Bookkeeping & Accounting Secrets for Small Business Owners
Your time is precious. Learn the insider strategies that save you time and money as a small business owner so you're not overwhelmed by tax season. Come to this innovative FREE webinar to discover bookkeeping rules, receipt scanning hacks, and how to spend less than 30 mins in your books each month. Tax expert and founder of ComplYant Shiloh Johnson leads this free 30-minute webinar to share how you can manage your money right so the IRS won't stand a chance during an audit.
Note: This topic covers U.S. businesses only. Any information provided during this event is not intended to be taken as advice or to be perceived as a specific position on any subject of law or tax law.
DeMei (00:12):
Hello everyone just filing in. Thank you so much for joining us for today's webinar about bookkeeping and accounting secrets for small business owners. I'll go ahead and introduce myself. My name is DeMei and I'm a Customer Support Specialist here at ComplYant. Myself and my team answer user questions and service requests through live chat and email. And we also reach out to users directly to learn more about their businesses and their business needs so we can continue to grow this platform in the ways that best support them. If you're not familiar with ComplYant, it's a must-have tool for business owners that helps them to save for and pay their tax payments on time. If you're not yet signed up for an account, you can get signed up for an account in minutes at www.ComplYant.co to begin receiving reminders if you haven't done that yet. You can also find us on Instagram at ComplYant app and on Facebook at www.com/ComplYantapp. And we have our founder and CEO, Shiloh Johnson here today. Really excited to hear what we have going on. Without further ado, I'll go ahead and hand it over to Shiloh and you can take it away.
Shiloh (01:15):
Hello. Hello. Good day everyone. This is gonna be a doozy. I'm gonna do my absolute best to make it value-packed and let me go through things quickly. Let's get started. So again, I'm Shiloh, the founder, and CEO of ComplYant and our entire mission is to make business tax a million times easier for small businesses so they can get back to doing the things that they love, which is building their business. My background, I have been in corporate tax accounting for almost now 15 years. I have been on the corporate side working for a large corporation for most of those years. I've also run my own tax practice. I have an undergrad degree in accounting, a master's degree in taxation and an expired CPA license because I don't maintain it because I spend all my days running a startup, which is phenomenal. But I said all that to say, I've spent a lot of time working with clients. I spent a lot of time working with small businesses. I've spent time in business management working with celebrities and athletes. I know a thing or two about bookkeeping and I think that we can do it a lot easier than what we're doing. My claim to fame is you can get your bookkeeping so succinct, you can get it down to 30 minutes, imagine 30 minutes a month on bookkeeping. I'm gonna show you how, let's get to it.
(02:24):
So as I mentioned, that's a bit about me. This is what we're gonna talk about. So just so you know, these aren't secrets as in nobody knows them. These are just the less talked about things that people don't do to get through. And I think because bookkeeping is horrible and people don't like committing time to it, oftentimes people wait the entire year to do their bookkeeping until the very end, which results in them spending weeks on it when it could just be 30 minutes a month. So, tip number one, do it regularly. Don't wait until the end of the year. Create a system early. Set to start now, even if you've got a backlog for the entire year, if you start now, your 2023 can be much smoother.
Define (3:01):
Shiloh (3:01):
So, the first thing I wanna do is throw up some definitions. I think it's important to know what the difference between bookkeeping and accounting is. And this is specifically for two reasons. One, so that A. you understand what type of talent you're hiring when you hire a bookkeeper and what their expected roles can be. And then also 2. when you hire an accountant, you need to understand what you should be getting out of that person because those things are not synonymous, and they don't do the same things. The major difference here, and I'll point out bookkeeping is the process of recording the accounts or transactions of the business. That's it. It's just the process of recording. There's no reporting that comes along with it. There is no tax preparation that comes along with it. There are no journal entries that come along with it. It's just the process of recording the accounts and transactions of a business. That's the huge piece.
(03:43):
I've seen lots of the businesses make the mistake by hiring bookkeepers and assuming that person can handle their tax returns and everything else and they just cannot. So just be clear about that understanding. And then accounting is a bit deeper. That's someone who can actually, it's a system of recording obviously, of summarizing business and financial transactions and analyzing, verifying, and reporting the results. So, they go deeper into account verification, they go into auditing, they go into reconciliation, they go into report creation. So, you're getting a much more robust service when you hire an accountant versus a bookkeeper. But this is also why bookkeeping can be done by the business owner. It doesn't have to be a third-party hire out. And I strongly encourage small business owners to at least know the basics of bookkeeping in the event that they do hire out, they can spot mistakes, or they can dig into questions because how are you talking about your company's financials if you have no idea what's going into them or how it's being done? So, at the very least, you should at least be able to understand how to categorize, how to connect bank accounts, and how to check reconciliations. I see the most fraud happening there, not just from service providers, but bank fraud from inaccurate transactions or tax fraud from inaccurate transaction recording. And sometimes it's non-intentional, sometimes it's fraud because we didn't know any better. So that's just worth knowing and understanding.
Shiloh (05:01):
Consider this masterclass bookkeeping. We're gonna go generally and teach very elementary level. This isn't gonna be deep. The goal isn't to get a degree in bookkeeping, but just to understand the basics and go over some things to help streamline how you're running, what you should be doing. Since we're at end of the year, it's the perfect time.
Connect all accounts (5:18):
Shiloh (5:18):
Okay, first topic and the first thing you should do when you're working on your bookkeeping, I'm gonna screenshare a sample set of books through the QuickBooks system cause it's the one everyone uses and it's the most common and easy to relate to. It's worth molding when I screen share though. QuickBooks is just one platform you can use. There are many and they generally all do the same thing. So even if spots are different, like, oh, my app doesn't have this, I'm sure they probably have some version of what I'm about to show you. It's just probably not where you might think it is. So, you may wanna call the company and see how you can access it, but they all basically do the same thing.
(05:49):
The first note or moment that we wanna talk through is connecting all of your accounts. I call this the triad of connection. Triad meaning the three places you need to make sure are connected. So, you're selling source and we think about selling sources like the POF system you use to sell the items or the website you use to sell the items you're selling - Clover, Shopify, Square, WooCommerce, eBay, PayPal, anywhere that you're doing business to sell, that's called your selling source. That's where you're listing your products and someone's paying you money or coming into that platform to pay you directly. So that selling source has to be connected. The second point of connection is the bank. So, if you sold it on Squarespace or Shopify or whatever, then those transactions get deposited into the bank. So, you have to connect your bank to the bookkeeping system so that you can check to make sure what the selling source said you were supposed to get, you actually got. So that's the first point of check and connection. The third point of connection is the actual books. Your books are just that. It's a book of transactions that have been sorted and organized so that you can do other things with that information, whether it's getting loans, filing your tax returns, or just making decisions about the business. That's what your books are.
(07:05):
Advice number one: don't use Excel. Even the most tenured and successful accountants don't use Excel to do bookkeeping. It's a waste. It's a waste of time and energy and there's too much room for mistakes when you could use software that can help protect you from the mistakes that you may be catching. So, unless you're a seasoned accountant, don't use Excel. Use some kind of software - QuickBooks, Xero, FreshBooks, or Bench, all of these people do the very same thing and can get your books organized.
(7:32)
This is QuickBooks screen, it's a sample business. Don't worry, this isn't a real business. No one was harmed in the creation of this account. I'm gonna show you, it's just from your banking screen here. You could hit link account. Again, every platform does something very similar, but what you'll want to do is connect your bank account and remember my triad. So, you'll wanna connect your selling source, your bank account, and then, your books is the third part of that triad. But your bank is actually the truest source of truth. If you're ever audited, the one thing the auditor is gonna ask you for is your bank statements. Because your bank statements basically tell the story of how you received money. How that's changing over time is they're now asking for your CashApp payments, they're asking for your Venmo statements, they're asking for a third party like peer-to-peer lender or money exchange services so that they can capture every point of transaction because people are starting to sell outside of bank accounts.
(08:26):
So, you'll just wanna be mindful of that. The IRS implemented a new rule where they are allowed to ask for records from peer-to-peer selling sources or Venmo or CashApp or all of those. And so, you'll just wanna make sure that you're not getting around the system by not providing that information. They know, trust me. So, it's better to just get it in off the top and make sure it's all there. The one thing I will say about QuickBooks that's not great is the selling source connections, you can't do here. I think only the bank can connect. The only thing you can do here is connect your bank. I think they have PayPal, and they may have, yeah, I think they're all banked and credit cards, that's a clear distinction too. Along with banking is credit cards. So, it's checking accounts, saving accounts, and credit cards. Anywhere that you are spending or receiving money for the business should be considered. The next point of secrets to quick bookkeeping is receipt scanning. So, if you're importing the transactions in our transaction triad, the second point is receipts that especially relate to cash transactions, you'll want to make sure that you scan into your bookkeeping system and save it somewhere. You don't need this necessarily to like do anything except when you need it. That's the most true thing about bookkeeping as a whole. You only need it when you need it, which sounds weird because you don't need it every day. I don't need a receipt to process my business transactions. No. But if and when you were audited, they're going to ask you for a receipt, and then you're gonna be like, I don't know, it's shoved in the box somewhere.
(09:57):
But if you create the habit of just scanning once a week on Friday mornings or make the habit of downloading a receipt scanner app, most of them are free. You can do it literally at the table. Whenever I go eat or do anything company related, I just sit there, and whenever we're doing something and I'll just snap a quick photo, and then I can do whatever with the receipt. It can be lost, I can put it in an envelope, but I don't have to worry about it now because I know it lives somewhere digitally and it just saves you the headache. And then when you do need to bring a CPA in the fold, so let's say file your tax returns, name questions about a purchase you made, let's say you bought a laptop for your company and you didn't save the receipt and you didn't buy it by credit card. Maybe you bought it cash, maybe you bought it on your personal account. You definitely, definitely wanna keep receipts if you buy things on anything other than a business account. And you definitely wanna keep receipts when you buy things cash and when you receive cash, that is where the most fraud happens and the most money laundering. And if you tend to be a high-cash business, you run the potential of being audited even more. QuickBooks has an app, so does every other platform and then in the app you can scan from your phone and what happens is those receipts get dumped into this bucket here and then you can also drag and drop those receipts in this bucket. You can even email those receipts to this bucket and then all of them live here.
(11:12):
And then if you're a sophisticated bookkeeper, you can come in here and match them to the expenses that come across the bank account or you can just leave them in here as a data keeper. However you wanna use it, I just strongly encourage at the bare minimum scanning your receipts.
Categorize
Shiloh (11:27)
The next point in our quick secrets to bookkeeping is categorize. This is the entirety of bookkeeping. It's just sorting. If you think about your books like buckets, your transactions need to be put in certain buckets. There are three main buckets to care about. The bucket of bringing in things, the bucket of paying for things, and the bucket of saving for things, doesn't even matter what the accounting jargon is, whether its expense, liability, or asset, doesn't matter to you right now. What matters is just doing the very basics of sorting your transactions: a. so that you can spot how it's done in a relationship to plus and minus and income and outgoing and then also so that you can look through your transactions a little bit easier and maybe you can't read your reports as thoroughly as an accountant could, but you could spot like, actually I spent money but that looks like it's income. I think this was done wrong. Or oh I know I bought this thing and I don't see that here.
(12:22):
So that's really the goal. It isn't to understand reports perfectly and to make these executive decisions about a ten-year plan and projections. No, it's so that you very simply can glance at the incoming-outgoing, make sure everything is where it's supposed to be, nothing is fraudulent and that you can at least with a fair amount of accuracy, understand some version of your reporting. So, I put it in my little, of course, you know, I like triads. I put it in my little three-point. You're bringing in as all of your income accounts. And then those can be labeled however you want, it could be service income, it could be product income, it could be you know, shoe tag income, you can call it whatever you wanna call it. The point of it is to track the income. So, the subcategory should say income. And then your pay for is everything you're spending money on. That's usually expense accounts or liability accounts. So if you're gonna get insurance or if you're going to buy a car for the company, a company vehicle, if you're going to just get inventory, all of this is under either expenses or cost of goods, but we won't go that deep. And then Save For usually are larger purchases, which we call assets. So it tends to be like computers, machinery, equipment, buildings, all these things are like larger assets. We're not necessarily saving it. But what it's worth noting is that we have to give every dollar a job. In business bookkeeping, every dollar has to have a place.
(13:43):
It's not like personal money where you just kind of leave money over there and you don't touch it. No. In business books, every dollar needs a job. It's either going into an account or we're gonna account for it as income or it's going into something else and we're gonna account for it as spending. Give each dollar a job. So, in this sample account, the system checking account made up, all of these numbers are just reference numbers. The top numbers are what the bank says that you have. The bottom number is what QuickBooks says you have. These numbers need to match. At the end of each reconciliation period, they need to match. If they don't match, you have something off. Either you have too much money in your book or you have not enough money in your bank and you need to go make a deposit. This is important in the sense that you don't overdraw. Even if you're not writing paper checks, money doesn't always come in and out perfectly dollar for dollar. Sometimes money comes in a little bit late and you've spent money already going out. And oftentimes banks will allow you to overspend because they've seen your transaction movement and they know you're gonna be good for it at some point. So, you don't wanna spend money that you shouldn't be spending, but you've already spent doing something else. So, the best way for you to keep track of that, I don't know how else people are doing this. Sam's literally like writing it down. But is to just quickly glance at your book balance.
Your bank balance is lying to you
Shiloh (14:55):
This is the amount of money you have to spend, your book balance, not your bank balance. Your bank balance is lying to you. I tell people all the time, your bank balance lies, it does not tell you the truth. It does not tell you what you've already spent that hasn't come through. It doesn't tell you things you forgot that you have on auto-pay. It doesn't tell you money that you even forgot you had coming in or a surprise refund or whatever. Your bank balance is lying to you. Your book balance is the truth. Your book balance is the transactions you've already accounted for, and checks you've written that haven't cleared yet. Auto pays that you forgot about. It's everything that should be happening that you didn't make a concession for in the bank balance. So just be careful to note your books should be your source of truth, not your bank. If it's the other way around, it's high time for you to clean up your books because your banks are always gonna be wrong. You're gonna overdraw too much. You're gonna be hit with a ton of overdraft fees. So it's like in personal spending you create a budget. The budget isn't to tell you how to spend the budget is so that you have an assignment for each dollar you expect to come in and out. And the bank doesn't always line up with that math so you just wanna make sure.
Shiloh (16:02):
If you're watching the balance, the categorization is just that. It's very simply mapping where each dollar is going to go. Remember that's the whole job of categorization is to map where they're going to go. So, with Amazon, there's a lot of like robotic AI, do the bookkeeping for you, da da da. I don't think that's personally a joke because machines can't predict your expected spending. It can assume but it can't predict. So even if you've got some like automatic transaction software, you definitely wanna make sure that it's categorizing the way that it should. So, this $89 could be for an expense. This $89 could be for inventory. This $89 could be for personal spending and the system wouldn't know that. So you have to tell the system what it is. Because it's money received, we have to put it somewhere which either it's gonna be income or some kind of discount or maybe it's a refund. If it's a refund on something purchased, you'll have to check what you purchased and then you can put it back in the account you took it out of is what a lot of the bookkeepers do or accountants do. But either way, it's tracking it. So we'll assume that it's money and because you sold landscaping, you wanna say who it is and you can say it's this person. You can even assign it to a customer if you have customers in the system. I recommend tagging if you are spending for a specific thing. Let's say you're doing a lot of spending at a conference, you can tag all of that spending to a conference. You can call it tech conference 2002 and then every single dollar will go under that tag and then you could run a report with just those tag items. But that's deeper than we wanna get. Mainly you just assign what it is and you add it to the system and you're done.
(17:41):
The matching happens when you already have an expense that's been put into your books and now the bank is just matching it with what you've already put in. That's what matching is. This is the perfect scenario because you know it's accurate, which is why receipt scanning matter so much because you can match your receipts with transactions that are coming into the bank. It also just makes it a quick match button and then you're done. You can move on. The other thing that's worth thinking about too is you if you have more than one, you'll wanna check the date on things and make sure the date matches, it's 08/05, you'll want the 08/05 transactions, you can always click into it to see what it is. And it'll give you some details - $19 at the car wash. What I like to do to make this process quick, I go through and do all of my matches first cause they're the easiest, then I do my multi matches second, and then I save all my uncategorized for the end, and then I just slip through them because I usually always know what they are. That's the beauty too of doing this more regularly is because the transactions are fresh on your mind. If you wait till the end of the year, you're gonna forget what you did at lamination business card. We'll assume it's business card, bad example, but the point is you'll forget, and then you'll have to go back and look for receipts and retract and it's just not worth the time. If you do them regularly once a week, once a month, then it's fresh on your mind, you know exactly what you spent. You can drop a memo in there and keep it pushing.
Setting rules
Shiloh (18:59):
The next thing we're gonna jump into, I won't jump over to the slide cuz the only word it says is set rules. So, I'm gonna walk you through setting rules. This one transaction is the key to my 30 minutes of bookkeeping every single time. It works like a charm. Setting rules is just telling the system what to do with that transaction. Do it automatically. That's all a rule is. So, let's say that you always go to Squeaky Clean Car Wash. You can tell the system, here's the car wash rule. It's always gonna be money out, it's always gonna be on this MasterCard and I always want you to put it as an expense and I always want you to put it in automobile. And you can even go so deep and say I always want it to be clean car wash. So I can add the vendor and I always wanna type a certain customer, if that's your business model. And then you hit save and now what the system will do is every single time those pop in, you'll notice that they went away because it automatically categorized them for me. So every single time those transactions actually pop up, they will automatically go in the bucket they're supposed to go to. And you don't have to do anything. Such that when you pop in here to do your books, most of it's already done.
Shiloh (20:18):
This is why bookkeeping can be 30 minutes. Set rules. Nobody does this, they just avoid it and it literally makes everything so, so, so much easier. Set rules. Unless it's a one-off charge or something that you don't do regularly, you don't think you'll see again, don't worry about it. But if it's utilities, rent payments, regular product purchases, regular expenses you know you're always gonna have, set rules. You'll be surprised, even if it's not a regular expense. Obviously, Starbucks is always gonna be coffee, and obviously, it's always gonna be company meals. You're not ever gonna go to Starbucks unless you buy a gift. But even then it's generally always gonna be that thing. So you could categorize them even if you don't go every day, maybe you go once every couple of months, make rules. You can have a million rules. There's no limit to how many you have and they will always live in here. You can come in here and fix them, delete them, and edit them. You can make them auto-categorized or you can make them not auto-categorized. When you do not auto-categorize, it leads it in the bucket but it automatically adds the account and you just have to approve it. So if you're not sure and you don't feel comfortable with doing auto-categorization, you can do non-auto and it will live in that bucket until you say I approve to go. But it takes a few minutes to set up and it will literally save you hours over the course of the year.
(21:40):
So the other really important part to quick sort of hidden gym bookkeeping is reconciling. I know so many people don't do this, they just do the sorting and then they don't do anything else. And I will say from an accountant's perspective, if all you do is categorize, you're in great shape. I know a lot of business owners don't even do that. So if all you do is categorize, you're in really, really great shape. But if you just so happen to be fearless enough to do reconciliation, I strongly recommend it. The only thing that reconciliation does is it basically matches what you said to what the bank said. That's all. It's just like a follow-up. We wanna just double-check that this is right and then you're like, yeah this is right. And then you take that and you put it in a nice report and you go save it down on a file somewhere. That's all it is. The reason why reconciliation is important is because I have seen so much fraud get caught in the reconciliation process because you cannot lie with a bank statement. It comes from the bank. And so if the bank says that you should have had a hundred thousand dollars in this account on June 3rd and then we run the statement and we run the reconciliation and it's like $2, you're gonna be like, wait a minute, where'd the money go?
Shiloh (22:52):
And either we have a bookkeeping error or we have a bank error. And the only way to really find that is through the reconciliation process. I strongly, strongly, strongly, strongly recommend that business owners at the very least do their reconciliation. It's super simple. Every platform will show you how to do it. There are like walkthroughs, video walkthroughs, there are explanations. It's not super hard. All you have to do is take the statement balance and put it right there and the statement date, that's it. I'm gonna assume that it was the eighth and there's $0 in the statement balance and now you get this nifty screen that has every single transaction that is in your books and you get the job of matching what the bank statement says with every transaction within the period that you have in your books. And all you do is just check them off like yeah, I got that one. Yeah, I got that one. Yeah, I got that one. And you do that until the amount results at zero, then you hit finished, done. That's it. That's the only job which is to match what your books say to what your bank statement says.
(24:00):
And even if you don't feel good about hitting, I did it right, going through and just doing the click-off process to make sure that you have the exact transactions and that you recognize them all. I have seen lots of banks mistransactions, and I have seen lots of business owners mistransactions. I have seen duplicate charges, triplicate charges, I have seen outside third-party fraud. I have seen so many things and the only real way to capture that is by actually reconciling. When you don't, I don't know how else people are capturing. When you're moving so much money so quickly all the time it's very hard to... And maybe you're not doing much in the beginning but eventually, you will and it gets difficult to track. So, I always say if you start out with your best foot forward, you don't have to catch up later. So, save yourself the time, and the headache and just do the process, especially when you're small. Especially when you're new, and especially when you're small. Cause you don't have a lot of transactions and you have room to mess up so you could do something wrong and it's not super detrimental because you only spend a hundred dollars anyway and you're like no one lived or died. It's not a big deal. But when you're hundreds of thousands or crazy successful, like I know you all are gonna be, you don't want to spend that time learning. You wanna spend the early days learning.
Shiloh (25:17):
So that's reconciling. You just would say finish now, I'm not going to cuz it's not balanced. But then it would go into this screen, it would say, do you wanna print it? And then you would say, yeah, sure, I'll print it or save it or whatever you wanna do with it. And then you move on. I just wanna make a note where I am is the register and what the register is, once you hit sort or match or add, the register is where those transactions go. So, this is where they all go after you put them in the bucket, the register is the bucket. So, let's say you do something wrong, you can go back to the bucket and say wait a minute, I don't think I did that right. Let me look at it again. What was this? Oh, let me see. Poke around. That's another bit of advice. When you're in a slow period and you've got like an extra couple of hours to spend, poke around. Poke around in your books, make sample charges, make sample expenses, figure out what buttons do what they don't do. It's worth the time to teach yourself. You don't have to know what every single thing does, but if some of these things look like, oh I got a credit last month and I didn't know how to do it, I should go look at that. And then you can open up credit memos and then you can get help about the credit memo. You also can go to whatever your platform's FAQ section is and get help from them. You can go to their customer service and get help from them and spend the time, especially while you're slowly trying to figure things out.
Shiloh (26:33):
Even if you don't have like everything packed, doing some things is better than doing nothing. When you ignore it and then you wait till the end of the year and you hire someone that will come in and like clean up your books. Number one, you don't know if it's right. Number two, you're gonna pay a lot of money because good accountants are gonna charge you for their time. And then number three, you're gonna have to turn around and pay someone to file your taxes. And bookkeeping services are not free and so you just wanna make sure. If you don't wanna take the time to do it, fine, but at the very least, you should understand how the process goes. I've had even past clients ask me, can I teach them how to check their own books? And I've even done that and I strongly recommend that to some degree you should at least have some clarity around the process so that you can look at this and be able to spot something that doesn't look right. The other thing that's worth noting is you can never be a hundred percent removed from the books because you're not a hundred percent removed from the spending. So, if you're the only person as the business owner that's probably doing spending, maybe you have some employees that are doing it as well, but you're the one that knows. So, when your accountant or bookkeeper even comes in to do something, they're going to ask you, what is this? They don't know. They didn't go to Bill's Windsurf Shop, you did. So, they're gonna ask you what you bought so that they can properly categorize it. So, you're going to take the time anyway. You might as well learn a little bit while you're at it.
Shiloh (27:52):
There will never be a scenario where you can be a hundred percent hands-off. I've never seen it and I don't recommend it. For example, I had a friend who runs a skincare shop and she had a bookkeeper that said that she was paying her taxes, and all of a sudden she started to get all these notices from the state of New York. Come to find out, not only was she not paying her New York fees, but New York had shut down her license, which meant that she couldn't purchase. So, when she went to go buy more products, they wouldn't sell it to her because her license wasn't active. And here she thought that person was doing it but because she never checked on them, it was a year and a half this was happening and then she had all these fees and all these expenses and she was on the phone crying like what do I do? And I said, nothing, you pay the money and you move on because this is part of the breaks, you can never be a hundred percent removed. Okay, I've talked a lot. I think that's good.
Q&A
DeMei (28:40):
I think that was excellent. So, for the people. I just love it.
Shiloh (28:46):
Awesome`
DeMei (28:46):
Another question may be possible that you might have already touched on as well. You've seen lots of things in working with different clients, and different businesses. What's one of the most common mistakes that you've seen working with small businesses when it comes to their bookkeeping and their accounting and how can they avoid these tax mistakes?
Shiloh (29:05):
<Laugh> I've seen so many. Ignoring, which is something I already said. So biggest mistake is people just, they don't do it. And I don't know what they think, they think it's like osmosis. I don't know if they think they're gonna clap their hands when someone's gonna do it. No, it doesn't work like that. The biggest mistake you can make as a business owner is not doing the work you don't wanna do. Just spend a few minutes each month and get it done. In fact, I would even say timeblock an hour every week and call it the “I don't wanna do an hour.” <Laugh> and just spend that hour doing the things you don't wanna do because it will make you just mentally at more at peace. You won't have to worry about it. You will know you've committed that time and gotten at least something done even if it was to hire someone or whatever the goal is, take the time and do it. The other mistake I see is people hire very blindly, they will hire an accountant or a bookkeeper and not confirm if the person is even really an accountant. They will not confirm if the person is even really a bookkeeper and that person will be charging them 2, 3, 4, $5,000 a month, and then at the end of whatever period nothing has been done. And they're none the wiser because as a business owner they're like, I don't wanna do this so somebody else will do it. The downside about that sort of ignorance, not ignorance as in lack of smarts, but ignorance as in you're ignoring it, is that you don't know if anything is right or not right. And you are the one responsible, not the bookkeeper.
Shiloh (30:37):
When you get audited and the IRS says, well you misfile $40,000, and not you owe us blah blah blah. They're not gonna go, bookkeeper, you owe for this company. They're gonna go, business owner, you owe. When you signed on this line, you confirmed that this information was right. The onus is on you and if that's a risk you're willing to take, fine. But I would just like to say don't do that please. Another mistake I'll put on there is people tend to be very nervous to claim deductions or expenses. But if you spent the money, you spent the money, there's nothing to be nervous about. In fact, the tax code is actually written for small businesses. It's written to benefit you, the business owner. That's why there are so many deductions because they want you to be in business, they want you to be spending, it pours into the economy. People then come and spend with you and you keep this economic cycle rolling. They write code for you. Take advantage. I'm gonna go to a fancy dinner, I don't know, let's talk about ComplYant for a whole hour. What would you like to know about our business? So, I can write this off as a business expense. Take advantage of the resources that are there for you in terms of write-offs. Don't be scared. Don't be scared. Write everything off, write it, write it off until they tell you you can't write it off no more <laugh> write it off because it's there for you. People often are very timid. Oh, I don't want the government to get me if I have too many write-offs. That's a joke. Do you know the people that pay the least amount of taxes because they have a lot of write-offs <laugh>?
DeMei (32:05):
That's a great point. Absolutely. Excellent. No, those are excellent points. Definitely, things you want to keep in mind. And again, I guess overall we can't ignore our...
Shiloh (32:17):
Don't do it, don't do it.
DeMei (32:19):
Can't be hands off either in any way. Absolutely. And I guess you touched on it earlier in your presentation. The other thing I was wondering is, what is the benefit to a bookkeeper over an accountant because you made it very clear there are two different things a bookkeeper can't do what an accountant does. So, what really is the benefit to a bookkeeper over an accountant?
Shiloh (32:43):
Absolutely. I wouldn't hire a bookkeeper but that's because I have been doing that for a long time. I think people use bookkeepers like safety nets. They will pay them and oftentimes they are 25, 30, $35 an hour and it tends to span, in my opinion, you can get bookkeeping done in a couple of hours a month, but a bookkeeper will tell you they need 30 or 40 hours a month and you don't know the difference because you don't wanna pay attention to your books so you pay them. I think that all of the work a bookkeeper does, a business owner can do. It is not rocket science. You do not need a degree. Most of it is Google University. Most of it can be found on the platform of the site you're using. It's very simple. If you just keep the logic of placing these transactions in buckets, that's all a bookkeeper is doing. To me, there is not a ton of benefit for a hiring bookkeeper. Please don't shoot me. Bookkeepers don't come for me <laugh>, I know how you girls like to... So don't come for me. But an accountant, which they are in my opinion worth the price tag because they bring expertise, they bring with them what they have seen in their experience as accountants and having filed other tax returns for clients. They bring with them trends, they bring with them audit behavior and an understanding of how to operate in an audit. They bring with them education and expertise. Accounting is the one field that you do need the degree. You know how people are like, oh you don't need a degree in such and such to be a such and such. You need a degree in accounting to be an effective tax accountant. You do. Because there's so much code and nuance to the process.
Shiloh (34:17):
It's not something you can quickly Google. It's a lifetime of experiences of clients of actually like contacting the state and the IRS and filling out those forms. That's the expertise you're paying for. You're not paying for people to sort transactions. You're paying an accountant to actually bring you their expertise. Having worked with another shoe salesman, well actually I had a shoe salesman client and this is how he claimed his manufacturing process, but let's take the same deduction for you because that works really well for him. And now you just want, because that person brought you their laundry listed expertise and now you get to benefit from it as having paid them for their services. This is why I think bookkeeping is not worth paying for because it's a very quick process that you can do yourself. Accountants don't traditionally do bookkeeping and that's worth noting. Accountants tend to actually do like the nuanced accounting. So, journal entries, they tend to audit statements, they prepare statements, and they also will help defend you on an audit if you're ever audited. And then they also can file all your tax returns. So those people don't tend to do bookkeeping. Sometimes you will get an accounting firm that has a bookkeeper on staff, which is worth paying for, sure. I mean if they're all one happy family. But I wouldn't pay separately for a bookkeeper because it's just to me not worth the money. And odds are they're probably overcharging you.
DeMei (35:35):
Absolutely. That's, that's excellent information. It sounds like, like you said, again, don't come, don't come for us, don't come for Shiloh, but don't
Shiloh (35:43):
Don’t
DeMei (35:44):
Usually, you wanna be doing the work yourself that a bookkeeper does because it inundates you in the data and the information which is important and you wanna know what's going on with your business at all times. And those circumstances where audits and things of that nature could become happenstance. It looks like we did get a question in the chat and it says, are there any tips or suggestions on how to find a valuable accountant?
Shiloh (36:07):
There are so many. Also, side note, we should definitely have like an account resource on the page. But anyway, very side future bill note <laugh>. Realtime product development on the webinar, this is how we do things at ComplYant <laugh>. So, there are a few things. Number one is action network. There are others, especially if you're in any kind of like small business groups or any kind of like cohorts or business support groups, there tends to be, well who do you use? You know, network is the best because they can give you actual verification for how that person worked with them. Word of mouth is just still today in accounting is really worth it cuz that's your point of reference. If you're going cold and you don't have any point of references and you're just googling, go to Google, ask for references, and accounts will invite it. Would you like to speak to some of our clients if they have any that are in your industry? That's another point to look for when you're like cold-calling accountants. Ask if they have any accountants or any clients that do something similar to what you do. If you're a food service company, ask if they have food service clients and see if you can speak with any of them, or even ask who they are and kind of Google them and see if they'd be open to chatting with you. You really, really have to double-check because these people are dealing with your money and that is not lightly taken. And I think we are an overly trusting society in certain circumstances and we don't double-check. We just assume that people will do what they say they're gonna do and we assume that they are who they say they are.
Shiloh (37:32):
Now I love that about us. Yay, there are downsides. <Laugh> and your businesses’ money is one of them, especially when it comes to tax obligations because those tax obligations come with jail time. Like if you don't do your taxes properly or not at all, you go to jail. Google any one of these like celebrities that are there for, you know, Wesley Snipes, I don't know, Toni Braxton, whoever, all these folks had tax problems. Don't take it lightly, make sure that the person is who they say they are and does what they say they can do. And the best thing to do that is literally just checking references. Also, stay away from the Instagram accountants. Please just stay away because they are not who they say they are. Just because they tell you to get an LLC in your child's name and then go buy a car and then sell the car to the LLC that your child could drive when they 18. No, don't do it. Don't do it <laugh>, don't do it.
DeMei (38:29):
Very questionable. Don't do it. Yes. No, not doing that.
Shiloh (38:33):
<Laugh> don't do it. The other point I always point out is if you're an accountant and you've got time to be an influencer, you're not a good accountant because good accountants are busy. They don't got time to be on the tickety talks. No, no, no. <Laugh>, they are busy, they're getting to work, they have several clients, they've got employees, they're getting crap done. Good accountants are busy. They do not have time to be on the internet. So that's why I always say, the same thing with men, good men are busy, they're not on the internet like <laugh> A little dating advice from ComplYant. So don't do it. It's not preferable. Also, because even if it sounds like trigger word posty, they're committing their entire day to figuring out how to get your attention. It doesn't even mean the information is accurate, it just means it's attention-grabbing. And so don't base a decision about your business on something somebody posted. Go and research or go and ask somebody like, Hey, I saw this on the internet. Is this right or can you confirm or is this the best decision I make? Always double check information you see on the internet. Don't take it as face value. People can post anything and it's never checked for accuracy. And remember, you're responsible. If you make a decision and it isn't the right decision, it's on you. So you wanna make sure that the information you're getting is correct. I saw we got another question.
DeMei (39:57):
Yes, it does look like it. Great one, if I run multiple small businesses, should I do the bookkeeping all at once or for each individual business?
Shiloh (40:08):
Oh, such a good point. Also, that's pretty common. There are lots of business owners now that are doing several things and they're segregating those sorts of things into different entities. Which is one of the reasons why ComplYant is so cool because we can actually help you manage your accounts across all of your entities under one platform. So just a nod over there. But yes, I think that it's worth doing it all at once because then you're not having to come back and back and back and back. So, if you've got four different entities and one of them is like your public speaking entity and then like one of them is your merch entity and then like one of them is your consulting entity, great. Do it all at once, especially my goal, my thing, my little tidbit is the first week of the month because the first week of the month you tend to be a little bit slower. You're just kind of working through, most of your bills are probably due. So, you're looking at your money cause the dollars need to make sense real fast. And so, your statements are posting at the last day of the month or the first day of the following month. So all of that is prepared at the same time.
So if you just take the first three days of the month and just say, okay, for an hour one of these days I'm gonna commit an hour to each entity and you can do an hour, take a break, another hour, take a break, a third hour. If you don't want to go that heavy, you can do an hour on Monday, an hour on Tuesday, an hour on Wednesday, and then you know that at the end of the first week of the month, I'm done. I don't have to look at this again and then don't. But it's worth doing. Also, because a lot of bookkeeping platforms now tie in the capital with their bookkeeping offering. So, I know like Xero has a new capital offering I know that QuickBooks has a capital offering and that capital is based on your books. So, if your books aren't done, you can't borrow. But when they are done and you can go and hit a few buttons and apply and then they're gonna evaluate your books and then determine some working capital they can give you. The same is true of getting third-party loans or going to the bank. It only matters when it matters. It's all fine and Dandy until you need it and then you're panicking. How do I get somebody in two minutes? I gotta pay $20,000 for somebody to organize four years of books because you've ignored it. Just take the time and do it.
DeMei (42:18):
That's an excellent point. That didn't even really occur to me, but yeah, you could totally knock it all out in one fell swoop, huh? Excellent.
Shiloh (42:26):
In and out
DeMei (42:27):
Gems. I think the point that you brought up about the business bank account is really cute, vital, and the fact that you don't wanna be spending from your personal, it can get very sticky. I guess it might be a broad question or there might be many things that would encompass this, but what are some other vital pieces you would say such as the business bank account that the business owner doesn't wanna overlook?
Shiloh (42:51):
Oh, that's a really good question. There are two things I advise when it comes to not overlooking things that you probably could, definitely a business bank account, also a business credit card. Your spending should entirely happen on a credit card if it can because you can then as a company rack up way more points than you would on your personal spending and then the business is paying for it and you as the business owner gets to benefit from the points. So, a lot of the travel I was doing in the early ComplYant days and when I had my own tax practice, I was doing travel or living or doing all the things because I had a bazillion and one credit card miles as a result of the spending I was doing. And those are miles you can keep as a business owner, so you don't have to give them back to the business. It's just a bonus gift. And so I say always get a credit card so that you can benefit from travel and other things. And then the other thing I say is to build a relationship with a banker. I think that that is not an under sale. I know it sounds archaic, but relationships go very, very far. Especially when it comes to lending and credit. Sometimes people base a lot of those decisions on the relationship. So let's say you're a bakery in the city of Inglewood, which is where I'm from, and there's a chase on the corner and that's where you bank and you go into that bank every week to make deposits and maybe you take them a box of cookies and you meet the banker and just say, Hey, just wanted to introduce myself, I'm at the corner, feel free to come by and have some cookies every day. I'll give them to you for free. They start to see you more and more and they may start to see the deposits that may relate to your success as the business. They see the line outside of your store always doing well and they see everybody talking about you so now you come in and you say I need a working capital loan. They're gonna be like, yes, it's the baker around the corner, we got you. Now they're gonna go leaps and downs to make sure they get you that capital because they've already seen the success of your business right there within their neighborhood. And it's their job as a neighborhood bank, especially community banks to support the local businesses. So please build a relationship with your banker. Sway them, bring them coffee. That's another one.
DeMei (44:47):
Thank you, Shiloh. That was great. Yeah, me personally. I think I just had one more question and again, you kind of touched on this too. Of course, again, accounting is a huge undertaking and something that you need to be formally trained for, you need a degree to be an accountant (Inaudible 45:03). And again, we're gonna work on that accountant listing. We're gonna work on something like that for ComplYant. Are there any other resources may be that you can think of or maybe just ideas you might have for owners to like learn basics or kind of teach themselves? Again? DIY is huge.
Shiloh (45:20):
Yeah, DIY is huge. YouTube, there are lots of really cool videos. There is actually a law firm I used to know back in the day, I can't think of her name. She would do hosted sessions, so she'd give you law advice, and then she'd bring in another expert. So, she'd be like law and then tax and then law, and then accounting and then law and then accounting. So, she'd kind of loop it around as expertise. So, podcasts, there are tons of podcasts that talk about like just accounting if you wanna learn or just business operations in general. Lots of stuff on YouTube. Every platform. So like Bench is a service that they do the bookkeeping for you is a little bit cheaper, but again, I don't know if it's worth paying for. You could if you want, but it's a tech platform that integrates service. So, Bench is a version of that that you could use. Generally, every self-serve bookkeeping platform has some kind of like accountant resource. So, on QuickBooks, they have something called their advisor like QuickBooks Advisor Resource. And it's basically a website where all of the accounting professionals have gotten certified in the QuickBooks method. I don't even know. And so, you could scour that list for someone that's local. And then the other thing is Xero has something very similar. They have an accountant sort of resource platform.
So, any platform, FreshBooks has something similar. So, any platform that you're using, they will tend to have like an accountant resource sheet or some kind of list that will give you like, “Hey, here are all the accountants we've connected with.” And again, still, check your references, but that could be a good way to source. Another thing you could think about is like... So, every city in America has this, but every city has some kind of like small business outreach, whether it's through their Office of finance or whether it's through their of Office of Economic Development. And these resources are designed for the small businesses within the city to thrive. And so, you could go to those people and ask, do you all have a resource list of service providers? And they can give you some. The other thing you may wanna think about too is the Chamber of Commerce, chamber of Commerce will have resource lists of service providers who will literally connect with the Chamber to be a resource to businesses. Which I strongly encourage people, small business owners, to get with your local chamber, black chamber, Latinx chamber, whatever chamber, Filipino chamber, this is California, LA, it's a chamber for everybody, right? But we'll not be excluded in LA, there will be a chamber for you but get with them because there are so many resources they offer and they scour to make sure they bring those resources to you. Whether it's discounts, whether it's relationships, whether it's oftentimes, sometimes grant money, or loan opportunities. So, check with your local chamber they tend to have service providers, but get connected. If you're a small business, get connected to your local community anyway because you're gonna need resources and you're gonna need help. So, get connected.
DeMei (48:23):
Excellent. Well, thank you so much, Shiloh. That was our show. Yeah, I think that concludes it, I don't see any more questions. Again, thank you. Thank you, thank you so much, Shiloh, for your time, putting together the presentation, extremely informative. I feel like lots were shared. I learned something. I hope everyone else did as well. I guess if you'd all like to re-watch this discussion, you'll be receiving a link for this in your email later. And if you need more information about ComplYant or maybe you missed an opportunity to ask a question, you can feel free to shoot us an email at hello@complyant.co. Again, that's C O M P l Y A N T.co. We're happy to receive topic suggestions for upcoming webinars, as well as general questions you might have about the platform and any feedback you have as well. We wanna make ComplYant better for small business owners like yourself and we always wanna gather that feedback from you. So don't hesitate, get in touch with us. We thank you all so, so much for joining us and we hope you have a wonderful rest of your day. Thank you.
Shiloh (49:25):
Take care. Bye.