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EP 13: How to Feel Empowered in Your Business Finances and Tips on Preparing for Tax Season with Jackie Easterday, CPA
113 Plays1 year ago
Our very first Business Playdate is here! We're thrilled to bring you this conversation with Jackie Easterday, CPA.
This episode is great for anyone who is looking to build confidence in learning more about their business finances, from organized bookkeeping to S-Corp tax benefits.
Jackie has nearly two decades of tax and accounting experience and has been helping small business owners take control of their finances for over ten years! While she and her team specialize in bookkeeping and taxes for small businesses, her true passion lies in empowering business owners with financial confidence to grow and scale the business of their dreams!
You can learn more about Jackie, her services, and resources at easterdaygroup.com, and be sure to give her a follow on Instagram @jackie.easterday.cpa.
Thank you to Jackie for joining us on The Business Playdate!
Follow The Business Playdate online & come say hi!
- The Business Playdate Instagram: https://www.instagram.com/thebusinessplaydate/
- Lindsay White's Instagram: https://www.instagram.com/lindsaywhite.co/
- Betsy Moorehead's Instagram: https://www.instagram.com/betsymoorehead.biz/
- Learn more about Lindsay's marketing program here: https://lindsaywhite.co/
- Learn more about Betsy's marketing services here: https://betsymoorehead.com/
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Transcript
Introduction to Business Playdate
00:00:00
Speaker
Well, and I tell people too, like as a business owner, even if you're farming it out, even if you're subcontracting it, you have someone doing it, whether it's taxes or your bookkeeping, you still need to kind of have an overarching understanding of what's going on in your business. Don't just blindly pass it over to somebody. Try to understand even a little bit of it because it's your business at the end of the day.
00:00:24
Speaker
Welcome to the Business Playdate, a podcast hosted by Lindsay White and Betsy Moorehead. Two internet strangers turned business besties. We're two marketing professionals living across the country, raising our kiddos while running our own individual businesses. We built these businesses based on our experiences working in corporate management roles with the end goal to be able to show up for our families first. And we did it. We're so happy you're here with us. Now let's get into this week's episode.
Personal Updates from Lindsay and Betsy
00:00:53
Speaker
Hey y'all, welcome back to the Business Playdate. Lindsay, your background is different. It is. I am finally in my new house. It has been a whole year in waiting and we made it. I have an office again. I am so excited for you. All of the, like if you guys are not following Lindsay on Instagram, which surely you are, but she has been like sharing a couple of little sneak peeks of what her new office looks like in her stories and it is just adorable. I am so excited for you.
00:01:21
Speaker
It does make me really happy. I mean, there's all windows, it's beautiful natural light, and it's just like a much happier place for me to be working out of every day. Oh, good, good, good, good. I am myself, I am sitting here in my husband's office because today of all days, he had a plumber come and do some work.
00:01:38
Speaker
in the bathroom that is literally right next to where I normally record the podcast. So I moved upstairs to his office. And when you go into someone else's space, you feel like you're invading it a little bit. I just totally had to rearrange his whole desk.
00:01:53
Speaker
Sorry, sorry, Ryan. I love the bookshelf in the background. We have some interesting garb back there. There's so much going on back there. There's actually a picture. We'll have to take a screenshot of this. There's a picture of Ryan and Akim Elijah on, who is a very, very, very famous basketball player that used to play for the Houston Rockets.
00:02:14
Speaker
And we went to a Rockets game one time and Ryan, we were like, there were floor seats. We were sitting with a friend and we like went back to like the little bar behind. Um, it's like the bar on the floor seats or whatever. And right. I'm like, can't find Ryan. I look over and he's like taking a selfie with this guy. And I was like, Oh my gosh, that's a Kim Elijah one.
00:02:31
Speaker
And it's like right by the locker room. Like, Akim hasn't played basketball in a long time, but it's like his prized possession. So it's like right at the very front. That's some Houston Astros stuff because, you know, we're sports people anyway.
Introducing Jackie Easterday, CPA
00:02:45
Speaker
We have something very exciting for you guys today. We do. Tell them what we did. We had our very first podcast guest interview today. So we had our very first business play date, official business play date with Jackie Easterday. Jackie is a CPA with nearly two decades of tax and accounting experience. She has a lot of experience helping small business owners such as myself. She is my personal and business CPA.
00:03:13
Speaker
helping take control of their finances, and she's been doing that for about 10 years now. Amazing. I know. Her team specializes in bookkeeping and taxes for small businesses, but her true passion is really empowering business owners with financial confidence to grow and scale their business. So she's great with helping you figure out your numbers, and she's a mom. She's got three boys, three, I'm sure, very energetic boys, because such as boys be.
00:03:41
Speaker
I tell you what, when we talk to her, you guys, this conversation is so full of wonderful information. You just don't even think about as a business owner that could happen from a tax perspective or financial perspective. I definitely felt some
00:04:00
Speaker
some empowerment when we were talking to her on how to take control of my own finances. But some of the things that you're going to hear into the episode are just the importance of keeping your books clean and organized.
Key Insights on Bookkeeping and Taxes
00:04:13
Speaker
Not only does this help lower stress during tax time,
00:04:16
Speaker
But if you're going to scale your business and have growth or make any major purchases, we talk about getting a mortgage as a business owner, what that's like. And Lindsay talks a little bit about what that process was like for them whenever they bought their new house and just things like I didn't even think about. And then we also talk about the differences and the ins and outs of filing
00:04:38
Speaker
taxes as an S corp versus just an LLC. And I don't think that a lot of people know about that. At least I didn't until I was filing taxes for two years as just an LLC and getting a shocking number that I owed to the IRS every year. So
00:04:53
Speaker
Jackie has a lot of really good insight on that. And then she talked a little bit too about like, if you are going to be an S corp, you know, paying your salary or just like in general, like owner's wages and like what that might look like and how to kind of decide what salary makes sense and what you're doing as a business owner, but all the other things, like you're not just the CEO of your company. Like you're doing all these other things and she had some really, really good insights. So we are so excited for you guys to listen to our very first official business play date with Jackie Easterday.
00:05:27
Speaker
Hello. Hi, Jackie Easterday. Thank you for joining us on the Business Playdate today. Yes, I'm so excited to be able to chat with you guys today. Yeah, we're so excited that you are here. We are really just going to get started with our Playdate portion of the Business Playdate. So I know you because you are my personal and business CPA, but I want everyone else to get to know you. So tell us a little bit about yourself, your story, and how you got to where you are today.
00:05:51
Speaker
Yeah. So, um, live in Texas, um, in the Houston area, I have three boys, um, I, the oldest 11 and I have twins that are nine. Um, and so that is the bulk of my outside of work life, but how I kind of got to where I am today. So my undergrad is in finance. I worked as a financial analyst for like an oil and gas company, did the corporate thing for a few years and did not love it. And also realized how,
00:06:20
Speaker
important accounting was. And I hate admitting this, but I literally got a D in my first accounting class in undergrad. I retook it and got an A. So I did, but I just, I hated it. I thought it was terrible and awful. And then you get into the real world and you're working with numbers in a business and you realize, even if you're not going to be an accountant, you have to understand accounting.
00:06:41
Speaker
So I went back to school, got my master's, worked in public accounting, doing taxes, which I didn't think I ever wanted to do and, sickeningly enough, fell in love with taxes.
00:06:51
Speaker
Um, and did that for, you know, seven or eight years, did the tax, you know, season 80 hours a week. And when I got pregnant with my first son, just realized that was not the life for me. Like that was great. Well, it was just, you know, my husband and I, and it was always perfect. So just during basketball season and he could do his thing and I'd be at the office. But then once we had, um, Miles, I knew
00:07:15
Speaker
it was time to kind of find something different. So I tried to kind of pull back my hours and that never works. Like you, especially when you're in a corporate setting and I think when you're a hard worker and a good employee, like pulling back your hours just doesn't happen. And so, um, we ended up kind of doing some bookkeeping on the side and then we found out that we were having twins. And so I decided, um, when he was two, so I decided to kind of stay home, do a couple, have a couple small bookkeeping clients just on the side. So I felt like I had,
00:07:44
Speaker
stayed in it a little bit. And then the idea was when the twins were in kindergarten, you know, would I go back to work? What would I do? And that was COVID. And that wasn't happening. One, I also just, I didn't want to go back into corporate. I didn't want to go, you know, back into public accounting. I didn't want to go into corporate.
00:08:04
Speaker
And honestly, the online space grew so much and just totally blew up during COVID. And I realized there was such a need for, you know, online business owners to have somebody in their corner. They need accountants, but nobody wants to talk to a traditional accountant because they're dry. They talk over your head. Communication is terrible. And so,
00:08:28
Speaker
things just kind of pivoted in that direction. And I grew my client base significantly. And then now, you know, I joke, I took my first head shots and I was in like a sweatshirt and leggings and was like, Oh my God, this is so crazy. And now I'm just like, this is the online space. Like, you know, and so that's kind of how I got from where I'm at. And, um,
00:08:50
Speaker
I love it. I love who I'm working with. I love how I get to work. I love being able to, you know, control sort of the way I'm working with people. Like every client is different. Um, and so that's sort of where we're
Balancing Work and Life
00:09:05
Speaker
at. And we've got, um, my husband works full time with me. He works, um, more on kind of our tech side. He's much more techie than I am. Um, we've got a bookkeeper kind of girl on our team. And so it's, it's awesome.
00:09:18
Speaker
That's amazing. I love all of that, especially like the part where you talked about like, not only like when you had your first child and kind of like thinking about going back to corporate or like having your twins going back to corporate because I think Lindsay and I both kind of had similar like mindsets around motherhood and the corporate life, which a lot of our listeners are ex-corporate employees. But also the COVID, like that was such a good point. Not only did we all learn how to function and work from home,
00:09:47
Speaker
with our kids at home. But we just didn't want to go back. We could do our jobs from home. And there was a way of building something. And I love that. So how long have you had your own business in this capacity? Yeah, I would say so 2020 is really the year that, prior to that, I did a lot more freelance work for local. I was mostly working with a lot of nonprofits on their books and things like that. But in this capacity, things really shifted in 2020.
00:10:15
Speaker
Yeah. So one thing that we like to talk about is, you know, Lindsay and I both also are kind of in that three to five year range of having our own businesses. And, you know, some people really like want this like massive amount of growth in so many periods of time or like they would kind of want to have a slow burn or like they, you know, want to grow an agency or they have all these goals. So what would you say? Like, I know you just said like you have a bookkeeper growing your team. What would you say like is kind of the next big
00:10:44
Speaker
thing for you, like defining success, like what does that look like for you and your business? And like, what is your enough, so to speak? So this is one of the, I mean, you guys get it as business owners, you are constantly kind of redefining what your business looks like and what, you know, booked out and what capacity kind of looks like for you. And I think that for me, success looks like
00:11:11
Speaker
I love the top level. I mean, I'm obviously a QuickBooks person and at the core, I am a numbers person and I'm going to get into Excel and QuickBooks and three hours are going to pass, right? I need to call you.
00:11:26
Speaker
But I also, I think one of the things that's different about me than typical accountants is I'm a people person and I love people. And so I would love to be able to build a team that is in my client's books, that is, you know, they're handling, you know, the details and the bookkeeping, but I'm on that higher level piece. I am looking at their financial reports. I'm helping them, you know, grow their business based on their numbers. Tax strategy, like that higher level piece. And so to me, I would love to,
00:11:56
Speaker
you know, be at, be at this, you know, higher touch point, have a team below me. But also a big part of that that I love is I want to employ other, like our current bookkeeper as a one year old, I want to employ other moms. I love how flexible my job is. You know, my son,
00:12:12
Speaker
my fifth grader has a field trip tomorrow and I can block that time off and I'm not even you don't have any anxiety about it. You just you can do those things and I want to be able to give other people that opportunity as well. And so to me success not only looks like me being able to grow at the point that I can still totally have a flexible schedule and be there for my kids or if I want to take lunch with my friends or things like that, but also be able to give that opportunity to other moms that are at home as well and give them that flexibility. I think
00:12:41
Speaker
It's been such a game changer for my family and for my personal life and even my marriage. Like everyone's, you're just, you're doing what you love. And so I would love to be able to bring on a team and grow it in that capacity to give people that opportunity too.
00:12:57
Speaker
I love that. I know, especially if Betsy and I feel so strongly. And that's kind of part of the reason we started this podcast is like, you can't be what you don't see. And there's so many women who are in these corporate jobs or their stay at home moms. And they don't realize that there are so many opportunities and options for you where you don't have to be like,
00:13:13
Speaker
a slave to your corporate job, or not making an income when you want to be making an income, but you want to be home with your kids still. So it's really cool to hear about other businesses who are trying to give other moms that opportunity to be in a space that's better for them.
Transition from Corporate to Personal Business
00:13:28
Speaker
Yeah. So can I ask one thing? I know we're about to move on to another question, but I just have to ask. I know Lindsey and I both have said we've struggled with this, and I am still learning it. But when you came out of the corporate world and started doing your own thing, whether it was like you were doing something on the side,
00:13:42
Speaker
how long did it take you or maybe you still have this like to get over that corporate mentality of like the nine to five grind or in your case like tax season like working 80 hours a week like what does it look like for you now? I think it's so fluid still all the time. There's times where I feel like I have this nailed and everything I've got this great separation of work and personal life and then there's times that you just kind of wake up and you're like these lines feel completely blurred. But I think that it was
00:14:12
Speaker
I think it was a while because you have to build up your confidence to know I can do this differently, still as successful or more successful than in a corporate setting, but you have to get to that point to feel confident enough to know that. And I think once I gained that confidence to know I'm delivering this amazing product that's needed and I'm helping other small business owners gain time, gain clarity, lessen their anxiety around their numbers,
00:14:40
Speaker
And then it felt a little bit easier to kind of drop that like, okay, I need to be checking my email all the time. And yes, you know what I mean? And so I did little things like took my email off my phone or, you know, I heard one time on a podcast I'm almost talking about.
00:14:55
Speaker
she was talking about, she got into like a rhythm where she was in the grocery store line, like responding to emails. And she was like, I'm not helping anybody by that email. Like I'm stressing myself out and my clients aren't getting the best of me. And so I think just kind of learning, it's okay to take your email off your phone or to do things like that and have that confidence. So
00:15:11
Speaker
It took a while and I still struggle with it, but I think just kind of gaining that confidence and knowing, you know, you can do it however you want to do it. Yeah. I love that. I took my notification for my email off my phone after my second daughter was born and I have never put it back on. And that was 13 months ago. And I was like, this is such a different version of me as a person, but as a mom, not constantly having
00:15:35
Speaker
a ding, ding, ding, ding, come through and feel like I need to get in there and answer it. Cause I'm the kind of person that like, I wish want to like look at it and take care of it right away. So it's not looming. Um, and we all work with, we all work with clients. We have provide services. And I feel like every time I took my email notifications off my phone also, and every time I'd get a client email would be like this, like,
00:15:54
Speaker
Oh my gosh, this feeling of I have to go do this right now. When you don't, I can wait until tomorrow. That doesn't need to be taken care of right now. And then you'd feel this looming, almost like guilt of, oh my gosh, I need to be working on that, but instead I'm making dinner. And so taking it off was huge for me as well. Yeah. I think it's all these little things that you can do that you don't really aren't, that they're not big things, but they just kind of help you reframe your mindset.
00:16:20
Speaker
In my inbox, it's so simple, but I created a label that's a need to response label. Cause I can't handle looking at my numbers buildup. I cannot log in and see that I have 50 emails. And so like that, I don't, I can't address everything in real time, but if I just label it, it needs a response and that number, it's not unread anymore. It helps, you know, I love that. Genius like needs response tech category. I need to implement that.
00:16:47
Speaker
Yeah, I just think it's little things. Meanwhile, I'm over here laughing because last week we were talking about how much of a hot mess my inbox is and how I... You are not inbox zero. I am not inbox zero, but maybe I need to implement that. Yeah, there you go. It could help maybe.
00:17:06
Speaker
Okay, so you have kids, you have three kids, three boys, which as a mom of a boy, they're very energetic. How are you juggling at all? Do you have systems in place? Do you have help? Are they, they're obviously in school now? What does that look like? So them being in school is a game changer. You know, when they were in preschool and you know, it was nine to one, four days a week, I would feel like by the time I got home, I had about an hour and a half to do anything and then go back.
00:17:32
Speaker
Um, so honestly, it's just the season of life you're in and you're working at coffee shops and whatnot. But like now that I have this long, these longer days, five days a week, it makes it a whole lot easier. Um, but I don't, I block off the days that I have calls so that I can have work days because you can't do both. I've learned that very quickly.
00:17:54
Speaker
Um, I shut down when the boys get home from school, but that doesn't mean that some nights I'm not answering emails or things like that. I think one of the things that I have struggled with a lot and come to realize is that work-life balance looks completely different for everybody. And I think when you're in corporate, that idea that I have a great work-life balance means I don't open my email when I'm at home or when I'm on vacation or something like that. But for me, if I, you know, sometimes I get up in the morning and I go through my inbox and I sort through what I need to do and
00:18:22
Speaker
you know, maybe that's at 6am or sometimes I do that on the weekend on Sunday just to kind of prep for the week ahead. And so I think it's just being able to be fluid and what works for us. My husband, like I said, he works at he we work together full time. So we're both home when the boys are home so we can split for sporting events and things like that. But you know, sometimes it's sometimes it's perfect. And I can work from nine to three and not have to do anything else and take off a Friday. And sometimes I'm working on the weekends. And so it's just kind of
00:18:51
Speaker
what works for that season of life. What does tax season look like for you? Is your work-life balance right in quotes here? Yeah. Does that look the same for you during tax season? I really try to take Fridays or at least Friday afternoons kind of for myself. Even if that means I'm
00:19:10
Speaker
getting all the returns done that are sitting in my car. It doesn't necessarily mean I'm going to get a massage or whatever, but just the things I want to do without anybody posting a car with me. But you should. You probably deserve a massage, right? Right. And not that I don't spend some Friday afternoons, but I try to take Friday afternoons for myself, and I try to not work on the weekends. And maybe I do check email or things like that just so that the week starts out smooth. But during tax season, I definitely will work on, I'll pick,
00:19:38
Speaker
you know, a Saturday or a Sunday. And I don't work all day, but maybe I'll work four or five hours. There's a couple, you know, nights that, you know, typically, like I said, I'll try to shut down when the boys are in bed. So I'll pick a couple nights that maybe I am, you know, they'll come home, they'll do snack, do their thing. And then I go back in the office for a couple hours. So
00:19:55
Speaker
It's definitely different, but I've also built this business that I never go back to the ADR work weeks. I'm not going to do that. And that's why I've been very selective of who we work with and what our tax roster. I mean, you could fill up a tax roster in a second because everybody needs taxes. And so I've really tried to grow that side of the business very strategically. So we never go back to that. And then the other thing that I've done is I've implemented deadlines for my clients that
00:20:22
Speaker
help me to not be up against the deadlines, right? And that also helps them. Nobody wants to get an email that they owe $15,000 in April 12. Like no one wants that email. I don't want to send that email. Like people need time to process that stuff, right? And so I think it's also just implementing deadlines that are going to work. And my deadlines are typically earlier than other people's deadlines, but it helps the flow of the season just a little bit better.
00:20:47
Speaker
Do you take a post-tax season sabbatical trip? So when I was in public, the day after tax season was always a company holiday. The sick joke about my birthday is April 15, and so it's so terrible. That sounds awful.
00:21:07
Speaker
Yes. And so we've done the same thing like the day after is kind of shut down. And honestly, it happens really naturally just post tax season because we still have a lot of monthly clients that we're working with regularly. But
00:21:20
Speaker
people are kind of done hearing from me for a while. So like things just really slow like May, June, even July, until I think people get further away from the shock and awe of tax season. So a lot of times business just kind of naturally slows during that time period too. And I think it's just this Q1 tax season rush and then kind of everybody's debriefing. But
00:21:43
Speaker
We did during the summer. I tried to take every Friday off and kind of lean into that more as opposed to, you know, I think one of the biggest things is what I tell my clients all the time is understanding the cycles of your business. And, you know, when there's peaks and valleys with your income and preparing, so you can kind of lean into some of the valleys and use that as your recharging time, you know, and then be recharged when income picks back up. And so I think that's just kind of,
00:22:12
Speaker
the cycle we hit with being accountants and CPAs and things like that. So I definitely try to slow down more for the summer, especially when the boys are home. I go from having five days a week to no days a week. Remind me how old they are. What grades are they in? I have a fifth grader and twins in third grade. So they're pretty self efficient in the sense that
00:22:35
Speaker
They're going to just go be on screen. They're going to do something, but they can't be on screen. If they're on screen five days a week, we have a huge problem. Not because I'm against screens, but because attitude, just the whole thing. Oh, gosh. Yes. We are both screen households here, so you're in safe company. Yes. Yes.
00:22:55
Speaker
Oh, well, what a fun time to get to know you and have gotten to where you are. And this wouldn't be a business play date if we didn't talk a little business.
Importance of Clean Financial Records
00:23:06
Speaker
So we just talked about tax season. And obviously, you work with small business owners. And a lot of our listeners, if not all of them, own their own business. And so we wanted to just kind of
00:23:19
Speaker
Talk to a little shop here. So like me personally, I have like a million questions I want to ask you, but let's talk about like small bit, like keeping your books, like the importance of keeping your books. Like what does that look like? You know, QuickBooks, all of that. And then how does like, what are the reasons why somebody needs to make sure that their books are under control? Yeah.
00:23:49
Speaker
I think there's a million reasons, but the biggest reason that I think most people think is just to have things ready for tax time, right? So that's kind of, most people come to me and they're like, I'm not going to do this again. Q1 is huge as far as bringing on new clients because it's a new year, it's new you. It's also, you're going through the pains of not having your stuff together during tax time and people are bowing to never do it again.
00:24:12
Speaker
So I think that's usually the biggest reason that people want, you know, bookkeeping services and to have accurate books and numbers is for that clarity and to kind of alleviate some of that anxiety around tax time. And while that's fantastic, to me, it's so much more important than that.
00:24:27
Speaker
Um, I think knowing your numbers, I mean, I, you'd be, how many small business owners have no idea like what they're profiting. You know, they have no idea, um, what their sales, they don't have any idea of their income trends and things like that. And that stuff is so important to know in order to grow your business and make business decisions. When's it time to hire somebody? Should you increase prices? You're working your butt off, but you're not bringing any money home. Like what's going on. And so I think,
00:24:53
Speaker
To me, that sort of the big flex of working with somebody and having clean books is being able to know your business, know that side of it, and be able to grow your business and feel like you're making really, really sound financial decisions. Then there's also a million other reasons where you may be getting a mortgage on a house and you need clean books. And if you haven't done that, it's a hot mess. And so I think there's just a point in your business where
00:25:22
Speaker
It's just, it's part of doing that. You need to have numbers. You're growing and scaling and running a, you know,
00:25:31
Speaker
scaling business, you need to know what's going on on the financial side of everything. I mean, I just went through that exercise with you. If I didn't have Jackie in my back pocket, I don't know that I would have gotten my mortgage. I had to read books and I had Jackie to write me the letter I needed for my mortgage, and it's hard to get a loan or a mortgage as a sole business owner.
00:25:54
Speaker
It's not rainbows and butterflies. You have to provide a lot of details and a lot of things. And if I didn't have clean books, which there was a time in my life where I did not have clean books, it would have been really hard. It would have been at least chaotic and stressful. I remember when Lindsey told me about that process and how she was working with you on it. I was like, holy shit.
00:26:13
Speaker
What do I ever do if I didn't even know that was a thing? So can you talk more just about the mortgage or just even any big major purchases as a small business owner who owns you, how that impacts that situation? Yeah. So a lot of times you go, if you're going to get a mortgage or a loan or even sometimes with car loans, they're going to ask you for your pay step. Give me your most recent pay step. And they can look in there and they can see what your monthly pay is, see how much you've been paid. They can kind of assess things.
00:26:43
Speaker
But as a small business owner, you know, we don't have a pay stub. You might be an S corp and you may be drawing a small salary, but you, you know, your business profits are the bulk of your pay. So how are they going to determine what you're bringing in? How can they determine what you're good for? Um, and that's where your books come into play and they want to see how much you're profiting. What do your numbers look like? They want to tie things out to your bank statements and things like that. And,
00:27:08
Speaker
So because you don't just have that simple pay stub or last year's W-2, you've got to provide them with your, your business numbers, because that's where your, your income and your compensation is coming from in order to cover that loan. And so a lot of times, you know, I've worked with other small business owners too, and they ask for a lot. Like it's not just give me your pay stub and things like that, but it might not be,
00:27:33
Speaker
difficult, but it's a lot of back and forth. And Lindsay, you can probably attest to that. Like I've had clients say, you know, they're giving them, you know, explaining every bank transfer, they asked for a million bank statements, or they want to know what this was. And they want to know, I've had one client who the loan officer wanted to know their business plans and their growth plans. And, okay, so like, here's what your taxes look like. Here's where you're at. Like, tell me what you are doing to grow your business. Like, how are things changing?
00:27:56
Speaker
And so I think there's, it obviously depends like loan officer or loan officer, what they're doing. It also depends on, I think the, if you are, you know, applying for, with somebody else, like what is their financial position? Do they have, the loan officers, they're like assessing the risk, right? Yeah, exactly. So they have to ask those questions. Yep. Like how much are you taking out? Can you afford it and how you can afford it is what your business is bringing in.
00:28:18
Speaker
And so in order to have books that are showing truly what your profit is, that's the way you prove to them how you could afford whatever loan or mortgage or, you know, whatnot that you, you know, that payment. Even if you have a significant other who's bringing in the bulk of the income for the household, you could still be seen as a liability. So you still have to show these reports, these things. And
00:28:40
Speaker
I know they asked me for a P&L and it was so funny because I was like, thank God I have someone who can help me provide that because it would take me days to figure out how to even, nevertheless, if my books weren't clean, how to pull that report and make sure it's what it's supposed to be in compliance, if you will. It's just so important to have someone in your back pocket who can help you. And my background's in finance. I have a finance degree. I don't know how to do any of that.
00:29:07
Speaker
No, it's different. A big part of it too is sometimes just knowing what the banker or the loan officer is asking for. Like that verbiage is really hard. So having somebody to bounce that off of who has a little bit of an idea of what they're asking for is also sometimes you get that long list from them and you're like, I don't know what 10 things on your even been. So it's important just to stay, while there's importances for taxes and growing your business, there's just
00:29:35
Speaker
life opportunities that you need to have your books in order for.
Business Structure and Financial Management
00:29:40
Speaker
So I think a lot of our listeners have pretty well established businesses at this point, but if you were just starting out, like you have to start somewhere, right? You're starting at zero, or maybe even in the red if you had to buy something for your business. What would you recommend to them? What is best practices to keep their books in order and make sure they're set up for success? What would you recommend?
00:30:01
Speaker
I'm taking notes. First and foremost is open up business bank accounts. Because the sooner you can separate your business and your personal finances, the better. There's a million people out there that they've got their, they just think, I'm just a freelancer. It's not a big deal. That payment's just sitting here. I have Adobe and Canva and a couple of things sitting in my credit card.
00:30:24
Speaker
But before you know it, you do grow more and you grow faster and then that's expanded. And now you're sifting through months and months, personal bank statements and credit card bills to figure out what your expenses were. I am getting anxiety just thinking about that. So often I'll tell people, they're like pulling their stuff together for taxes. And I'm like, well, do you have any software charges that you paid for personally or anything? And they're like,
00:30:48
Speaker
Yeah, but I don't, I don't want to take the effort to go through it. And I get it. It's a lot. It can be incredibly overwhelming. And also nobody wants to go back and review all their Amazon charges from the year. And like, it's over in Stonewood. I don't want to see it, right? But those are business expenses. And that's something that you're entitled to take to offset your income and lower your tax bill. And
00:31:08
Speaker
So often I see people just avoid it because it's a problem and then you're paying higher taxes. Yeah. I got to the point where I have my business bank account debit card on my Amazon account. So like anything, like I know I don't want to get them mixed up and
00:31:22
Speaker
Now I know like which things to pull if I need them, but that's about, you know, as, as I am. I mean, just starting off at a minimum, get that checking account and get a debit card, move, you know, your Stripe payments or whatever payment process are you're using so that all your income's hitting that account and then use that debit card to, you know, put Canva, put Adobe, put QuickBooks, you know, whatever, you know, you're, even if you feel like it's small,
00:31:48
Speaker
Starting off with those foundations are really, really important. Then as you grow, you can open up a business savings account and a credit card and kind of grow that, but at a minimum, starting with that checking account is huge.
00:31:58
Speaker
I remember when I first started my business, that was actually one of the first things I did was open a business bank account. And PSA, for anyone listening who has not done it, generally a credit union will let you do it for free. So it's not going to cost you money. But I went to our local credit union and I opened up a business bank account and they were like, for you to open a bank account here, you have to also open a business savings account. And I was like, okay, great. And they're like, you have to have at least one dollar in it. So I pulled a dollar out from my wallet and I was like, here you go.
00:32:25
Speaker
Oh my gosh. But I had it and I felt so much better that I was starting from something rather than starting with nothing. Yeah. And I think, so one of the things too with kind of piggybacking off of this starting out is people, one of the questions I always get is when should I become an LLC or should I become an LLC or should I stay a sole proprietor? And it kind of goes hand in hand with the bank account piece because if you're a sole proprietor and you're operating under your social security number, totally fine.
00:32:53
Speaker
But if you can open a business bank account, they'll let you open one as a sole proprietor. It'll be under your social. But when you become an LLC, you're a different tax entity. You're a different legal entity, right? Yeah. So your LLC now needs its own tax ID number. You don't use your social, you use your EIN. Then you need new bank accounts. So a lot of times I tell people it's state to state because some states like California have really, once you open an LLC, you have like eight, $900 annual charges to maintain that LLC. Some states don't have any annual charges.
00:33:23
Speaker
But if you're like legit, like I'm going to start this business, I'm going to grow this business. And I think sometimes just creating your LLC and then opening your bank account so you don't have to redo it later down the road is also something to kind of consider and think about.
00:33:40
Speaker
because I often see a lot of people who have an LLC and like all their bank accounts are still personal accounts, you know, but it's dedicated to their business, which is great to start out. But one of the biggest benefits of being an LLC and not giving legal advice, but it's the, you know, the separation of your business and your personal assets. And that's what I was going to ask you. Yeah. It's that protection between the two. But if you're using personal bank accounts for your LLC and you're running personal expenses through your, your, your,
00:34:08
Speaker
You know, back from like my, you know, business law days, and you know, you're, you're co mingling things in your, you know,
00:34:17
Speaker
basically not giving yourself that protection, you're you're taking that away. And so I think that's really, really important to to understand that it's not just for, you know, tax time and clarity, but it's also to, you know, kind of maintain that protection, which is why you set up an LLC to begin with. Well, it's like, oh, sorry, but I was just like, if God forbid, like somebody sued you, yeah, they'd see your business and have no tie to your personal assets.
00:34:42
Speaker
Right, right. I mean. I think that's how, again, I'm not giving legal advice too, clearly. But yeah, and that's a big piece of it is so many times people are like, oh, have my LLC. It's great. But they're still using a personal card. Or they're using their business card. They're not paying themselves each month making a transfer from their business account to their personal account. But they're just like, I'm going to use my business credit card because I get really good rewards and use that for all my personal expenses.
00:35:09
Speaker
And from an accounting standpoint, you can classify those as personal. And they are not on the books. And every once in a while, a personal expense pops through. I literally just paid a doctor's bill this morning for one of my kids when he broke his arm. And as soon as I paid it, I was like, crap. So I mean, that just happens.
00:35:28
Speaker
you want to make it minimal, like things, you know, and the sooner that you can separate those, the better off you're going to be. And I think along those lines, really looking at your state and your legal laws and potentially becoming an LLC right off the bat, you know, get your paperwork filed and open up at least a checking account. Yeah.
00:35:48
Speaker
I have a question because you mentioned S corp versus LLC. So I was previously like an LLC only, and that's how I was filing my taxes. And then like, you know, I'd get the shocking number during tax time. And so now I'm moved to going to be filing as an S corp. Can you talk a little bit about like the differences between the two from a tax perspective and maybe people listening or like having an
00:36:12
Speaker
Oh, shit, moment two during tax time. I would guess a lot of our listeners are at the spot of do they need to be an LLC or should they be moving over to an S corp? Yeah. So one of the biggest things is a lot of times people think an S corp is a different entity. It's just a taxing structure. So you are still an LLC. Your legal entity stays intact. You're just telling the IRS, tax me as an S corp, and then your state will follow suit.
00:36:40
Speaker
Um, and so that's really important to know that LLCs are S-corps. It's kind of the square rectangle thing, you know, but it's just a taxing designation. So you don't file a new paper with your state or anything like that. And you send a form into the IRS.
00:36:55
Speaker
definitely recommend working with an accountant who files those forms. They seem very simple, but the amount of times people have come to me and they've like, hey, I filled out my form, but then I got a letter back because I put the wrong date here or there. There's just nuances that it doesn't look like a complicated form, but there are nuances that a CPA or somebody who does it regularly knows. So you file this paperwork, you mail it into the IRS because it cannot be electronically filed.
00:37:21
Speaker
It can be faxed if you've got a fax machine. And in the year of our lower 2023, we have to fax and snail mail things. Right. And so the IRS receives that, and then they look and they tag your LLC and your EIN. They're going to be taxed as an S-Corp. So then what that means is when you're not an S-Corp, all of your business profits are your compensation. You're not drawing a salary from your business. You just make those draws from your bank account to your personal accounts. So all of your profits are considered self-employment income.
00:37:51
Speaker
And what self-employment income is, is it's actually payroll taxes. So when you, how did, you know, you worked in corporate and you have a salary, you know, you pay FICA or Social Security Medicare, you pay half of it and your employer pays half of it on your salary. Social, and that totals up to about 15%. Self-employment taxes are just both that. It's the employer share and the employee share combined because you're self-employed, you're the employee and the employer. And so,
00:38:20
Speaker
I think kind of understanding that helps to kind of understand where the tax benefit comes in place. So when you are not an S corp yet, you're considered fully self-employed. So you pay those self-employment taxes on your entire profit. So maybe you make a hundred grand, then you pay on top of your income taxes, you're paying another, you know, 15 grand and see self-employment taxes. But when you become an S corp, what you're saying is I am an S corp. I'm an owner, but I'm also an employee of my business. So now,
00:38:48
Speaker
Being an employee, you have to draw wages because that's how we pay employees. And on that salary, you have to pay those payroll taxes, which are those self-employment taxes, right? But because you're employed by your business, you're not self-employed anymore. You're employed by your business. So your profits now, you're not subject to those self-employment taxes. It's super complicated. It's not, you know. But I didn't know this. Yeah. And so that's the shift in it is
00:39:17
Speaker
you know, now, you know, you're employed by your business that you're not technically self-employed. So that example where you made a hundred grand, now you're an S corp, maybe of that hundred, hundred grand, you drew 40,000 of that was your salary, right? So now, you know, 40 grand, it's going to be a salary. You're going to get a W two for that. And now your business profits are a little bit lower. There are 60 grand because you can take your salary as a business expense, but that 60,000, that's not self-employment income anymore because you're employed.
00:39:43
Speaker
And so in that example, you know, you save almost $9,000 by converting to an S corp. Super, you know, numbers talk and whatnot. But ultimately what you have to think about when it's time to convert to an S corp is it's not, I've seen a lot of people who just file the paperwork and move on with their life. You have to draw a salary. It's a big red flag for the IRS. I have a ton of clients that come to me and I'm working, you know, a new client, we're just doing taxes or something and they're not drawing a salary.
00:40:13
Speaker
And it doesn't mean that automatically the IRS is going to come right after you because there's a zillion tax returns for them to file, right? But it's a really big flag to see an S-Corp that doesn't have, there's literally a line on the S-Corp return that breaks out salaries, owners' wages, and other wages. If that's zero, that's a red flag to them because you're not paying any payroll taxes now. You're just evading all of those payroll or their self-employment taxes. And so it's really important to draw a salary.
00:40:44
Speaker
When you're drawing a salary, you want to set it up through a payroll processor. It's the easiest way to do it. We use gusto for all of my clients. They will take out the taxes. They'll pay the taxes. They'll do the returns. But you have to pay them. You have to pay 50 bucks or 60 bucks a month for that. You have a separate tax return, too, now.
00:41:01
Speaker
So there's additional fees where you've really got to kind of weigh is it the right move or not. Because if you convert too early, you're paying more in payroll taxes and a separate tax return and all these additional fees that you wouldn't necessarily be paying. So I really recommend finding somebody that, you know, a CPA or an accountant that does S-Corp conversions and really diving in, you know, investing in that piece of your business to make sure it's the right move because
00:41:30
Speaker
If it's not the right move and it's costing you money, you can revoke an S selection, but you have to wait five years to become an S corp again. Yeah. Wow. Both of our faces. Wow. So it's a big move. It's not scary if you're working with the right people to do it and it's the right move for your business. It can be a huge tax saver.
00:41:53
Speaker
Because to be clear, you're paying the taxes monthly because they're coming out of the check that you're giving yourself. The taxes are coming out as if they did in your corporate job. You're paying your taxes every month. But I know for me, I have to go into, because I use the QuickBooks payroll, I have to go in and make sure I file it and pay it. So you have to make sure you're doing that.
00:42:19
Speaker
Yeah. And so on your wages, you're going to have those taxes just like it was when you were in corporate, right? But you still need to save on the remainder of your profit saved for taxes.
00:42:31
Speaker
Um, but it really is, it can be a huge, you know, I've worked with some people who we go back and look at everything and it's $20,000, you know, that they saved throughout the year by making the conversion. So when it's right, it's right. And then as you're growing and scaling, those tax savings just stack up on top of that.
When to Transition to an S Corp
00:42:47
Speaker
Um, you know, year after year, but if you're in a point where some people like, they think, Oh, should I become an LLC or should I become an S Corp? That's a question I get all the time. I'm like, we gotta be an LLC first.
00:42:57
Speaker
be an escort and you shouldn't be an escort until you're at the point where you can kind of, you know, basically what it looks like is once you're profiting enough to support your salary that you might draw from your business plus maybe another 10 or $20,000, that's kind of where the sweet spot is to really
00:43:18
Speaker
see the tax savings kind of come into play. So I usually tell people rule at them, if you're working full time, 40 hours a week in your business and you're profiting 70, 80 thousand dollars a year, there's probably, that's probably a good point to start thinking about S corp. And then obviously if you're working less and you know, you're working 20 hours a week, you know, you might be able to convert lower when you're making 50 or 60 thousand dollars a year. So those are kind of, you know, the rules of them. If you're in those, you know,
00:43:44
Speaker
ranges, you could probably see some significant tax savings, but there's a way to do it and you want to make sure you're doing it the right way. So you mentioned you should be at a spot where you can support your salary. Yeah. What should a salary, like what are the considerations that someone should take into play? Yeah. So what the IRS says is that your salary needs to be reasonable. That's the guidance they give you, right?
00:44:09
Speaker
Don't you want that? What is reasonable? You got to have six things and you got to be reasonable. Come on. By the way, we could come to your house and need to go through all your records at any moment. All your documents. So what that really means is they want you to have some sort of data and calculations and numbers behind your salary. So you're not just pulling a random salary out of thin air, right? And so it's important to look at salary comps in your area and things like that. But one thing that's really big, important to consider
00:44:39
Speaker
especially as business owners is you have your core business, but you're also running a business. So you're not, you know, I'm not just going to draw a CPA salary because I'm also doing a ton of admin work and marketing and all these other pieces. So your salary can be more customized to you based on the operational side of your business, not just, you know, your client work. And so it's kind of important to really weigh the time you're spending your business in these different areas and do
00:45:09
Speaker
you know, some sort of calculation or salary comparables. We do those and we do an S corp conversion for our clients. We use a software and we go through all of that to figure out like, hey, based on everything you said, down to your county, here's kind of what that salary looks like. But even if you just do some research on, you know,
00:45:26
Speaker
pay scale or any of those salary platforms that you've got some sort of data like, hey, the average web designer makes this in my county and I'm working this many hours and just something to kind of support. When it comes down to the IRS, if they were to ever audit you for anything, what they want is they want data. They want support to back up the number that's on your return. So if you drew a salary of 20 grand, they want to know why.
00:45:53
Speaker
If you expensed $3,500 in software, they want to know why. Where did it go? Show me the receipts. Show me all your Canva invoices, you know, things like that. So at the end of the day, just having something to back up your numbers is really what they're looking for.
00:46:06
Speaker
But back to that 100 grand example, would there ever be an instance where you pay yourself 70%? 70 grand? And then you only have 30 grand left? Does there need to be a certain percentage? You're leaving so much. There's a lot of schools of thought out there on this. So technically with IRS, your salary needs to be reasonable.
00:46:33
Speaker
The only time you'd really want to change your salary if you made more is if your role changes in your business.
00:46:39
Speaker
So I tell people a lot, you know, here's your salary. You're working 30 hours a week. If all of a sudden next year you're working 40, we might want to change your salary to reflect that. Or maybe that, you know, you are very, very heavy in client work and in two years you've got a team doing that and you're more doing admin and marketing and things like that. We can reevaluate your role in the business, but that's really the only time you'd want to change and adjust your salary. Um, and I use the example a lot. So,
00:47:05
Speaker
if, you know, there's two businesses and they're both selling t-shirts and they buy the same t-shirt for two bucks. And business A sells that t-shirt for $5, but business B turned around and sold that t-shirt for 20. Like they're, that's just, it's your profit margins. They're just, they're selling better. Their marketing strategy is different. So if, you know, your salary is a consistent 50 grand and in year one, you make a hundred thousand dollars, but year two, you make 200 and your role in the business is still changing.
00:47:31
Speaker
you're just, you're nailing it. You're, you know, you're, you're killing your marketing strategies and you're selling more. And so you really don't need to adjust your salary based on your profit in my opinion. That makes sense. I love it. It does. Yeah, it does.
00:47:45
Speaker
Oh my gosh, I've learned so much. So much today. Thank you for letting us pick your brain. Yeah, of course. We have been so excited to bring ACPA, most specifically you, onto this podcast to just talk to everyone about these things because I feel like accounting is one of those
00:48:06
Speaker
topics that's considered boring, but everyone has to do it. If you're a business owner, you have to know why you need accounting. You at least need to have someone on your team who's doing it for you, or you need to know what you're doing. So it's so important. It's so, so, so important. Well, and I tell people too, as a business owner,
00:48:24
Speaker
Even if you're farming it out, even if you're subcontracting it, you have someone doing it, whether it's taxes or your bookkeeping, you still need to kind of have an overarching understanding of what's going on in your business. Don't just blindly pass it over to somebody. Try to understand, even a little bit of it, because it's your business at the end of the day. Right, yeah. You need to know your numbers. I mean, you need to know your numbers to even think about converting to an S Corp, so that's very important.
00:48:51
Speaker
Yeah. So on all of our business play dates, we like to wrap up with a couple of fun little questions. Yeah. So the first question is, what's your tangible tip? So we like to leave everyone with something that's actionable. It can be business or personal, whatever it is for you, but something that our audience can benefit from. So I think it is, for me, tracking your receipts. And this sounds, I mean, people are constantly asking me, do I need to keep every invoice, do I need to keep all my receipts? Like, you know, whatever.
00:49:21
Speaker
And I think it helps to know, like we had just talked about, why you should even keep them. If you're to get audited by the IRS and they come back and say, show me your invoices for your $3,500 you took in software, you want to pull up all of those, you know, Canva, Adobe, QuickBooks, HoneyBook, all those charges and show them that support for that. They won't take a credit card. They won't take a bank statement. They want to see, you know, if I just said Best Buy office supplies, they want to see what I bought at Best Buy. You know what I mean? And so they want to see those invoices.
00:49:51
Speaker
So to me, for my business, I would say 90% of my invoice is probably more, but will be conservative. 90% hit my inbox in some way, shape, or form, right? You get that monthly fee that hit that annual charge, pay somebody, you get the receipt, you book a flight, you get the receipt. I just keep a folder in my inbox that's business expenses. And then I have a 2023 folder and I just save them all there.
00:50:13
Speaker
And each month I kind of check off and know as I'm going through my bookkeeping, like, okay, have that, have that, have that. But I don't save all the PDFs to Google Drive or Dropbox and try to overly complicate it. I know they're there. And if I were to get audited, I might have to take some time to kind of sort through it. But I think
00:50:29
Speaker
just having an inbox, like a folder right in your inbox and just save all of those there. Cause they all hit your inbox is love that. Um, yeah, it's simple, but it's going to give you a little bit of peace of mind knowing you're keeping those in one spot. What about like you went to lunch and it was a business lunch. I'll take a picture of it and like literally email it to myself. Yeah. Smart. Yeah. Yeah. So smart. Smart. I need a little, a folder, a receipts folder.
00:50:55
Speaker
I know they're all in there. They're archived. Yeah, exactly. They're all there somewhere. But if you just put them in one spot, even if you don't do anything more with that, they're all just hitting just if it were to happen. If you need it. Yeah, go there. Yeah. Yeah. Smart. Love that. Love that. Yeah. Okay. So what is one non-business related thing that you are loving right now?
00:51:17
Speaker
TV show. I can't even say it.
Family and Fun: Fantasy Football
00:51:20
Speaker
But I would say it is fantasy football right now. And not because I am like an NFL sports guru whatsoever. But like I said, I have three boys. They are they're into all the sports. And so my husband this year was like, we should start a family fantasy league. And my my sisters, my brother in law and I was just like, so we did a whole draft and like, these are all like doing their thing. We're all set up. But it has been really frickin fun. I don't
00:51:45
Speaker
When I'm learning more about like NFL stuff, just stay relevant with my kids. But also, it's just it's kind of like a weekly check in and everybody's kind of, you know, playing somebody else that week. And I used to roll my eyes at fantasy football years ago when my husband was doing it. I was like, Oh, my God. But it has been really fun this year, just I think reframing how we're doing it.
00:52:07
Speaker
And it is like, you know, the boys be playing my dad and they're like texting him about it and things like that. So it's like a smack talk going down. Yes, it is. I love that.
00:52:16
Speaker
It's fun. It's just something I did not expect that I would ever say, but it has been really fun this season. How is your season looking? I mean, I know nothing about it. Yeah. I started out winning every single game, and I don't think I've won any. The other day, honestly, I think it was this yesterday. I looked at our standings, and it was like my husband, my brother-in-law, my brother-in-law, my dad. And I was like, this is the biggest load of BS. Of course, you guys would all be at the top of the leader. But it's been
00:52:42
Speaker
It's been fun. So yeah, I love that. That's so fun. Well, before we wrap up completely, can you tell everyone where they can find you online and yeah. Yeah. So, um, Instagram is kind of my jam. That's where I'm hanging out. Um, Jackie dot yesterday dot CPA. Um, we have a website, you should a group.com, but always posting, you know, videos, tips, tricks, pics, pictures of the kids, things like that on Instagram.
00:53:11
Speaker
And I always tell everybody, you know, if you've got a question, send me a DM, send me an email. I am not shy about telling you like, Hey, we should jump on a call and you should book a call for this or something like that. But I think being able to be comfortable to ask those questions is how you're really going to scale and grow. And in order to do that, you've got to feel okay, kind of being vulnerable and asking a question. And so if you've got something, you know, on your mind, like send it to me and you know, I am happy to kind of chat through it or tell you like, let's jump on a call. So
00:53:40
Speaker
Yeah. And a fun little shout out. One of my favorite things about Jackie's email newsletter is that she has a margarita sponsored and like featured everyone. And I love that. Well, Texas girls can't go too far from a margarita. No, I literally was like looking at like Christmas margaritas the other day. And I was like, I don't know if I can get like, I don't know if I can get behind it. I saw a really cute one. I saw a super cute one. They looked adorable, but I don't know how they would taste.
00:54:06
Speaker
Like a cranberry one. Yeah. Yeah. Jackie, thank you. Thank you. Thank you so much for joining us on the Business Playdate. This has been wonderful. It's been super fun. Thanks for having me.
00:54:18
Speaker
Oh my gosh, that was such a fun conversation with Jackie today. I know that I got a lot out of it. Did you feel like you got a lot? 100% dead. So great. I loved that. I love having conversations about things like your books and your numbers. I mean, I know I have a finance background, but it's not something you think about very often, but it's so empowering. It makes you just feel so much more in control of your business.
00:54:44
Speaker
You know what you can do. You know what you can't do. You know what your goals are. It's a really nice thing to have that knowledge. Oh, sorry. I was just going to say, what a great topic for the end of the year, too. Yes. Oh my gosh. Yes, definitely. And if you are out of control in your books, maybe this will inspire you to be a little bit more in control next year. Yeah.
00:55:06
Speaker
But if you enjoyed that conversation, go give Jackie a follow on Instagram, sign up for her newsletter, as I mentioned, Margarita, every single one that comes out, which I love. And give her a follow. And if you haven't already, please go give us a review on Apple or Spotify podcasts. We would absolutely love that. We read every single one. We would love, love, love to see your shining face come through there. Yes, we would. Y'all have a great one. We'll be back next week with more. Bye.
00:55:41
Speaker
you