episode 133- transcript

Dave Cain:  Welcome to unsuitable on Rea Radio. The award-winning financial services and business advisory podcast that challenges your old-school business practices, and their traditional business suit culture. Our guests are industry professionals and experts who will challenge you to think beyond the suit and tie, while offering you meaningful, modern solutions to help enhance your company’s growth. I’m your host, Dave Cain.

Hey, small to mid-sized business owners, how many hats do you wear on a daily basis? I’m willing to bet it’s more than a few. You’ve got HR considerations to tend to, marketing initiatives to deploy, accounts payable to manage, and that’s not even taking into consideration the real reasons you got into business in the first place, and don’t forget you’ve got to get the kids to soccer practice.

Today’s guest wears multiple hats as well. As a small business owner herself, Amy Smith knows all about the ins and outs of managing all aspects of a company. Amy is also a QuickBooks ProAdvisor here at Rea & Associates, located in our Zanesville, Ohio office, and she has recently facilitated several QuickBooks seminars in the southeastern region of the state. On this episode of unsuitable, Amy is going to talk about some of the common pitfalls business owners have to grapple with, and why the secret to rising above a lot of these challenges may just lie in good bookkeeping practices. Welcome to unsuitable, Amy!

Amy Smith:  Hey, thanks for having me, Dave! I’m excited.

Dave:    So how about that intro? I didn’t read that, I didn’t write that intro.

Amy:   Gosh, you made me sound awesome.

Dave:  Yeah, well we have ghost writers. We pay a lot of money for our ghost writers.

Amy:   Well, we have a pretty good marketing team that makes me look really good, so.

Dave:  And they do, they do do a nice team.

Amy:   They do, they do.

Dave:  But we’re gonna jump into bookkeeping practices, and some of the good stuff, but I have to share with you some of the things I’ve noticed, over the last couple years, that … maybe two things that the poor bookkeeping practices have crept into the business environment as well as tattoos are in the business environment more so than ever before, so hopefully we can wrestle through, and tackle some of those. So what do you want to tackle first, poor business bookkeeping practices, or the tattoos?

Amy:   Oh, man. Tattoos, I have a really bad story about, so we’d better skip that one, and let’s handle the bookkeeping first.

Dave:  Okay.

Amy:   I think I’m up for that challenge today. Not enough beers yet.

Dave:  Not enough beers for the tattoos?

Amy:   Maybe one or two more beers, and you’ll get the tattoo story.

Dave:  So you know, we talk about the business owners wearing many hats, and you, yourself, as a business owner, and so you know what that means firsthand. You work that firsthand. There’s many hats you have to do, and sometimes, what I’ve experienced, and you as well, is the bookkeeping maybe happens at 8:00 at night, at the end of the day, maybe Saturday morning, maybe-

Amy:   …, maybe. That’s if marketing doesn’t get in the way, or there’s a major emergency, or there’s a family emergency. Yeah, it might get done.

Dave:  And customer calls, client calls, it just is put on the back burner.

Amy:   Especially if you’re a service oriented business, a small business, like my husband and myself. We get calls all the time. I know how I work with my clients, I always tell them, “You know, if you have an issue with your accounting, even if it’s on a Saturday, and it’s in the middle of the afternoon, or in the evening, or whatever, call, because I know that that is probably the only ten minutes or half hour that you have to be able to get your books done, and I’d rather you call instead of wait and putting it off, and then forget to call, and then we have a bigger issue, later, and nobody-”

Dave:  Then it doesn’t happen.

Amy:   It doesn’t happen, exactly.

Dave:  Before we get too deep into the conversation, I want to back up a second, and talk about your credentials. You are a, did I get that correct, you are a QuickBooks pro advisor?

Amy:   Yes. I have been-

Dave:  Is that like the Grand Poobah of QuickBooks? King? Queen?

Amy:   Yeah, I’m the queen of QuickBooks, I guess. I have been an active user of QuickBooks for, okay, I’m gonna date myself, probably over 20 years. I started, my parents noticed that I was a prodigy when I was nine, so that tells you how old I am.

Dave:  Get going, huh?

Amy:   It sounded good, didn’t it?

Dave:  It did!

Amy:   Yeah, I’ve been actively using it. I started QuickBooks, like most small business owners, I was working for a couple guys that owned a landscaping company, I was working part-time to be around my kids, and they were doing their books like most business owners do. An Excel spreadsheet, the checkbook was never getting reconciled. That’s where I learned how to use QuickBooks. They said, you know, if you find something, tackle it. I, at that point, all those years ago, I hired a consultant to come in to teach me the ins and outs of it, and I got proficient to the point where I would have other contractors, …, call me and say, “Hey, Amy, I hear you’re pretty good at QuickBooks. Come and help.” But it’s not all about QuickBooks. It’s really not about what software you’re using. It’s all about developing good bookkeeping habits.

Dave:  So a process, the systemic issues with good bookkeeping. Let’s talk about the value of good bookkeeping, and-

Amy:   Well you’re in the height of tax season, so you tell me the value of good bookkeeping.

Dave:  Well, we just sent out a couple invoices where we had to correct some bad bookkeeping.

Amy:   Yeah. The value of good bookkeeping comes into many place. Let’s talk about the banker. Let’s pick on the construction industry, ’cause I have quite a few construction clients. How many of them need a new piece of equipment, something breaks, and they need it tomorrow? They go to their bank, they print off their reports in QuickBooks, or whatever software or Excel spreadsheet, and the bank looks at it, and it’s a total, complete disaster. They know they’re not right, and they need them to make an answer within 24 hours, and it’s not gonna happen. It’s because they don’t have good, clean books.

Then look at it from the aspect of tax season. Were you able to do tax planning instead of on April 14th they get this big huge tax bill that they were not prepared for, but if they had clean books in October, we could’ve reviewed them, told them what they had, and if they’re a construction company, yes, they could’ve bought new equipment to offset that tax.

Dave:  And do some planning.

Amy:   And do some planning.

Dave:  Obviously you run into situations where, as a business owner, I think man, my books are in good shape, and I may not know any better.

Amy:   That’s right. That’s true, and we often, we get into situations ourselves, as I know a few CPAs who have gotten in … you know they accepted engagements, they think that the bookkeeper has been doing a good job, then when they get in there they, “Oh, this is just a monstrosity. It’s not right.” They don’t have that. Sometimes all you need is a checkup. I mean have somebody, even if you’re not with Rea, which you should be, but if you’re not with Rea, have your accounting professional take a look. Have a professional bookkeeper come in and take a look. I do that all the time. I just come in-

Dave:  I change the oil.

Amy:   Change the oil. That’s exactly right. Yeah. Just take a look under the hood.

Dave:  Just check it all out.

Amy:   Check it all out.

Dave:  Check it out. There are times when I’ll have a client or a prospect bring us their profit-loss statement, their income statement, from QuickBooks, or they’ll send it. I’ll say, “Send me your information,” and they just send me the income statement, and they’re really proud of that income statement, they say, “Oh, boy, that’s really good,” and I say, “Well, wait a minute. I need to see the balance sheet as well.” So they send you the balance sheet, and it’s a mess.

Amy:   You know what the funny part about this is? A lot of business owners don’t understand what a balance sheet is. They don’t understand the value of having a strong balance sheet, and I, when I first started using QuickBooks, I was young. I was very young then, and I didn’t have the knowledge that I have now, and it’s kind of like I like to describe it as Jenga. The Jenga game.

Dave:  Oh, yeah, love that game.

Amy:   Okay? Double enter your accounting, you take one from here, you take one from there, you know. But the whole key to a good Jenga game is making sure that you have a solid foundation.

Dave:  And lots of beer.

Amy:   Well, and lots of beer, yeah. But with that solid foundation, that means you have a solid balance sheet, and that is key to any business. I know, for our business, we’re a new business, we are looking, I’ve even, I mean I … one of the things that I do with all of my clients is I train the business owner. They have a responsibility to be looking at their books, and looking at certain reports. Yeah, they don’t have to get into the weeds of things, but they need to understand what is going on in their business, and they have a responsibility, so when something big happens, they can’t stand up and say, “Oh, I didn’t know.”

Dave:  That’s a responsibility.

Amy:   That’s exactly right. Everybody has a pipe dream. They’re gonna love what they’re gonna do, and it all starts from a passion, but if they’re not gonna do the books, then they need to make sure that they hire somebody to do the books.

Dave:  You’d mentioned earlier that good bookkeeping practices is a good part of the foundation of any business. If you don’t have that, you’re toast.

Amy:   Bookkeeping starts day one, not someday.

Dave:  Day one.

Amy:   Day one. Even when someone’s developing an idea, because a lot of those expenses that they’re incurring, when they’re out developing that idea, can be deducted as they’re creating the business. It’s day one.

Dave:  Let’s go, let’s shift gears about good bookkeeping and how it relates to cash flow management in and out. Again there’s, you’d mentioned the banker, but let’s talk about how good bookkeeping practices can help with cash flow management.

Amy:   I know for me, as a business owner, it makes me sleep at night, because you know what you’re up against. The business owners that are just constantly putting out fires, they’re the ones that I can make a huge difference in, because I’m able to help them plan and prepare, and cash flow management is key to that success, and if they’re not doing their books, they’re not managing their cash, they’re letting their cash manage them.

Dave:  What about management, we’ll talk about managing, let’s talk about managing the balance sheet first. Obviously we talk about cash, and we laughed about a live example where we heard a business owner, a very successful business owner, well-dressed business owner, you wouldn’t know that this would happen, but he had been reconciling his bank account for eight years.

Amy:   I heard he looks a little like Peewee Herman.

Dave:  Yes, yeah. Eight years.

Amy:   Eight years. And you know, it’s funny, because I was just at somebody’s the other day, and they opened a drawer, ’cause I asked for their last bank statement, and they pulled out probably a whole year’s worth of bank statements, that had never been opened. How can you operate, not knowing where your cash flow is?

Dave:  So is that Amy’s rule number one? Queen Amy’s rule number one: cash will be reconciled.

Amy:   If you ask my husband, there’s a lot of rules that I have, when it comes to running the books.

Dave:  Can we get your husband on the line here? I want to know who runs that household.

Amy:   Well, it’s mutual. It’s mutual.

Dave:  It’s mutual.

Amy:   And you know, it’s good, because I’ve taught him good practices, he’s able to go and look at reports, he’s able to go in and look at past sales reports, he’s able to set goals for himself. He knows, at all times, where he stands, and the reality of it is, yeah, being a new business, cash is sometimes tough, but the reality of it is we know where we’re going, and that’s all that bookkeeping is, is kind of like a treasure map. If you don’t know where you’re going, you’re just gonna keep walking around in circles.

Dave:  Sure. So rule number one: reconcile the bank. Rule number two, let’s talk about billing and accounts receivable. How often do you demand, I was gonna say suggest, demand-

Amy:   Demand. It depends on who you talk to. If you talk to my husband, it’s demand.

Dave:  To do billing.

Amy:   Billing, as soon as something’s, a task is performed, especially if you’re a small business, cash flow is an issue, communication is key in business. Communication, communicating with your customers. Do not let them get passed, depending upon what your terms are, their 15 days. Do not let them get past 30 days. I would say that, on the 20th day, I’d be calling. Vendors, if you find that you’re gonna be in a situation where your cash is kind of backed up a little bit, or it’s held up, and you know it’s gonna be held up, reach out to them. Have a conversation. The longer that you keep them in the dark, the more leery they become of you, as a business owner. I mean we’ve had situations where we were gonna be maybe five or ten days late. You just pick up the phone and say, “Hey,” and they are so appreciative, and even in today’s world, because so many bills move through email, I mean-

Dave:  They get lost.

Amy:   They get lost. Or people look at them on their phone, and they’ll say, “Oh, okay, I’ll take care of that later.” Then they forget about it, and they forget to go back to it. So communication, in today’s business, as technology-oriented this is, pick up the phone. That’s all you have to do is pick up the phone.

Dave:  So again, pick up the phone, do billing instantaneously, …

Amy:   …, and with today’s technology, there’s no reason why you can’t.

Dave:  Why you can’t do that.

Amy:   That’s right.

Dave:  So you know, just curious, have you seen more tattoos in the marketplace than maybe ever before?

Amy:   Well, I don’t know. I know that we have a couple clients who have a tattoo shop, so yeah, not enough beers, Dave.

Dave:  But do you have any colleagues that have tattoos that you … I’ve seen a few.

Amy:   Have you?

Dave:  The production crew, here, is pretty good at talking about tattoos.

Amy:   Oh, really?

Dave:  …, you get a couple 16 ounces in him, and he’ll start, he’s a tattoo expert, so.

Amy:   Really? Wow!

Dave:  He is, so you learn a lot of things here, on Unsuitable.

Amy:   Oh wow, wow.

Dave:  Okay, so we got another rule, we need another rule. You talked about receivables, cash, and accounts payable. What about inventory? You know, I don’t need to keep inventory, I’m just gonna keep a little Excel spreadsheet. Maybe I’ll count it, but my account says I got it, like that’s gonna cost me. Uh-oh, here comes a rule.

Amy:   Now inventory is important-

Dave:  I don’t want to work with you. You’ve got too many rules.

Amy:   I make it fun, because at the end of the day, when somebody’s worked with me, and they’ve gone through what I call a process, ’cause it is a process, and they’re able to do tax planning for the first time, and then something positive comes out of that, they have that, what I call, okay, the Oprah moment, the Aha moment. That’s what they get, when they do their books right. As far as another rule, looking at reports, looking, that’s the first place that you’re gonna find mistakes, or you’re gonna find things that are not posted correctly. Housekeeping, you know, making sure your vendors are up-to-date, the information that’s in there. I am a big advocate for that, and I would say I probably do that in our own books, probably every quarter. It makes it simplified.

Dave:  You know, as a business owner, I don’t have time. I’m in the weeds. I wear many hats. I don’t have time to look at those statements. Can you develop a dashboard for me, on a daily basis?

Amy:   Yes.

Dave:  So these are the metrics that I need to run the business, and make decision. Doesn’t have to be a lot, but I don’t care about … I care, but I don’t really care about crude city withholding tax. That’s not gonna help me run the business. But I need metrics, and that’s one of the things you can help me do?

Amy:   Yeah. One of the cool things, and especially guys, I hear this a lot. Guys, they like the little graphs and all of the colors.

Dave:  I just like cash, I don’t care about the graphs.

Amy:   You like green. Yeah, don’t we all. With QuickBooks, you have the company snapshot. You just pull up the company snapshot, it’ll show you what your receivables are, it’ll show you what your payables are, it’ll show you where you’re at, just in a snap.

Dave:  So if I asked you to do analysis of my bookkeeping practices, if I asked to buy an hour of your time, could you give me a pretty good strategy, within an hour? Could you see where I’m at?

Amy:   Yeah. I do it all the time.

Dave:  Uh-oh. And then what? Then the hammer falls.

Amy:   No, I mean it’s just being observant. It’s just you walk in, you kind of see how things are handled. I was in a situation, a few weeks ago, I went into a business, it was a little retail store, and first thing I wanted to know is are you tracking inventory? What do you think they said?

Dave:  They weren’t.

Amy:   No, they weren’t. They had no idea what was going out that door by customer, or by employee.

Dave:  And they might be the ones that complain about their tax bill.

Amy:   Yup.

Dave:  How about that?

Amy:   Exactly. Or their bill from their accountant.

Dave:  How about that?

Amy:   Yes.

Dave:  So I know you strongly believe that good bookkeeping allows you to be proactive, rather than reactive.

Amy:   One of the best advice I ever received was from a former employee, when I was getting ready to start my consulting business, when I first started out on my own, was he says, “You know, Amy, the thing that I hate the most is when our account walks in here three days before tax season, and hands me a tax bill.” He says, “If you can get your clients to be proactive instead of reactive, you are doing something,” and that has stuck with me every day.

Dave:  So I understand you’re presenting several QuickBooks seminars.

Amy:   Yes, yes.

Dave:  And how do I get a seat? How do I get a seat at one of that?

Amy:   How do you get a seat? If you go to our Facebook page, our Rea Facebook page, there’s a listing there. Right now we’re currently doing them in Marietta, we’re doing them in Zanesville, and we’re doing them over in Newark, Lincoln County.

Dave:  Seating limited?

Amy:   A little bit. Lincoln County it’s not, but in Zanesville we’re having about 20 people. Marietta, we have about 15. So the numbers are getting up there. So it’s good stuff.

Dave:  So you need to bring that to the other markets around the state of Ohio. So we talked about many different versions of QuickBooks, are there any particular versions that you like, we hear the online version, that actually, that question came in from a caller. That’s not my question. It came in from a caller.

Amy:   Okay, then we have a caller, all right.

Dave:  The question is, let me read the question, when do you prefer QuickBooks Online or the old discs? That was kind of an older guy that asked that question, but-

Amy:   It’s not the old disc, it’s the desktop version. If you ask an accounting professional, and if you take a poll, if you walk down this hallway, and you take a poll, most people do not like QuickBooks Online. But there’s a place for QuickBooks Online. If you are a business that has an inventory based business, you do a large volume, it definitely is not for you. If you are a service based business, and you’re just running some basic invoices, you’re doing everything with a debit card, QuickBooks online is for you.

Dave:  Sure.

Amy:   It works.

Dave:  And you can help me navigate that decision to make, ’cause I won’t know?

Amy:   Yes, I can.

Dave:  I won’t know how to do it. I just want my metrics, my dashboard.

Amy:   You want your dashboard.

Dave:  And my cash reconciled.

Amy:   And your cash, have your cash reconciled.

Dave:  Our guest today has been Amy Smith, with Rea & Associates, located in Zanesville, Ohio. Actually, you travel throughout Ohio, with your QuickBooks expertise.

Amy:   I do.

Dave:  Thanks again for joining us on Unsuitable today, Amy.

Amy:   Thank you for having me.

Dave:  You have great insight. It’s truly amazing what clean books can do for a business. Thank you for bringing your unique perspective to today’s shows. Listeners, if you want to learn more about QuickBooks, or if you have a specific bookkeeping question, email us at podcas@reacpa.com. We’re happy to put you in touch with Amy, or one of our other bookkeeping professionals. Have you subscribed to unsuitable on iTunes yet? What are you waiting for? Here’s a pro tip to help you maximize your experience. Try listening to unsuitable with an ice cold beer in your hand. In my experience, it makes the listening experience that much better. Until next time, I’m Dave Cain, encouraging you to loosen up your tie, and think outside the box.

Disclaimer:    The views expressed on unsuitable on Rea Radio are our own, and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only, and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation, so they can expertly guide you to the best solution for your specific circumstance.