In this week's episode, you'll get an inside track on budgeting with precision, utilizing accounting software to not only manage expenses but to fuel strategic decisions that enhance cash flow and secure your business's future.
This conversation goes beyond numbers; it's about assembling a great financial team that works with your prosperity as a goal. From the moment you embrace the Profit First method, to the pivotal role of key players like Tyler McBroom and TaxSaversConsult.com, you'll learn the importance of each expert, including when to bring in a CPA and how a financial planner can navigate the complex world of fees for long-term success. A personal brush with bookkeeping fraud has taught me invaluable lessons that I'll pass on to you – because taking control of your finances is the surest path to business triumph.
Be sure to subscribe to the podcast, and share it with someone who could benefit from what you heard. Also, head over to https://theerinolson.com/links and sign up for the email list, and you can get all the downloadable PDFs and tools! News: We finally have a YouTube channel! Visit us HERE: https://youtube.com/@theerinolson?si=xPNSU1-C7Yt9zXgD
In this week's episode, you'll get an inside track on budgeting with precision, utilizing accounting software to not only manage expenses but to fuel strategic decisions that enhance cash flow and secure your business's future.
This conversation goes beyond numbers; it's about assembling a great financial team that works with your prosperity as a goal. From the moment you embrace the Profit First method, to the pivotal role of key players like Tyler McBroom and TaxSaversConsult.com, you'll learn the importance of each expert, including when to bring in a CPA and how a financial planner can navigate the complex world of fees for long-term success. A personal brush with bookkeeping fraud has taught me invaluable lessons that I'll pass on to you – because taking control of your finances is the surest path to business triumph.
Be sure to subscribe to the podcast, and share it with someone who could benefit from what you heard. Also, head over to https://theerinolson.com/links and sign up for the email list, and you can get all the downloadable PDFs and tools! News: We finally have a YouTube channel! Visit us HERE: https://youtube.com/@theerinolson?si=xPNSU1-C7Yt9zXgD
See ya next week! Erin
Speaker 1:
Welcome to the Quality of Life podcast. I'm Erin Olson, a wife, a mother and a serial entrepreneur. After starting three successful businesses, I've learned some hard lessons regarding the ins and the outs of starting and running a small business. My intention is to share my knowledge that I've learned from the School of Hard Knocks so you don't have to learn it the hard way like I did. Each week, I hope, to guide you to the next level in your business or in the business that you're working. So let's go. Hey guys, welcome back to the Quality of Life podcast. It's Erin Olson here to help you get from your business idea to a booming business.
Speaker 1:
Last week, we talked all about getting to know your numbers. I know I didn't want to learn about them either, but once you do get to know exactly how your business is doing financially, it is so freeing I really mean it. The peace of mind that I got from knowing where I was financially and how to take control of it was so worth the time that I took to learn. You can get ahold of your books too, and it feels so good to take back the power instead of letting them control you. This week, we are going to talk about what to do with your books now that you have them in order, and who to work with to make those numbers work for you. I am not talking about hiring a controller, although I would probably suggest getting one, or at least looking into it, when you start making over a million dollars a year in sales Goals. Right, I am talking about things that have really helped me to become a profitable business owner three times over. I am also talking about the team of people that you align yourself with in the financial world, like a banker, a bookkeeper and a financial planner, and also an accountant. So strap on your chief financial officer hat and let's dig in. One thing that has really made a huge difference in my bottom line is my mindset. Now, we've all heard the term bottom line, but that is just business lingo for whether your business has a profit or a loss. It's literally the bottom line on your profit and loss statement, like we talked about last week. So here is my mindset.
Speaker 1:
For the first several years, I wanted to have as many write-offs as I could so I could pay the least amount of tax as possible. That's the way I was told that businesses work and nobody really wants to pay taxes, so it made sense. Plus, I was told by a CPA that you could take a loss in a business for about three years without raising any IRS audit red flags, and while this is true, it is horrible advice. In the first couple years you might take a loss as you're building your business, buying equipment or hiring people, but buying stuff solely to decrease your tax liability is a terrible business strategy. The shift in my mindset came when it was time to get a loan to buy a building and to get a line of credit to help us with our cash flow, since we showed a loss or very little profit for years, we looked like a business that was barely making it, even though we had well over a million dollars in sales for that year. We literally had no value. And what bank wants to lend money to a company that isn't good at making money? You follow me here. By trying to pay as little taxes we could, by buying vehicles and things that we could use but really didn't need, we looked like a business barely keeping afloat.
Speaker 1:
Do not do what I did. It makes building your business way harder. We will talk about taxes a little bit later, but get your mind right in that you actually want to show a profit, even if it means paying more taxes. So in building my businesses, there were a couple tools besides the accounting software that really helped me make my numbers work for me, one was putting a budget in place, just like I mentioned a couple episodes ago. Putting a little time here just means telling your money where to go instead of wondering where it went. I am not talking about creating this thing to limit your spending. I am just telling you to plan where your money will go using your accounting software, so you can make better choices of where to allocate, that is, spend, your income. This is not a concrete set of rules to govern your spending. It is a fluid, ever-changing flow that you consciously get to choose. That's probably why they call it cash flow. So let's learn about a budget. Here is my quick start guide to creating a budget.
Speaker 1:
Number one print out the last three months to a year's worth of expenses using your accounting software. Of course, most softwares have a report where you can compare the expenses of all of your categories by month. This is the one that you wanna print out, so you can see them all in front of you in black and white, then make notes of any seasonable changes that you might see or any trends that jump out to you. Number two now I want you to figure out your current operating expenses, separate from the extras. This is everything that goes into your COGS or your cost of goods sold, your utilities, everything such as rent, payroll, if you have one, and shipping and other things that you must pay for every month to create or sell your product. Now add 20%. This is what you must make to cover all of these things, plus taxes. The IRS never forgets about taxes due, so you shouldn't either. Print it out according to the category of the expense. Number three next add that up and write this number on a piece of paper as your minimum sales goal to start, and put it somewhere where you can see it all the time, so you know what revenue you need coming in to be able to pay the bills and stay afloat. Ta-da, you have just created a budget. That wasn't that hard now, was it? This is the most crude form of a budget, but if you do this monthly, you will start to build that budget muscle and it will get easier and easier. Now you have a tool that you can start to plan, and I mean in advance, for seasonality and for growing your company.
Speaker 1:
Then the next thing that made the hugest shift in my business's profitability was reading, or actually listening to, the book Profit First by Mike McAllowitz. This book was instrumental in getting all of the bills paid and making a profit. I cannot suggest this book enough. If there was only one takeaway from this whole podcast, this would be it by the book. It is also great on Audible. It's easy to listen to and the guy's pretty funny. The core concept of this book is to make profitability a priority. Instead of paying bills first and waiting to see what's left after paying expenses, the gist of the book is to move all income into four buckets or checking accounts immediately. The buckets are profit taxes, owner's compensation which is your paycheck and operating expenses. The way this book really helps is to get you to focus on income generating activities, and that ultimately increases profitability.
Speaker 1:
If you implement this while you are still small, you will win at business and you will get a paycheck. If you are already a bigger business, you might have to find a consultant to help you with this. They will ensure that you are allocating things correctly. So when you implement this Profit First strategy, you will need to set up a few bank accounts to help you implement it the right way. This is where your team comes in. You need a banker and you need one that you can get to know. That will help guide you in getting funding when you need it. I found a great bank through a referral and let me tell you, shelly at Farmers and Merchants Bank in Minnesota is still a friend today and her bank is still a home to my bank accounts.
Speaker 1:
Find a banker that can do business with corporations, because you might become one someday, if you aren't already. Also, you will want to make sure that this bank offers business checking and savings and a line of credit and possibly business financing for a mortgage. Oh, and one more thing you probably don't want to go with one of the huge corporate banks to start. It's very hard to get a relationship with anybody at a huge corporate bank. Get to know your banker While they are in the business of making money. They can be a huge asset and advisor.
Speaker 1:
The next people that you are going to need on your financial team are a bookkeeper and an accountant. While you might be acting as your own bookkeeper for now, there will come a time where your time will be better spent delegating this to a professional. But there is a caveat Thoroughly, that both your bookkeeper and your accountant Make sure that you are in very good contact with them. Weekly reports are imperative. Let me tell you why. First, you don't want to lose touch with your numbers. You have worked very hard to get a relationship with them. Don't lose touch. Second, it will let you know that the person being paid to do the books is actually doing them Storytime. Okay.
Speaker 1:
So several years ago I hired a bookkeeper that a friend referred to me to take over this aspect of business so that my time could be better spent on business growing activities. After several months I noticed things in QuickBooks weren't getting done the right way. The bookkeeper was still showing up to the office weekly, but I wasn't getting an update and reports as often as I wanted. So when I asked about it, there was some line of bull and excuses made. I gave the bookkeeper a break and let them know I expected to be brought up to date and up to speed. After a few weeks I decided not to pay for services that weren't rendered. The bookkeeper called and demanded payment and I said I would gladly pay as soon as I got proof that all of my books were up to date. Then they said sorry, I haven't gotten payment, so I have erased your books. Wait what? I hung up and I looked and that person deleted my business for the last three years in QuickBooks. This was a huge problem. Long story short, the bookkeeper got arrested for fraud and malicious intent and a couple of other things, and we all had to go to court. I also had to find someone to rebuild my books. This was a very expensive mistake.
Speaker 1:
So do business with a handshake, but do your darn homework and make sure that your bookkeeper is legit. I learned a lot from this terrible thing and, yes, I did find a replacement bookkeeper. It was actually a firm and we all lived happily ever after. But the long and the short is, you need to find somebody that you can trust. Sometimes, going with a firm where they have checks and balances would actually be a better idea. Okay, there are two other team members that you need on your side the accountant and the financial planner. Well, as far as accountants go, they also need to be fully vetted.
Speaker 1:
There is a guy that has helped so many businesses save money and taxes, and his name is Tyler McBroom. He has a company that can hook you up with a tax professional that can help you in your state. The website is TaxSavorsConsultcom. I will put that in the show notes, so don't worry about writing that down now. Their goal is to help you pay the least amount of taxes without encouraging you to spend more.
Speaker 1:
As a strategy, this is what I told all of my accounting firms that I have used since the first one. I want to be completely legal in my taxes, but I want to be as close to the line as possible and to be strategic and use every loophole available to me to help reduce my liability. This is so important. I have also had accountants that just aren't willing to meet quarterly to help me plan and strategize. So take time and find a CPA, but not right now.
Speaker 1:
Tax season, if you haven't noticed, is upon us and if you go searching right now, you will only get those that aren't as busy, probably scraping the bottom of the talent barrel Just saying Okay. So as far as your financial planner goes, my suggestion is to talk to other business people in your area or your industry and ask for referrals, and those business people should be doing good. They should be making it. As far as we're concerned, not all planners are alike and make sure you ask up front what the fees are. In fact, you should probably ask that from all of the teammates that you acquire. It's not a bad thing to ask what's this going to cost me before anything is signed.
Speaker 1:
Okay, guys, this is a shorter episode, but oh, so important. I hope you take control of your finances and win. You likely will with the right plan and the right team. I hope that this episode helped get you on track to millions. Well, guys, that's all I have for you today. If you liked this episode, would you share it with friends and maybe go rate it on the podcast platform that you listen to it on? Thank you so much for joining me and I will see you next week on the Quality of Life podcast. See ya. Thanks for listening to today's episode. Be sure to check us out on the Quality of Life podcast Facebook and Instagram pages and our website, theaaronolsoncom, for downloads and more information. That is T-H-E-E-R-I-N-O-L-S-O-Ncom. Stay up to date by joining our email newsletter. Together, we can improve all of our quality of life.