taxes for people because I love to live in that middle zone. I want to make sure your books are clean. And I do that whether you need a bookkeeper, whether you have a bookkeeper or whether you are the bookkeeper, because we do bookkeeping to obviously Moxie bookkeeping.
But I think we're our real value comes in because so much of that can be automated and streamlined in the software itself, that we often pick up where everybody else leaves off with the What do I do about it? Right, what can I afford? Am I okay, which is not a bookkeeping question. And it's not a tax question.
Roy Barker 43:01
Yeah, definitely. Because, again, interpreting the numbers is probably just as important as the numbers. So we know can we can we buy something do we have? Are we going to be able to make payroll at the end of this month? And then are we, I guess, going to be able to buy a new piece of machinery or hire that next person?
Yeah, I mean, so in that ways, it's more important. And again, this is what brought me to my particular soapbox of profit first, which is this dead simple cash management system that lets your bookkeeping exist on its own. So I think of bookkeeping, a profit first, like beans and rice, right? You can cook beans a million ways. You can cook rice a million ways. But when you bring them together, suddenly you have this magical complete protein, right?
Something that wasn't there before. Right? So what I love about profit first, and why I insist that all of my clients do it. They don't have to do it with me, but they have to do it is it lets you make those financial decisions without having to wait on those reports, which are only going to tell you what already happened yesterday, right?
That's like trying to drive by looking in the rearview mirror. You know, what I what I know, you really want to know, and I know this because I myself, I'm a small business owner is what about tomorrow? What about next week? What about the end of the month? And so having that, you know, having your money set aside into those different bank accounts, lets me look at two numbers. Have I hit my sales target for the month?
And what is my bank balance? And if those are both, okay, the answer is Yeah, you're fine. Now you can let your bookkeeper worry about, Hey, would you buy on Amazon? You know, would you see this restaurant charge? Is that really business? Or is that you just going out after work? And so and so it lets you know people really do their jobs correctly. And let you answer the thing that is most important.
Roy Barker 44:59
Yeah. Do you ever use a pro formas? to kind of take a look? If I want to buy a piece of equipment to go that far to be like, how many more units do I need to sell to, to finance that or to pay for it?
I can. Yeah. And and here's why I don't start there. I don't start there, because most of the small business owners that I know, don't have the time or interest to figure that out with me. Right? They just want the answer. And so again, I can charge you a whole bunch of money to be on speed dial and give you that answer. Or I can say, let's open up yet another bank account, which sounds crazy. I know it sounds crazy.
And you definitely want to go to a bank that doesn't charge you monthly fees and doesn't charge you minimums. And there's a lot of good banks that do that. Now, I'm going to say let's open up an account that's just for equipment purchase, because we know you're going to want to buy a new whatever, in a year or two or three. So if if we want to buy a new truck, and we want to have $100,000 in there to buy a new truck when we're ready. What's our goal to how you know, how soon do we want to do that? And so how much do I need to be putting in there.
And so based on a percentage of my income, so as my income fluctuates up and down with seasons, or demand or whatever pandemics, whatever, I say, Okay, I'm gonna put, you know, 3% of my income into this truck fund. And I know that I have to be putting in at least X number of dollars a month to be on track, I'm putting in less, well, I need to sell more, my sales aren't good enough. Or I need to cut expenses somewhere else so that I can still do that.
So it it, it lets business owners do this thing called bank balance accounting, where you look at your bank balance, which I know y'all do every day, multiple times a day. And say, got it. I know what that is, rather than having to do the math backwards of Oh, right. But payroll and Oh, right. But rent and Oh, right. But insurance, you just you know if it's in that account, and that's the account for that purpose, you're good. Give every dollar a job, give every dollar a home,
Roy Barker 47:18
like that give every dollar home. That's good. All right. Well, no, we appreciate you being on the show. I know we ran a little long, but it's a great conversation. I just, you know, I think people need to pay a lot more attention to their money. Because like you say, at the end of the day, it's like, wow, I'm making a lot of money, got a lot of business. But at the end of the month, when the you know, it's time to sit down and pay the bills, a lot of people say, well, where did all that go? So we need to be sure and you know, have ways that we can manage both our revenue coming in and our expenses going out? For sure. Absolutely. So any any other wisdom that you want to leave the audience with? Before we wrap up?
I mean, I would say if you're excited by that idea, or if you're curious about what that might look like, the one step that you can take is to activate that old savings account tied to your business checking account, which you probably have, or if not open one up, and just start putting 1% of your income in there. And watch it grow. Yeah, and see how fast that grows. And, you know, maybe that'll motivate you to get curious a little a little bit more and see how the system can really transform your relationship to money. And the way that you think about what you can afford and how to afford it.
Roy Barker 48:37
Yeah, cuz most banks nowadays, they beat you up to take that savings account when you do an account with them. Yeah, and it gets back to the other one of my favorite things of finance that, I guess, you know, got me more excited about it when I was younger is just learning about the time value of money. And so you know, this is kind of a message to younger kids. I'm sure you've seen the analogy of the two sisters, that and you can correct me if I'm wrong, it's been a while. But basically, you got two sisters.
One is gets out, they both get out of school and one's kind of the party girl that's, you know, running around doing everything, not saving any money. The other one is the conservative one that starts putting X number of dollars back for I think it's like 15 years, and then she gets married has kids quit saving never saved another dime. Well, about this time, the party girl decides she wants to start saving. And so she starts putting the same amount of money back.
But at the end of like, what 3040 years. The Conservative one that saved all the money in the very beginning still has much much more money in savings and the other other one compound that was close. Yeah, that was close. Closer than I would have gotten. I need to pull the figures because when You sit down and actually work through the math is like really eye opening. And so if younger people, younger business owners, it's never too late to start.
I'm not trying to discourage anybody, but I'm just saying, way sooner, the sooner the better for everybody. Yep. All right. Well, before we get away a couple questions, first off, what is a tool or a habit? What's something that you use every day, that really adds value, either professionally or personally?
Well, the tool is the tool that I use every day, which I think is a personal tool, but allows me to do my business is I don't get out of bed without saying five things I'm grateful for, that just puts my head in the right space keeps everything right where it should be, you know, I can't be in too bad of mood when I when I acknowledge all of the blessings that I have.
Roy Barker 50:50
Right. Now, that's awesome. I think we, you know, sometimes when things feel rough for us, if we think about all the things we have to be grateful for, and there's a lot of people going through a lot worse, it does take our mind off of our troubles and allows, you know, we don't want to be weighed down by always thinking how bad we have it too. That's hard, too hard to advance in life. Yep. So tell me tell us who do you like to work with? How you can help them? And of course, how can they reach out and get a hold of you?
So I think, you know, my favorite people to work with are, are people who are ready to make a change, that are willing to have a conversation and collaborate on it. They're not wanting to bury their head in the sand anymore. They don't want to just hand it off and never think about it again, they really want that education piece of it. Right? Hey, how can I be a smarter, better business owner, that, you know, that really gets the most value for my time?
You know, I know a lot of people who love what they do and are happy to work 60 hour weeks, that's great. I want that to be a choice. I don't want you you know, if you feel sick, if your family gets sick, I want you to be able to work less than that, and not worry about your financial security. Right? It's that you know, you have to not be bouncing on that razor's edge.
Right. So you know, people who are either just getting started and want to get started, right, or people who are at the point where they're making enough that they're worried about how to handle it, you know, but they they, so they want to, they want to know the number stuff, but they don't want to learn accounting. And that's where I can come in, and really help make it simple and clean. And, you know, not full of technical terms, where they don't have to worry about budgeting and really can just keep their eye on those two key numbers. Right?
Roy Barker 52:46
Yeah, not to open up another big topic, because I'm sure we could do another show. But when you're a business person, most of the time people are counting on part of this as their retirement. And, you know, my advice is you always need to, you know, have your, well, you know, what they're calling more about your steps or whatever the you know, the vigil, retirement accounts are for yourself. But if you take care of your business, and you stay on top of this, typically, you're you will see more value at the end of the line.
Because unfortunately, what I've seen is businesses that are in disarray, now they need to sell or want to sell, and they can't because their financial back office is in such a mess that, you know, they'd have to take 50% of the value. So, again, it's a part I wish we wish I would thought to talk a little bit more about that. But it's just imperative because you don't want to work in your business for 30 or 40 years and be like, okay, now we can finally retire. We're going to go travel. And then the money's not there. Yeah,
I mean, it's, you know, there's some terrible irony to what makes a business enjoyable to run is what makes it profitable to sell. Right, exactly.
Roy Barker 54:01
Alright. Well, thanks so much for your time. It's been wonderful talking to you a wonderful talk with you. that's gonna do it for another episode of The Business of Business Podcast. Of course I am Roy. You can find us on all the major podcast platforms, iTunes, Stitcher, Google, Spotify, we are also on all the major podcast platforms, usually, I mean, we're on all the major social media platforms, we hang out on Instagram a little bit more than anything else. And also, a video of this interview will go up as soon as the episode goes live. So check it out there. Until next time, take care of yourself and take care of your business.