episode 158 – transcript

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

Dave: I’m your host Dave Cain. Now that it’s November, I’m going to start harping on the importance of year end business and tax planning and thus avoiding surprise tax liabilities comes April 15th. I know you hear your CPAs talk about this stuff all the time, but it’s only because we hate surprises. Not only will good bookkeeping have it save you tons of time in the long run, you might find that you actually saved some money along the way. But don’t take my word for it. Amy Smith, Rea’s bookkeeping specialist and trainer, along with being a QuickBooks guru, is back to talk about what you actually stand to gain when you get your books and financial statements in order.

Dave: Welcome back to unsuitable, Amy.

Amy Smith: Hey, Dave. It’s great to be back, and I made it here a year.

Dave: Perfect. I hated to interrupt you guys here while you were taking a selfie. We got a podcast to do.

Amy: I’m sorry. I’m becoming just as famous as you. I have goals, you know.

Dave: You do have goals. And I’ve seen your goals and they’re wonderful.

Amy: Thanks.

Dave: Congratulations on meeting those goals. The last time you visited with us, you talked about bookkeeping issues that maybe needed to be buttoned up along with increase in tattoos in the business. You remember that discussion?

Amy: And I haven’t gotten any new tattoos either. Sorry to disappoint you.

Dave: That’s no problem.

Amy: That wasn’t a goal.

Dave: So not for 2018, may ’19 and beyond.

Amy: No, maybe.

Dave: So before we get into the nuts and bolts of the discussion, I want to talk about your QuickBooks designations. All these designations you have. What exactly is your title in the QuickBooks world?

Amy: Actually I’m just an average certified pro advisor. I used to hold the title of advanced, but I kind of let that go when I took a brief hiatus from public accounting. And they’ve actually done away with that program. So I don’t like to think of myself as an expert or a guru. I’m just somebody that uses the system to its fullest, and 20 years of experience, I should know something.

Dave: Your colleagues in Rea’s Zanesville office just refer to you as, “She’s just damn good at QuickBooks.” That’s your being famous.

Amy: And you know what, I’m so down home and down the earth, that’s what I like. I don’t like it because when someone says you’re an expert, it sets the bar so high. I don’t have the answers to everything, but I have resources and I use those resources to the fullest. I don’t know it all.

Dave: And you can go for it.

Amy: That’s right.

Dave: And you’re also a trainer, and we’ll talk a little bit about that as the podcast moves on. But the one thing that stuck with me the last time we got together is you also have a family business and you use QuickBooks with the inventory module within QuickBooks. So, I mean, you know all the issues that can come up with QuickBooks.

Amy: Right.

Dave: So not only do you teach it, you help clients with it, but you use it in your own personal life, in your own personal business.

Amy: It’s amazing. I think of how one software has changed my life.

Dave: Yes.

Amy: In our family business, my career, and the way that I help others.

Dave: So that’s why we’re here today is to grab some of that knowledge that’s floating around in the experience that you have.

Amy: Grab something, Dave, and hang on tight.

Dave: Yeah, here we go, huh? Going to lead off. Hey, let’s kick it into it’s fourth quarter. It’s go time. We’ve got to get those books going.

Amy: That’s right.

Dave: Is it too late to start?

Amy: It’s never too late. Fourth quarter is the prime opportunity. Taking advantage of tax planning, I feel like I’ve been doing nothing but harping on that for the last two months.

Dave: Every time I talk to you, you harp to me about that among other things. You’re just a good harper.

Amy: I know. I think it comes from being a woman, doesn’t it? But we won’t go there.

Dave: That’s one of the things I’m not allowed to talk about in my contract.

Amy: Yeah.

Dave: Just stick to QuickBooks, would you?

Amy: Okay. Okay. But no, the advantage of what you can gain from tax planning is huge. Being a small business owner and working with … Being in small business all my life, I understand especially from a retirement aspect of it, a lot of small business owners, they don’t think about retiring. All they’re thinking about is what’s hitting them right now in the face. It’s what’s happening today.

Dave: Here today.

Amy: Or what’s tomorrow. And they’re not thinking about 25 or 30 years down the road when their bodies are old, they’re tired, and they want to sell the business. Taking advantage of tax planning coupled with utilizing retirement planning as a benefit to offset tax. I work with small business owners and they all usually think tax is bad. But tax is actually good from the standpoint is if you’re paying tax, you’re making money.

Dave: Making a little money.

Amy: That’s right.

Dave: Yeah. I made a note I didn’t want to ask you about this, bookkeeping to me seems to be a lost art. There’s some really, really good bookkeepers out there that really are just fantastic. But there’s some very, very average bookkeeping going on out there that maybe just don’t know how to use the program. But there’s some very average bookkeeping. Are you seeing that?

Amy: I do.

Dave: Or is that me just being me?

Amy: It’s you being you, Dave. It’s okay. What you find is is that in most businesses, the bookkeepers were thrown into that position. They were never properly trained. They were never properly schooled. They have the ability to learn. They just need the resources to do that, and that’s one of the things that I love is when I’m working with a new bookkeeper that’s been doing the same way year after year and doesn’t know any different, but then when she gets that moment when she realizes this is why I’m doing this. If I do this the right way, then I get this report.

Dave: Yeah.

Amy: And so that’s, like I said, I’ve had three instances this year where small businesses have lost their bookkeepers, and all three of them were unfortunately, as a result of their deaths. And the impact that they had whether they were doing it right or wrong …

Dave: Just their ability to know what’s going on.

Amy: Right.

Dave: So as we have many business owners listen to our podcast, maybe comment to the business owners that maybe they need to have some coaching and mentoring sessions, some training sessions lined up in the budget for their bookkeeping group or their accounting department. A lot of times we think of that group is so important. Sometimes they get lost out on some of the mentoring and coaching and training.

Amy: That’s true. And I tell a lot of the people that I train or as a few of the people in the office call them Amy’s groupies, I tell them YouTube. YouTube is a great resource. I even use YouTube. When I’m doing something …

Dave: You’re telling those dirty secrets again, aren’t you?

Amy: I know. I know, but my oldest son remodeled an apartment learning how to do it on YouTube videos. And if I get into a jam and I don’t know something or I’m trying something new, I’ll go to YouTube. There’s all kinds of videos out there on how to use QuickBooks or bookkeeping basics.

Dave: So yeah, I mean, that’s an excellent tip, excellent training tip. They could call you and the clock starts or they can research it a little bit and then get your professional opinion on something.

Amy: They just have to have the will and the want.

Dave: Hey, let’s get this fourth quarter planning in gear. When is it too late? January 2nd of 2019, pretty late.

Amy: It’s definitely late at that point.

Dave: Last week in December, too late.

Amy: Not really.

Dave: Nobody’s around. Nobody’s thinking about that.

Amy: Chad’s usually around at that point helping. It’s not, and I guess the first thing is from an accounting standpoint, I’m going to tell you the traditional role would be just looking at your balance sheet, making sure your cash is balanced. If we get an account and we know that all the data in the data file, all the accounts were reconciled, we know all the data’s in there. It may not be necessarily in the right spot, but we know the data’s in there. And that is probably the first huge step. Instead of leaving a whole file drawer full of bank receipts, but we don’t know anybody in this room that does that, or bank statements. But that’s the first step. Making sure your loan balances are accurate, making sure that the interest was posted correctly to interest expense and the balances are correct. Making sure credit cards were processed correctly, and I’m talking about credit cards they use in their business. Are their expenses hitting? Did they only post the payments? If they only posted the payments, they’re missing a huge chunk of deductions.

Dave: So I think the message … Just like at home, I read your mind. I don’t know exactly what you just told me, but I think you said, “Hey, don’t get behind. Let’s stay current each and every week, each and every month, each and every quarter. Don’t get behind.”

Amy: Right, and it’s hard. I mean, I get that. I mean, I’m juggling lots of plates right now and I’m doing my best to keep my head above water, but I have clients that we do monthly closes on and they look forward to that coming into that first week of the following month because they know that their books are accurate, they know they’re right. The other thing is making sure your payroll’s right, making sure you have your employee information correct. Another big huge thing is 1099s. Making sure that you’ve sent out W9’s and you’ve requested EIN numbers for these.

Dave: You should start doing that right now, couldn’t you?

Amy: Yeah, exactly. Exactly.

Dave: Instead of waiting until those things are come due pretty fast after year end closes.

Amy: Especially if you’re working with an accounting firm or a bookkeeper, their January is a bookkeeper’s nightmare month. It is, especially if they’re doing payroll and they’re doing 1099s.

Dave: So go back to these 1099s. December, probably December’s a good month to start doing that.

Amy: That’s right. It is. I have actually all of my clients I have them working on that. When I work with clients, I give them a homework list. So if it’s clients that I usually see on a monthly basis, they know that they have homework that they need to get. Because I make them do the leg work.

Dave: Okay.

Amy: I’m there to train them. I’m there for support, but at the end of the day, I need them to be able to do it that way I can service more clients.

Dave: Okay. You know, as a business owner, the byproduct, the big idea at the end of the rainbow, the big pot of gold is I want to sell the company.

Amy: Exactly.

Dave: And somebody’s going to come and do some due diligence and if they find that the books are not in order, I’ve just discounted my business whether I know it or not.

Amy: Yeah, and it’s true, especially … I hate to say this and I hate to pick on small business owners, but a lot of small businesses owners, especially if they’re a cash based business, and when I’m talking cash based, let’s say a laundry mat or a rental property company or a car wash.

Dave: The list goes on, right, sure.

Amy: Yeah, the list goes on. They have a tendency where they will, I don’t want to say this, but pocket the cash. Well then at the end of the day when they go to sell their business, they can’t prove they’re net worth of the business. So in the end they’re really cheating themselves.

Dave: Yeah, for short term gain impacting some long term ability there.

Amy: Right. Right.

Dave: You mentioned various accounting methods, and certainly if we have accurate data within the system, there’s some new rules that are vary advantageous to small business as far as certain accounting methods that can be used for your tax return.

Amy: Correct.

Dave: And, again, we both know if that file that trial balance is wrong, those statements are wrong, we can’t make an educated decision.

Amy: Yeah, and it’s in my line of work and what I do inside of Rea, and I said it yesterday, most of the new clients that I work with, they’re a disaster, and that’s why I’m there. I’m there to make sense of it all. I’m there to help them develop processes. I’m there to help them develop procedures. I’m there to help them clean up the balance sheet. I’m there to educate them.

Dave: Well, that’s a very insightful comment, and if you think about that and dig a little deeper, the business owner, they were never trained in accounting and bookkeeping. For the most part, we don’t want them doing the accounting and bookkeeping. One, it doesn’t get done, and second, it’s not correct. We want them out talking to customers, talking to clients, looking at processes, ways to make more money, not the accounting. It’s your job to help them get the books together and read those reports.

Amy: Yeah, and that’s true. I use this kind of … I don’t even know what to even call it.

Dave: You make stuff up again?

Amy: Yeah, I am.

Dave: You didn’t bring notes to the podcast.

Amy: I don’t. I’m the fly by the seat of your pants kind of girl.

Dave: They’ll be a disclaimer at the end of this report that everybody can hear.

Amy: Okay. Well, I gave a presentation a few months ago to a group of nonprofit, the majority of them were artists.

Dave: Okay.

Amy: And I told them, I said, “You know,” because they’re all … Of course, my first question was, “Who wanted to grow up to be an accountant or a bookkeeper,” and of course none of them raised their hands. I was shocked, and I said, “You know, you got to think of it like this,” I said, “Do you like to listen to music?” Of course they all said yes. I said, “So you like to write songs. You like to look at art. You like to walk through a sculpture garden.” I said, “That’s really no different than your accounting books because they all tell a story, and at the end of the day, your books tell a story.” And they all looked at me and they were just totally amazed, but that made sense to them. So being able to relate all of this on a level that the business owner can understand, that’s probably the most important thing we can do as accountants.

Dave: We got to relate to their business. We got to understand their business.

Amy: Exactly.

Dave: And that’s what you do well. That’s what you’ve been able to bring to the table with your clients. That’s your goals.

Amy: I think so. I think so. It’s just that, yeah.

Dave: All right. Let’s get a jump on tax season. Let’s just go through, check some things off. I’ve got a list. You’ve got a list. We got stuff floating around. Let’s just go through them.

Amy: Okay.

Dave: Let’s just go through them.

Amy: All right.

Dave: You give me one, I’ll give you one. Year end, what are we doing?

Amy: Bank recs.

Dave: Bank recs. Okay. Is it my turn?

Amy: Yep.

Dave: All right. Loan balances have to be correct. It’s your turn.

Amy: Credit cards have to be balanced and all the expenses have to be posted.

Dave: My turn?

Amy: Yep.

Dave: Okay. We have to have actually receipts for those credit cards in our files to support that deduction. Just because you’ve reconciled the credit card, I might lose a deduction.

Amy: Correct.

Dave: Okay. Your turn.

Amy: Fixed assets, making sure that nothing was accidentally posted like a $30 charge to equipment. Looking at previous year comparing. Making sure that everything’s posted correctly. I guess that was two for me. So you get two now.

Dave: My list is getting shorter and shorter. Hey, I’m going to compare. I’m going to do some analytical review. I’m going to compare this year’s balance to last year’s balance. Oh, wait a minute. Last year’s balance was totally messed up. How am I going to do that?

Amy: Unfortunately, depending on what type of company you are, you’re going to have to probably look at their balance sheet off their tax return. Sorry.

Dave: Back to me.

Amy: Back to you.

Dave: All right. You said some depreciation thing. Do I need to make … I got to make some new purchases for the end of the year. I want to buy a fast car, I want to buy a pickup. Let’s go. Let’s get it.

Amy: I have a client that has a race car and he thinks he can write everything off to advertising.

Dave: Do you let him do that?

Amy: No, I don’t.

Dave: Okay. Boy, you’re pretty strict. Loan renewals. You know what, I got a line of credit with a bank. I got to make sure my financials are ready to go the turn of the year. I’ve got to be ready to go. I’ve got a loan that needs renewal.

Amy: You’ve got to have all of that done, yes.

Dave: Okay. You run out of stuff, huh?

Amy: No, there’s all kinds of things.

Dave: I’ve been doing this a long time. I think I can go on.

Amy: Oh, I got a good one. Good one, good one. Comparing vendor expenses. I do not believe in the term fixed expenses. I think things can be negotiated. So I like having my clients review their expenses from their vendors, seeing if their costs have gone up.

Dave: Okay. My turn. Are you ready for one?

Amy: Yeah, I’m ready. Come on, bring it on.

Dave: All right. Leases. We got to look at those leases because leases can be treated differently for financial statements and tax returns and depreciation. You didn’t think I knew that, did you?

Amy: Gosh, big Dave here. I’ve got one too.

Dave: Oh, you’ve got one. All right.

Amy: I got one. Looking at AR. Looking at old accounts receivable, the money that people owe you. Looking to see if you have any old outstanding debts. Picking up the phone and calling them and find out why they’re not paying their debts. Maybe they’re not happy with your services. You need to be asking those questions because there’s a reason.

Dave: I got one.

Amy: Okay.

Dave: The way fair case. We need more accounting in your face. That’s a good one. You would not have gotten that one.

Amy: I was thinking of that. No, no, no. I was thinking of that when you talked about purchasing equipment because you know how many contractors go out of state and they purchase equipment and do not pay sales tax on it and you go and you ask them about use tax.

Dave: Stealing my idea.

Amy: I’m sorry, but it’s pick a spaghetti string. There’s lots of them.

Dave: There’s lots going on, huh?

Amy: There’s lots going on.

Dave: You mentioned contractors though depending on how they report to the bank or their bonding agent and the IRS, there may be some contractors schedules that need to be …

Amy: Work in progress.

Dave: There we go. We’ll take that one as a joint …

Amy: Okay. We’ll take that as a joint.

Dave: And I think we have heard in a podcast in the past from Chris Axene regarding some new tax law changes for entertainment cost, and, again, I think the QuickBooks has a handle that. So I think that little exercise we went through I think is very helpful of some of the key issues that need to be addressed right now and towards the end of the year.

Amy: That’s right.

Dave: So anything we missed?

Amy: Gosh, everything.

Dave: And you got to plan that Christmas party, don’t you?

Amy: Yeah.

Dave: For your clients.

Amy: Ah, okay. Yeah. I’ll waver it.

Dave: Our guest today has been Amy Smith from Rea and Associates located in Zanesville, Ohio, but travels throughout I would say southeastern Ohio.

Amy: Yeah. I would say pretty much eastern Ohio.

Dave: But you bring a good point for our clients who are traveling can … How we going to track our mileage and travel expense in QuickBooks? Got any quick ideas? We’re running out of time. You got to go.

Amy:   QuickBooks actually has a mileage tracker in it. So depending upon if you’re using desktop or online, you can actually the online version has a app I believe that you can get. So yeah.

Dave:  Perfect. Thanks again for joining us, Amy. You made some really great points about the impact of clean books can have on your business. Thanks for sharing your expertise and there’s not time like tomorrow to get started on this …

Amy:   That’s right. We still have time.

Dave:  You’ve got it.

Amy:   It’s like weight loss, the new year’s upon us.

Dave:  Got to go. Listeners, Amy is always offering a seminar or workshop on QuickBooks. And to boot, she’s got a personality that goes with that training. I think you’ll enjoy listening and training. Be money well spent. Follow Rea on Facebook to stay up to date on upcoming events. Amy also likes to post videos on her page. So while you’re out there, be sure to check those out. You can also learn more about Amy, her services. You can get a ton of great information on our website at ReaCPA.com. 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 and Associates. The podcast is for informational and educational purposes only, and is not intended to replace a 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.