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Episode 92: Bookkeeping and Accounting for Creatives
179 Plays4 years ago
CPA, Amy Northard, the Accountant for Creatives, joins me today for a conversation about bookkeeping, accounting, and a few of the government programs, such as the Paycheck Protection Program and EIDL that have been rolled out in response to the pandemic. We don't talk much about what the Paycheck Protection Program or EIDL is or how to apply, since I figured that a lot of people have already heard about these programs. We do however, chat about what businesses should be doing to give themselves the best chance for things, like the Paycheck Protection Program loan, to be forgiven.
Before we get started, a quick disclaimer: I am not an accountant and the information shared during this episode are for informational purposes only and not for the purposes of providing accounting advice. And while Amy is an accountant, she is not your account. You should contact your accountant to obtain advice with respect to any particular issue or problem.
For the show notes, go to https://daveyandkrista.com/btb-amy-northard-episode-92/
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Transcript
Fascination with Small Businesses
00:00:05
Speaker
I've always been fascinated by small businesses. I've dabbled in them probably my whole life, starting with the typical lemonade stand. But I think it's just fascinating to see the numbers behind businesses and get that insider view as to what's really going on underneath the hood.
Podcast Introduction & Host
00:00:27
Speaker
Welcome to the Brands at Book Show, where we help creative, service-based businesses build their brands and find more clients. I'm your host, Davy Jones.
Creative Bookkeeping & Pandemic Programs
00:00:39
Speaker
CPA Amy Northard, the accountant for creatives, joins me today for a conversation about bookkeeping, accounting, and a few of the government programs such as the Paycheck Protection Program and EIDL that have been rolled out in response to the pandemic. We don't talk much about what the Paycheck Protection Program or the EIDL is or how to apply because I figure that a lot of people have already heard about these programs.
00:01:02
Speaker
We do, however, chat about what businesses should be doing to give themselves the best chance for things like the Paycheck Protection Program Loan to be forgiven.
Accounting Disclaimer & Engagement
00:01:11
Speaker
Before we get started, a quick disclaimer. I am not an accountant and the information shared during this episode are for informational purposes only and not for the purposes of providing accounting advice. And while Amy is an accountant, she's not your accountant. You should contact your accountant to obtain advice with respect to any particular issue or problem.
00:01:29
Speaker
Be sure to check out the show notes at DavyandChrista.com for the resources we mentioned during the episode, and I want to hear from you. Let me know what kind of content you'd like to see on the Brands of Book podcast as we move forward. To leave your feedback, head on over to the DavyandChrista Facebook page and send us a message. You can also send us a DM on Instagram at DavyandChrista.
Amy Northard’s Introduction & Tax Season
00:01:47
Speaker
Now, onto the episode.
00:01:55
Speaker
All right. Well, we are back with another episode of Brands That Book. And we are here today with Amy Northard of aminorthardcpa.com. And Amy runs a CPA firm where she specifically helps creatives with taxes and bookkeeping. So after having gone through, I guess, Amy, the tax season really hasn't ended because it's been extended to July, right?
00:02:16
Speaker
Yeah, we're in the never ending tax season. And I know we reached out to you a little bit before what was supposed to be the filing
Pandemic Financial Challenges & Adaptation
00:02:23
Speaker
date. And you're like, No, no, no. No, there's no time for this right now. Are you all just as busy now dealing with tax returns? Yeah, we're a different kind of busy than I expected to be. At this point in the year, we thankfully were ahead of schedule in terms of our tax preparation.
Amy's Career Journey
00:02:40
Speaker
So we got all those clients taken care of. And then we were able to really switch gears
00:02:45
Speaker
and dive into what feels like never ending changes with all of the loan stuff that's going on right now.
00:02:52
Speaker
Yeah, for sure. And that's some of the stuff that I would love to chat with you today about the Paycheck Protection Program and the EIDL and so these different loans and grants and what companies need to do who have gotten one of these to apply for forgiveness and all of that. I want to get into all of that for sure today because I think that's top of mind for a lot of people. But I don't want to skip one of my favorite part of interviews, which is just hearing a little bit about your entrepreneurial journey and how you started the CPA firm and kind of got started with the creative industry.
00:03:20
Speaker
So, I mean, it kind of goes back all the way to high school when I was trying to figure out what classes to take. And my dad was like, listen, you need to take an accounting class. You just take it. And he let my siblings take more fun classes. But that's the perk of being the oldest child, I suppose. Thankfully, though, I had really awesome accounting teachers in high school that sparked my interest in the topic. I've always been fascinated by small businesses. I've dabbled in them.
00:03:49
Speaker
probably my whole life, starting with the typical lemonade stand. But I think it's just fascinating to see the numbers behind businesses and get that insider view as to what's really going on underneath the hood. And then when I graduated college, I started working at a small, relatively small, about 40 people accounting firm. And they were doing a lot of doctor
00:04:14
Speaker
groups, lots of those types of tax returns and bookkeeping and that sort
Business Growth through Passion & Resources
00:04:20
Speaker
of thing. And as much respect as I have for that field, it just wasn't that fun in terms of the work life. So I was seeing my coworkers, they looked miserable, to be honest. And I thought to myself a couple of years out of college and recently passing my CPA exam, I can't do this for the rest of my life. This can't be
00:04:42
Speaker
what it's going to look like 20 years from now. So I had that quarter life crisis and I definitely probably freaked my dad out by quitting that job and going part time at a company that it was not related at all. Like none of my job at that new company was accounting at all and it was 30 hours a week. So it gave me plenty of time to work on building my business without the stress of just completely
00:05:11
Speaker
diving in with no clients. And then after about a year and a half, the business grew so much that I didn't have time to do both. I was working a couple hours in the morning, waking up at 5 AM, get a couple hours of working, go to that day job, come home, eat dinner, and then work until the night. And it just got to that breaking point where I couldn't do it anymore. So then I went full time, probably about seven or eight years ago now.
00:05:39
Speaker
That's a pretty quick amount of time for a business to grow. What do you credit that growth with? I think probably just the word of mouth. Since I was in that position to not have to take on anything and everything that came to my plate, I was able to work with people that I was really excited about working with and do a really good job for them.
Team Building & Remote Work
00:06:00
Speaker
Then they would go tell their audience or their business friends
00:06:04
Speaker
because it seems like every day people are asking for who's a good accountant who's doing a good job for you so that really worked to my benefit and it still does because we don't really pay for advertising so getting out there providing a lot of free information i did tons of webinars just pumping out content on the blog which we're still doing.
00:06:24
Speaker
And just trying to provide more stuff to everybody. To get our name out there so people don't see that I'm some scary accountant that's going to come yell at them, that sort of thing was really helpful.
00:06:37
Speaker
And I think recently, I think what spurred on asking you to come on the podcast was we saw a webinar that you did with Gusto, right? Or Gusto. I never get this right, but it's what we use for payroll for Davey and Krista. So I know you put out a ton of great content and same thing with your blog. One thing that I noticed is you put out a lot of great content and a lot of great relevant content too about things that are going on just with recent events around the pandemic as well and the different ways that the government has stepped in to hopefully help small businesses. So the fact
00:07:06
Speaker
that you're putting out a lot of content is definitely recognized. When you were just getting started, it sounded like it was just you. Now you have a team, right? Yeah. So my mom was actually the first person I hired. So having such sensitive information with the type of work that I do, I was just really nervous to make that first step into hiring just some person off of the internet to come work with me. So she was the way I kind of dabbled into hiring. She had a bookkeeping background, so she
00:07:35
Speaker
I felt comfortable having her be one of our main bookkeepers and then hired on some contractors. Eventually, about three years ago, my husband came on full-time with me and then we realized that contractors weren't what we needed. We needed to have reliable help, not help that we could put work out there and they could either accept or deny it because that's not good for a tax season when you're trying to complete hundreds of tax returns.
00:08:03
Speaker
We switched gears around the time when my husband started working with me to bringing on full-time folks. So now we have three other CPAs in addition to myself on the team with our most recent addition this past winter. So it's been really nice, really helpful to have other people, others to mark people that I can bounce questions off of because with all of this stuff around the pandemic, you know, if it was on my shoulders, it would just feel so overwhelming. So to have some other folks to
00:08:33
Speaker
help me wade through it has been really helpful.
00:08:36
Speaker
Yeah, absolutely. And totally understand that line between having contractors and employees as well. Over at Dave and Krista, our team, they're all actual employees of Dave and Krista. And I just think that there brings a another level of I mean, even camaraderie, I think we enjoy I enjoy our weekly meeting where a lot of it is catching up on stuff that needs to be done. But then also just the camaraderie of working with the team as well. And the buy in I think a little bit people are actually invested instead of just being a contractor and kind of like you said,
00:09:04
Speaker
really being able to do their own work on their own time in their own way and not necessarily the way that the business wants it to be done. I was worried about the camaraderie aspect because our team is so spread out. We've got one person in Texas, one in Georgia, one in Kentucky, and then me and my husband and my mom are in Indiana. So we have actually had a really great time doing virtual lunch dates with each other and we do the monthly meetings just to get a handle on what everyone's working on.
00:09:34
Speaker
Eventually we had to reschedule our in-person team retreat, but that was another thing I was looking forward to to kind of build that friendship among everybody. Well, hopefully we'll be able to get back to in-person stuff sooner than later.
CARES Act & Loan Forgiveness
00:09:48
Speaker
So that might be a good segue to start talking about a little bit of what's going on in the world and Congress has passed the CARES Act. And I guess now is also a good time just to say I'm sure for people who've listened before they know that I am not an accountant. So
00:10:00
Speaker
So anything I say today certainly shouldn't be taken as accountated advice, not to speak for you either. But I would assume that the general disclaimer for you is that while you are an accountant, you're not our listener's accountant. So everything that you hear today, you should definitely go and get advice from your own accountant. But we do hope the information that we share today is helpful.
00:10:21
Speaker
So in talking about the CARES Act and the Paycheck Protection Program, we're not going to spend much time talking about how to apply for all of that because I think that there's a lot of information out there about how to go about doing that. But rather talking about the second half of the question or the second half of dealing with the Paycheck Protection Program and EIDL, which is once you get the money, what do you then have to do to make sure that that is forgiven? Yeah. So with a PPP loan, the biggest thing is to not reduce your
00:10:50
Speaker
employee headcount and then not reduce your employee wages. So my biggest and best tool, and you mentioned Gusto, they are what we use for all of our clients book or payroll, but they have phenomenal tools in helping you not only with the application process, if you're still in that stage, but also with the forgiveness portion. So you plug in how much you were approved for when you got the funds.
00:11:18
Speaker
And then they will run reports based on historical payroll and what they estimate you will be running to provide an estimated amount that's forgiven. So I am leaning hugely on that report right now to help estimate things and make sure that clients are in compliance with the head count and not reducing their wages. The best thing to do if
00:11:45
Speaker
If you have avoided your bookkeeping, if you have when it comes to numbers and all of this stuff, if you are the type of person that just wants to bury your head in the sand, this is not the time to do that. This is the time to really get a handle on your numbers, have it organized. You have to have that separate business bank account.
00:12:06
Speaker
You don't necessarily need to put the PPP loan funds in a new account because it's been my experience with other clients that they're going to put it in the account that they want to. So for example, Chase is going to put it in your oldest account that you've had with them. And there's nothing you can do about that. So you can either set up a new account, which right now is taking about one to two weeks and requires an in-person meeting, which a lot of people don't want to do right now.
00:12:33
Speaker
or just leave it in that main account and do a really good job of tracking. You will definitely need to provide
00:12:39
Speaker
payroll forms if you have employees and your payroll provider will have those for you. You will definitely need to provide receipts for things like if you have group health insurance and you're paying for that or retirement contributions, having some type of receipt or payment confirmation is going to be huge. Like I said, I talked with Chase the other day and I asked them that question. I said, what exactly are clients going to need to provide you?
00:13:05
Speaker
And they said, honestly, we haven't been told by the SBA yet what we need to collect. So we can't give you a final answer. I think that's a really stressful thing for businesses who are applying for the PPP or the Paycheck Protection Program is because I assume that everybody applying for the Paycheck Protection Program loan is assuming that it's going to be forgiven.
PPP Forgiveness Complexities
00:13:27
Speaker
I mean, you go into it thinking that the government is going to forgive this
00:13:30
Speaker
But just the information out there about how to get it forgiven has been ambiguous outside of what you had mentioned, which is making sure that you're not reducing employee headcount and you're also not reducing wages as well. I think Gusto is a great tool, and so it's really nice that they'll run those reports for you. For people who don't have a tool like Gusto, is this something that they could go back to their accountant with and just say, hey, how do I figure out what I was generally on average paying my people?
00:14:00
Speaker
I guess what advice do you have for them? There should be payroll reports that can be ran. If you're using QuickBooks or Intuit's payroll, if they don't have their own specific PPP report, you can just run a payroll report for the prior year.
00:14:18
Speaker
And then there's a lot of different spreadsheet calculators out there. If you apply through PayPal, they create their own for figuring out the average monthly payroll. We're all kind of developing our own tools. None of them have been issued by the SBA. We're currently working on gathering up all of the information, putting it into a spreadsheet so that we can just plug numbers in and it will spit information out. I'm hesitant to post that publicly just because
00:14:45
Speaker
It is not set in stone, but talk with your accountant. Be proactive about it. You don't want to get to that point where the eight weeks is over and maybe you were too nervous to spend it. You just don't want to get to the eight weeks and not have a plan. So get ahead of it. Make a plan. Do your best. That's all we can do right now is to just do our best. Try to play by the rules and try not to cheat the rules, which I'm
00:15:08
Speaker
Unfortunately, seeing a little bit of how can I game the system, try not to do that. Be as honest as possible. If you were making a certain amount before, based on last year or the first couple months of this year, don't double your income for the next couple months just so that you can try to use those funds up.
00:15:26
Speaker
You kind of have to do a little bit of a gut check. Hopefully, everything ends up the way it was intended with the majority of these loans actually being forgiven. But worst case, if it's not, it's a 1% loan. And you don't have to start paying it back until six months from now. It's not the end of the world. You're not going to get hit with a huge liability right away and maybe operate on the assumption that potentially not all of it would be forgiven just to be safe.
00:15:56
Speaker
And I think, at least from what I'm hearing, a lot of the people who are really concerned about it are people who have physical businesses where you're given this eight week time period, like restaurants, for instance, being the specific example that I hear a lot about, where they've let a lot of people go because they're not operating
00:16:12
Speaker
or they're operating at such a reduced capacity that they have no need to keep their full staff. So they've applied for this loan that is supposed to be forgiven, it's supposed to help to keep them afloat, but one of the requirements being they can't reduce head count, right? And so they're kind of left with this dilemma, okay, do I bring everybody back
00:16:29
Speaker
even though we're not operating at a capacity at least in any sort of near future that's going to be able to support them or do I not take the money which might lead to further financial distress so definitely things are a little bit messy but I think
00:16:44
Speaker
What you were saying is super important for people to hear. It's not a time to put your head in the sand, you know, and you can find probably an accountant or a bookkeeper that can help you make sense of your past records so that you can spend or make good decisions with any sort of money that you do receive under these programs.
EIDL Grant Policies
00:17:03
Speaker
So is the EIDL similar? Is there going to be some sort of application process that's similar to that to get that forgiven or is that sort of its own thing?
00:17:12
Speaker
So based on what we've read, and I mean, honestly, up until this morning, I was having conversations with my team about this, but based on what we have read the grant portion of the EIDL, it's not going to be included as income and it is essentially automatically forgiven. It's considered a grant.
00:17:33
Speaker
So it is intended to be used for operational expenses. And the way the wording is, is they say not to use it for the same purpose. So if you receive the PPP and the EIDL, they don't want you to use it for the same purpose. They don't really say exactly what will happen if you do use it for the same purpose. So we are recommending, and again, check with your own account, but we are recommending to our clients that if you get both,
00:18:01
Speaker
use the EIDL for operating expenses and then focus the PPP money on payroll. Yeah. And I wasn't even aware that you could apply for both. So you can apply for both the EIDL and the PPP. Yeah, you can apply for both. And I have seen a lot more success at least in the past week of folks getting the PPP since they reopened the second round of funding.
00:18:26
Speaker
I don't know if we're going to see a flood of the EIDL grants come through. It's hard to tell. It seems like those have kind of been trickling in. So it's kind of hard to tell where that is. But some people have gotten both, which is encouraging to see. A couple of weeks ago, I hadn't heard from anyone that had gotten either of them. So at least some folks are getting cash in hand to keep things moving.
00:18:48
Speaker
I've seen people start announcing that they've been getting these loans and grants, whatever it is that you'll call them, right? With the EIDL specifically, I think people were hoping to get a $10,000 grant, but I feel like a lot of people are saying, oh, well, I woke up and there was $1,000 in my bank account better than nothing, but not exactly what I expected from this. And apparently maybe there was some sort of change to the program where they started giving maybe $1,000 per employee, or they started delegating funds a little bit differently for that program.
00:19:18
Speaker
Yeah, so the way they kind of sold it to everybody in the beginning, like you said, was sign up for your free $10,000. So everyone's like, okay, let's get in on this. And then later, once I think they realized that these funds were going to go very quickly, they sent out more information to everyone that had signed up saying, well, actually, we're going to limit it to $1,000 per employee.
00:19:45
Speaker
And if you're a single owner LLC or sole proprietor, you count as the one employee and then limit the grant amount to 10. So $1,000 deposited into your checking account randomly, how it seems, is better than nothing, like you said. But it is disappointing to people that were expecting that.
00:20:04
Speaker
Yeah, expecting it or had already kind of outlined how they were going to use it and how it was going to help them to continue to move forward. I mean, all of this is definitely new territory, I think, for everybody. And so it'll be interesting to see how it plays out over the next few months. I haven't heard anything about the second round of Paycheck Protection Program money running out.
00:20:24
Speaker
I haven't either and i'm surprised because the way they were talking about it they made it sound like this is going to be done in two days after opening up the floodgates for application so it's encouraging that people are still getting money and they haven't run out yet.
00:20:39
Speaker
Yeah, absolutely. So if you are listening to this podcast, and maybe this is the first time you're hearing about these different programs, they're still worth looking into if you think that they're a good fit for your business. And of course, I would talk to your accountant first, but at least at the time of recording, it sounds like applications for both of these programs are still live. Yes, I'm not sure 100% on the EIDL, but PPP is open as of today. And I
00:21:07
Speaker
have seen several places that PayPal is working very quickly. Someone said they applied and 24 hours had money in their bank. Now, I can't promise that would be the case for everybody, even a small portion, but it's encouraging to see how fast it's going through them versus the bigger banks who seem to have been more focused on their bigger clients.
00:21:31
Speaker
I heard something similar about PayPal, and then I've also heard that smaller community banks are processing loans a little bit more quickly as well. Yeah, so check there for sure if you're still considering applying.
Tax Preparation for New Businesses
00:21:43
Speaker
I want to sort of transition the conversation to what our original topic was going to be with just talking about prepping for tax season, figuring out when it comes to accounting, what systems really should be in place when running a business, especially when I'm talking to new business owners. That's one of the questions, you know, it's always, okay, legally, what do I have to take care of? And taxes, you know, what do I have to take care of? So for somebody who's just starting a business, where should people start in terms of understanding what they're liable for when it comes to taxes they owe to the state?
00:22:13
Speaker
So, one thing that I see a lot of people forget about or possibly ignore is sales tax. So, traditionally, historically, only product-based businesses had to pay sales tax, and a lot more states are switching to the model where they are charging on either some or all services that are being provided in the state. So, TaxJar.com is a really great resource to figure out
00:22:39
Speaker
what your state wants you to charge sales tax on. So they have a great guide. I'm not sure if it's on their blog or just their resource area, but they have a great guide that's by state. So you can just scan down the list for your state and then they will also link the state law or whatever that's behind it. So it's not just telling you what they think. There is a link to confirm that that's actually true. So I would check there to get you started in terms of sales tax.
00:23:07
Speaker
And then if your state has income tax, you'll pay that with your annual return. So, you know, your tax software or your accountant at tax time will help you walk through that. And then let's see, I mean, the other thing in terms of paying the taxes is quarterly taxes. So a lot of people are overwhelmed by the thought of that, especially starting out and they think it's required. And, you know, if they don't send in quarterly income taxes, they'll
00:23:36
Speaker
have the IRS or their state come knocking on their door. And the biggest thing to remember there is those quarterly income tax payments are more of a deposit towards your year end tax. You're not actually filing any sales information. You're not reporting anything to them. You're just sending money in throughout the year towards that year end balance. Since you aren't employed by an employer, having that money sent in weekly or monthly on your behalf, this is the IRS and your state's way
00:24:06
Speaker
of getting that money throughout the year so they can properly budget and do all of those things with the money throughout the year rather than just getting a huge onslaught of funds one time a year.
00:24:17
Speaker
for people who are maybe just getting started or people who have been very in a very manual way, keeping track of their bookkeeping, where would you recommend that they start just on a daily basis being able to understand where their transactions are or categorizing transactions, that sort of thing? Do you have a favorite software among kind of the popular ones like QuickBooks? Even before you get into QuickBooks, the biggest thing that you can do to help yourself in terms of bookkeeping is separate all of your
00:24:46
Speaker
accounts from your personal accounts. That means you're not using PayPal for personal stuff. You have a completely separate business PayPal account. You have separate business checking, separate business credit card, all of that needs to be separate. And then once you've done that and you have rerouted all of your expenses to those accounts, then you can start looking at things like Xero, QuickBooks has their self-employed version, which is
00:25:13
Speaker
They've basically stripped out all of the confusing parts of QuickBooks and made it very easy for people to use. So if you are a sole proprietor or a single member LLC, QuickBooks self-employed is a great
Importance of Hiring Financial Professionals
00:25:25
Speaker
option. It is not a great option if you're an S corporation. You really need to have that full version of QuickBooks if you are that structure. And then waveapps.com.
00:25:36
Speaker
is a free ebook keeping software. They all require a little bit of a learning curve, some more than others, but wave apps is free. If you aren't in the mood or financially able to start adding another monthly expense, then start there. Get in the habit of tracking your money through there. We're only four months into the year. We're into our fifth month of the year right now. You don't have a ton to catch up on. It's like the perfect time.
00:26:05
Speaker
to get your numbers in, connect your accounts to whatever program you choose. They'll pull in the transactions and go through and give them a category and just take that time to get the numbers in there and then you can look at your reports and make some decisions more based on what the facts are telling you rather than just seeing your bank account slowly go down and get stressed out about that.
00:26:28
Speaker
This is where I would say, from the very beginning, Krista and I have found an accountant from year one of starting our business and, you know, revenue in year one looks a lot different than it does 10 years later now, right? And so I think that that's one of those areas in year one, we could have said, well, do we really need an accountant? We could try to do this ourselves or, you know, whatnot. I'm so glad that we did because one,
00:26:48
Speaker
And using the same accountant over the last 10 years has been really helpful too because he's super familiar with our business and we can go for him and he can speak in an educated way into our business about what we have going on. But also, a lot of this stuff, even if you are, I think categorizing your transactions on a monthly basis, let's say, I think can be confusing when it comes to tax time and realizing what needs to be paid and when.
00:27:13
Speaker
Do you typically tell people to wait to a certain point to find an accountant or is this something that people really should be doing? You're one of business. There's several factors when it comes in. I'm not going to go out and tell someone who's making zero money in their business, you need to invest an accountant above anything else. I think there's a time and a place for it. But if you were going headfirst into a business where you're selling on Squarespace, you have Stripe money coming in, you're selling on PayPal.
00:27:42
Speaker
That stuff is sometimes hard for even us to like wrap our head around and get straight when it comes to the bookkeeping. So to expect someone with absolutely zero bookkeeping background or knowledge to do that correctly, it's tough. So the more you have going on in your business, I think it's better to.
Transitioning Bookkeeping Systems
00:28:02
Speaker
start to just, you know, at least build that relationship, even if you're not handing off your bookkeeping right at the beginning, having someone you feel comfortable reaching out to question, ask questions. And then the key is finding someone that responds to your questions, because a lot of accounts that I've heard of, and the reason why a lot of people switched to us is because they come to us and they say, you know, my accountant started off really awesome. And now they don't answer my emails or, you know, they just fell off the face of the earth. So
00:28:32
Speaker
Do some time, do some due diligence, find an accountant that will respond to you in a timely manner, check with your friends, see who they're using, who they're raving about, and don't just jump right in to that relationship.
00:28:46
Speaker
Yeah, for sure. I think on a general bookkeeping note too, you brought up trying to reconcile like Stripe accounts and PayPal accounts and all that stuff. And that was a nightmare for us. We actually used Wave apps for a long time and we loved it. I mean, we started Wave apps, I think like version one of Wave. It's come a long way and we still recommend it to people for if they need an inexpensive way to keep their books.
00:29:08
Speaker
We had to recently switch to something else, so we're actually using BenchNow because it just needed to get off of
Common Bookkeeping Mistakes
00:29:14
Speaker
our plate. And especially when it comes to the transactions coming from all these different accounts and sorting all of that out, that just became increasingly a headache. I guess I would just challenge people to think about the time they spend in their books on a monthly basis and then eventually preparing all of that for their accountant. It probably makes sense in a lot of instances to outsource that to a bookkeeper like yourself
00:29:35
Speaker
And I get worked up talking about this sort of thing because Krista had done it for so long that it took a lot of effort for me to finally convince her to say, hey, listen, like really, the few hours that you spend on this each month would be better used to anything else. You know, even if it's not work, better used to, you know, you can spend more time with us and Jack, you can go spend some time alone, but better spent than anything else than this. So, you know, I would agree, especially as you have more stuff going on, it's probably important to find a bookkeeper and an accountant.
00:30:04
Speaker
Is there any business bookkeeping considerations that we should chat about? I think probably the most common thing that I see as kind of a mistake or error in bookkeeping is that let's say you're selling on Stripe and then you're seeing those deposits come into your business checking account. What most people do and if you didn't have an accounting background, it would make complete sense
00:30:27
Speaker
is that you just record that deposit as your income. The problem is when it comes to tax time, let's say you made $1,000 through Stripe before their fees are taken out. So Stripe is going to report that on a 1099K form and that's going to get sent to the IRS in your state. Then if you're only reporting $900 of sales because that's all that came into your bank account,
00:30:51
Speaker
there's gonna be a disconnect there. You're gonna be reporting 900. The IRS is thinking you should be reporting at least a thousand in sales and you're gonna get a letter. There's not even a human involved in that process. It's automatic. You get a letter. They're gonna say, pay us tax on this additional thousand. And then at that point, you either need to reach out to an accountant to help you get that straightened out or you'll have to write a letter back explaining the situation. So that's the biggest thing that I see
00:31:19
Speaker
as an issue and that happens with people selling on Etsy, selling with PayPal, anything that is depositing those sales funds into your business checking account, they're taking their cut and you need to report that as a separate expense. So instead of reporting 900 as sales, you need to report 1000 as sales and then $100 as the fee. That way the thousand matches up with their end.
00:31:44
Speaker
And this is finally actually what put Krista over the edge. And it wasn't that she wasn't doing it, but accounts became unhooked and things like that. And then she had to go back and redo and recalculate all of that. And that's how I was finally able to convince her that it wasn't worth our time to do it. You know, that's not where our gifts lie. So that was finally how I was able to get it off of our plate and outsource it for sure. So if somebody gets into a system, they get into a good groove, you know, whatever they decide with bookkeeping, what are the sorts of things that they need to have ready when it comes to filing their taxes
Efficient Tax Reporting Systems
00:32:14
Speaker
at the end of the year?
00:32:14
Speaker
At least my firm's policy is that we don't need copies of all of your receipts. My stance is save those receipts throughout the year and then put the time and effort into organizing them by category if you need to, you know, if the IRS or your state asks for more details about your expenses. For most people, that's not going to happen. So again, you can better use your time diving into work stuff rather than making your receipts in
00:32:42
Speaker
color-coded binder and sorting things out that way. So anyways, we don't require receipts. You need to keep them in your own records, whether it's digital or paper copies, just in case. But we request tax forms to be uploaded to the portal. We have a questionnaire that we send out at the beginning of tax season that helps us give a list of tax forms that our clients should be looking for. So if they answer yes, that they have student loan payments that they make,
00:33:10
Speaker
we'll let them know they need to be looking for that student loan interest document. So that's kind of our process. A lot of accounts have different processes, but most have that questionnaire that you answer every year, just so they can get a feel for what types of life changes happened the past 12 months. And then as long as your bookkeeping is up to date, then if you're using QuickBooks, you can give your accountant access to your QuickBooks. And that has been such a huge
00:33:38
Speaker
huge time saver for us. We don't have to email our clients asking them to pull a report and then go through the back and forth of, oh, give me the detail of this account. Let me look through there and make sure everything can be deducted and that sort of thing. So if you're using QuickBooks, whether it's self-employed or a different version, they can all have your accountant added. Same thing with WAV, same thing with Xero. So it's fairly simple. Once you get that bookkeeping in place and
00:34:07
Speaker
have your numbers straightened out there, the rest of it's not too difficult.
Managing Bookkeeping Tasks
00:34:11
Speaker
Is there anything else that we should mention before we wrap up here when it comes to finding an accountant or getting started with bookkeeping that might make it less stressful for people? Just taking it one step at a time. So if you are at this point right now and still need to file your 2019 taxes, but maybe you don't have any of your bookkeeping done, give yourself some goals. Don't put on your to-do list.
00:34:35
Speaker
All of 2019 bookkeeping, that's too overwhelming. Maybe do it quarter by quarter. So January through March 2019 and put that on your to-do list. I'm like that too. If I put something huge, one big project, like I currently have in my mind to redo my course, that's on my to-do list. I'm never going to be able to cross that off. It just feels too overwhelming. So I never start on it.
00:34:58
Speaker
But if I can just redo the outline, then I can get that crossed off. So think about your bookkeeping in that way. Give yourself small, manageable goals. Give yourself a treat for finishing it. And maybe right now your treat is going out for a walk, you know, finish that first quarter, go out for a walk, get outside. So I think that would be my biggest suggestion in terms of making that manageable.
00:35:22
Speaker
I think when it comes to accounting type stuff and legal type stuff and getting contracts situated and things like that, if you are the kind of person where that just feels overwhelming to think about, it always feels so much better when you tackle it. And I think it's always so much easier when you actually get to it than you think it's going to be, especially if you find somebody like Amy that can help you out.
00:35:43
Speaker
You had mentioned that you are currently taking new clients. Where can people find more information about your firm and figure out whether they might be a good fit for your firm?
00:35:54
Speaker
We have tons of information, you know, whether you want to work with us or you just want to check out the course that we offer or the free content on the blog, it's at aminorthardcpa.com. And then my creative outlet is Instagram. So I love posting fun pictures of calculators and my family there. And so, you know, if you just want to get a feel for whether we would be a good culture fit, that'd be a good place to check out too. It's aminorthardcpa over there as well.
00:36:21
Speaker
Awesome. Well, we will have links to all of that in the show notes. So if you are out and about right now, which, you know, I'm assuming not a lot of people are, but if you are, you can check the show notes for all of those links. And Amy, I just want to thank you for taking the time to chat with me today, not only about some current events and how people can maybe navigate the paycheck protection program and the IDL, but then also just good bookkeeping and accounting tips for people to keep their businesses organized. So thank you. Yeah, thanks for having me.
00:36:55
Speaker
Thanks for tuning into the Brands That Book Show. If you enjoyed this episode, please consider subscribing and leaving a review in iTunes. For show notes and other resources, head on over to dvandchrista.com.