Reasons why a bookkeeper can save your business with Chris Mims
When you are your own boss, it’s difficult to keep track of everything. No matter how hard you work, it’s almost impossible to stay on top of every aspect of your company.
You are the head of marketing, sales, payroll, human resources… it’s already stressful enough! Add managing finances to the equation and you get a hot mess. Thankfully there are ways to relieve that stress and help you regain your freedom and focus on the parts that matter the most to you.
That’s the reason why we invited our amazing and beloved bookkeeper Chris Mims to the Systematic Excellence Podcast, to talk about how even though you can have everything else in place in your business, it all fails without good accounting.
So keep on reading to find out why you need a trustworthy bookkeeper, how to know if they’re the right one for you, why the Profit First method so great, and tips to keep your business finances healthy!
What is Profit First and how can it grow your business?
Amalie: Could you give us just like a quick little explanation of what the profit first method is?
Chris: Profit First is a method as well as a mindset. So the beauty of Profit First is as income comes in, you split it out based on percentage into four different accounts. And that way, you’ve got money for payroll, you’ve got money for taxes, you’ve got money for operating expenses and you’ve got money to pay yourself, which is the first thing people cut when they have a tight budget.
Bank balance accounting is when you just spend money when you have it. It’s that cycle of “I have money, I can spend. I don’t have money, what am I going to do?” It’s the fear that comes up on April 15 when it’s tax time and you go, “oh my goodness, do I have enough money for taxes this year?” It’s very stressful.
Focus on what you’re good at
As many systems as we can have in place, and as many procedures and good planning and good marketing, all those things fall apart if there isn’t good accounting.
You can be incredibly passionate about your work and your purpose and all those things, but you have to be good at your business. And if you’re not, then you need to outsource it and that’s and that’s where a good bookkeeper, a trustworthy bookkeeper can come into play where they can just handle stuff for you. And then you can keep doing what you need to do and allow your brain to instead of be stuck on all those numbers and the tedium of bookkeeping you can then be creative and do what you are amazing at.
Amalie: What kinds of things do you need to look for when you’re hiring a bookkeeper? Do you have any kind of certifications?
Chris: You need to have someone you can trust, that is the primary thing. You need to hire somebody who’s got some qualifications. There’s currently no licensing for bookkeepers, so it’s not about finding somebody through your licensing board in your state, but you could contact your CPA and ask them for a referral. They might offer bookkeeping in house in their firm, but the rates are generally higher.
I’m currently a QuickBooks Pro advisor, which is a certification from QuickBooks. I’m working on one through Xero Software as well, that one is better for international business. And that’s the next level that I want to provide, because freelancers need to be able to do business, especially nomadic type businesses, need to be able to work across international boundaries.
As far as finding one, QuickBooks does have a list of everybody who’s QuickBooks Pro advisors, so you can search within QuickBooks.
If you were using Wave, which is a free software, Xero, or Patriot, every one of these programs has its own certification and will probably provide a list of vendors that you can hire. But I would encourage anyone to interview them. Have a good conversation about what their experiences and how they were trained and you can ask how many clients do they have currently, do they have time for me?
Make sure you have the right bookkeeper for your company
Amalie: How does someone recognize that they don’t have a good bookkeeper?
Chris: That is a challenge because there’s a steep learning curve for bookkeeping. So my story was I had my retail store. I had nine employees at one point, so my head was in the game. I’m taking care of clients, I’m taking care of their dogs. I’m taking care of my employees. So I hired a friend to do my bookkeeping and I never checked credentials.
I never looked at my P&Ls or at the balance sheet. All I wanted to know is are my books ready for tax prep. So when it came time to sell my business, when someone was evaluating my books, they said “we don’t know how you’ve lasted.”
I knew how I was struggling to pay my mortgage and pay myself and my employees and everything else, but I didn’t know how bad it was.
The reality was is that he wasn’t putting things on the balance sheet that should have been on the balance sheet. The profit and losses are going to tell you about short term income and expenses. The balance sheet is going to show you the long term financials. And he was coding things for very short term. That meant that devalued my business.
I was trying to get a certain dollar figure for my shop, and there was no way I could get it. No way because of bad bookkeeping. I lost 10s of thousands of dollars.
So I advocate that you should meet with your accountant in November, book an appointment with them every year and just have them look at your books. Just have them look at your financials to make sure that you are on the right track while you can still make adjustments before the end of the year. November’s an ideal time because all the tax deadlines are behind them.
Things you should be doing even with a bookkeeper
- Setting aside money for taxes is a good tip. Just automate it if you have to, that way you have money to pay the CPA, and you’ve got money to file the taxes and pay taxes if they come up because you can. So many businesses fail within the first five years, often because they either were noncompliant with their taxes, or they just did not plan for annual expenses.
- If there’s a subscription, instead of paying for it for 12 months, you pay for it annually and get the discount.
- When it comes to getting QuickBooks or another software that is not free, ask either a CPA, an accountant, a bookkeeper, ask them what they can offer you, because a lot of these software’s want to sell retail, but give discounted rates to professionals.
- Wave is great when you’re getting started. Once you gain some traction and you’re generating some revenue, and if you want to switch to the Profit First method, QuickBooks or Xero are definitely a better choice just because Wave doesn’t handle transfers between accounts very well.
Separating business from personal is the first rule of bookkeeping
Janine: When people bring in their messy things, what are the kinds of things that lead you to think “this is a problem”?
Chris: The chart of accounts is the framework for bookkeeping, so it tells us where your loans are, where your savings are, where your checking accounts are, where the income is coming in where it’s going out, but it’s also the long term and short term. So the long term loans, let’s say you’ve got a leased vehicle, and you lease it for five years, that’s got to be on your balance sheet. That’s all on the chart of accounts.
Recently, I saw groceries on a chart of accounts and clothing on the chart of accounts, and those are not business expenses. Someone had mixed in their personal banking in with their business banking, and that’s where it gets ugly really fast.
Where to find Chris
We hope this interview has been useful to you! You can find more information regarding Sonya’s projects and reach out through the following social media:
Connect With Chris