Bookkeeping Made Easy for Business Owners With Danielle Hayden

Welcome to the Biz to Biz Podcast, your number one source for all business news. Hey everybody, welcome to today's episode of B2B Vault, the Biz to Biz Podcast sponsored by NPS One on our new product Click Biller, the smart invoicing tool that links to your QuickBooks Online. And today we're going to be talking about the exciting world of bookkeeping and accounting. I know this is from my standpoint as a business owner. Is always a challenge. I learned how to do it at being in business for over 30 years, and I understand the importance of it. And I think that this is going to be a great podcast for new business owners, existing business owners to learn more about bookkeeping and accounting and why it's so important that you do a really good job with that at your business. And today's guest is Danielle Hayden, and she is from Kickstart Accounting, and we're going to dive in and talk about the world of accounting and bookkeeping with her. Welcome to the show, Danielle. Introduce yourself to the audience.

Thank you so much for having me here. Danielle Hayden, as you said, I am the founder and CEO of Kickstart Accounting Inc. For the last 10 years, we have had the opportunity to serve thousands of business owners, helping them understand their numbers to make better business decisions.. We do that through bookkeeping, CFO framework, and our tax services. I am so passionate about this topic. I really want people to, as business owners, be able to be confident and empowered by their numbers. I want us using our numbers to make business decisions every single day, not just at tax time. So when we get to tax time, it feels like just another Tuesday because we have been looking at our numbers all year long. We know them, we understand them, and we can make strong business decisions.

So, you know, the name, you know, I always talk to business owners and I tell them, you know, about the importance of bookkeeping and having, you know, you know, we have— I have somebody that cleans up my books every month. I do part of it that they don't understand, and then they do, you know, they do, they do the other part, cleaning it all up. And it's so important to have, you know, because at some time when you're running your business, whether you want to get a loan, you want to be— your business is growing and your credit card processor says, hey, we need a copy of your bank statements, P&L and balance sheet. And you don't want to be going, uh, what's that?

So yeah, I want us to get ahead of all that, right? Like we have seen over the years, we've had so many business owners come to us in a panic and hurry. For the situations you mentioned, right? Like, we need financial statements for a loan, a home mortgage, to purchase a vehicle, to take on an investor, to apply for a business line of credit, sell a business. And really, my mission is to say, I don't want anyone coming to me in a panic, right? Like, I want business owners— like, when you go to get a line of credit, you're doing it because you are empowered. You have the information, you're receiving your financial statements in a format you can read every month. Uh, you have already stepped into your role as a CEO of your business because you have those financial statements and you're using them to make business decisions. So the rush, the panic, like that all subsides when we have this, this information together. And I'll say one other thing is you as a business owner, should never be the one in QuickBooks doing your own bookkeeping. Most of us are not accountants, we're not bookkeepers. Your mom, your aunt, your cousin, your brother, your mother, your father, like, they shouldn't be the ones doing your bookkeeping. Bookkeeping is the most important part of your business because your tax return, the line of credit, those financial statements, nothing else is accurate without that foundation being created.

Oh, definitely.

Like, I—

and I'm so organized, my accountant loves me because by the time you— my bookkeeper, every month send— I send her the, the bank statements, I send her the credit card statements, I send her my merchant account statements, I send her all my, you know, everything that she needs to look at goes over to her. And then a few things, you know, I, I go and do, like, you know, okay, when we pay out our commissions, and I go mark in who got what, and that's about it. And then the rest of it she takes care of. And it makes sense. We appreciate clients like you, like very organized. And when it's time for tax time, I'm done. I'm just like, here, I just hand over the QuickBooks to my, my accountant and they file the taxes and we're ready.

I say, like, just another Tuesday. It's no big deal when you take the time throughout the year. And look, you guys, My mom used to say there's two things in life that are guaranteed. You're going to pay taxes and you're going to die. And her and I joke all the time now that she's like, you would go and own an accounting firm because I've been saying that to you since day one. And we cannot be surprised. Like, why are we surprised that we get to the end of the year and you have to file taxes? You're like, oh, shoot, I didn't do my bookkeeping again. Oh, I have no idea. I didn't pay my estimated taxes. I winged it again. And I just, I want people to know that there's a better way and it actually doesn't take that much involvement. The things that you say you do on a monthly basis, they don't take very long. Like downloading a few statements.

Literally, it's a 15-minute process.

Yeah. And for our clients, we go down, go and download the statements for them. So for a lot of like our clients, there's nothing that they even need to do. But it is your responsibility as a business owner to open your financial statements. So, um, a lot of accounting firms don't even send financial statements. So first of all, I want you to have a money team who is going to send you your financial statements regularly. Um, we send all of our clients their financial statements at the end of every single month, and they also receive what we call a snapshot. It's this easy-to-read overview of their numbers. It's our way of doing the analysis for you so that you can step into your role as CEO and say, all right, What's working? What's not working? How much do I need to save for taxes? What do I need to pay attention to? What does my debt look like? What are my receivables like? What is going on in my business that I need to address? That's your responsibility and your role in your business is to look at the numbers and to use them to make business decisions. That's it.

And it's like a point of sale, like we sell point of sale systems, right? So it's super important. You know, we tell people all the time like You know, if you're using this, the systems that you have, and you're getting your numbers, you need to know, like, we had a business that we put in a new point of sale and they have about 30,000 inventory items or more. And when we went to switch them over from their old point of sale to new point of sale, we found over 1,000 items that they were selling below their cost.

And wow.

You need to know that when you're running your business, like, okay, what do things cost? What am I selling it for? Am I creating my profit margin? And this is what— where bookkeeping and accounting comes in, so that you're looking at things like, oh, cost of goods sold, and then how much money you brought in, and you go, oh, that number doesn't look good. Why? So you got to be able to dive in and, and, and, and look at that. And let's talk about, like, how You know, like I talk to people and I go, you know, well, how much money do you have out on the street right now that you're not collecting? And I always talk to businesses and I go, you know, you have to have a policy. You don't just go out and say, okay, I'm selling this. And then here it is. I hand it over to Danielle and I send her an invoice. But what's the policy? How important is it to have good policy? And especially when you're a newer business. You know, because you're paying for the goods, then you're delivering them to your, at your customer. And then how long do you want to wait to get your money? And I always tell people, like, you take credit cards, you mark up your goods to include the cost of credit cards, or you pass the fee to them. And then you, you, you get that, you get people to pay you on time to improve your cash flow. Because that's also a big part of business that people don't realize. All of a sudden they go, Oh man, I'm owed $150 grand now. I got to buy more material. Where am I going to get the money from? And they're on the phone calling people to get paid.

So let's talk about cash flow first. Cash flow is the number one reason why small businesses go out of business. Like, really, if you like, if you look up the statistic, businesses fail because of cash flow and You know, one thing that I personally practice in my business, and I encourage our clients to practice as well, is bill early, bill often. What does that mean? If you are taking a project or you are shipping goods that you are billing early within that engagement and you are billing them often throughout the engagement. I don't believe anything should ever leave your, your business until you have received funds. You are never, as a business owner, the bank for another business unless you have bank or funding somewhere in the title of your business or your description. You are not meant to be the bank for another business. And so creating the terms and the, Um, the agreements and the policies from day one are what's gonna set you and your business up for success. And I wanna say that from experience. I know a lot of people will counter that argument with, well, Danielle, this is just the way it's done in my industry. I don't care. I really literally don't care because that's why the other people in your, your industry are going outta business. So in the accounting industry, We have a problem. We have low self-esteem and low self-worth. And so what accountants do is they say, yeah, I'm gonna do all this work. I'm gonna do your whole tax return, but I'm not gonna file it for you until you pay me. In my firm, we don't even touch your tax return until you've paid for my team's time. We're not even gonna touch it. You pay upfront and then we charge all of our bookkeeping clients for monthly bookkeeping services. And it's at the front of the month, not at the end of the month. You need to pay for my team's time before you receive my team's time. And I wanna encourage you all, it doesn't matter what the, the standard is in your industry. The standard in my industry is to, to bill after work has been completed and then to collect on a net 30 terms. Please, let's, let's, as a collective small business owners, let's improve here and let's improve our success rates so that we can stay in business.

Yeah, it's super important. You know, I, I deal with all kinds of businesses, startups, the big businesses. We had somebody, uh, a bookkeeping company/accounting firm that was local here, and we gave them our software. And when I first went to visit his office, which is not far from my office, um, I went there and there was a conference room with 6 people in there. Making phone calls. I said, what's that? And he goes, that's my wife and 4 workers in there, or 5, trying to call people to collect that are behind on paying us. Oh, we put our system in there so that they can automatically bill all their customers, whatever they're paying, $300, $400, whatever it is a month, right? Some people even prepay for their— they're paying monthly and it includes their taxes at the end of the year. Right? Once we put that in there, his wife like wanted to take me out to dinner. She's like, she goes, you have no idea. She goes, this has been a nightmare for us for years. And they— and then once they did that, they actually over the next 3 years, they actually doubled their business year over year. They doubled their business because they weren't chasing money anymore.

And you know what, one more reason why we as business owners have to be looking at our numbers at the end of every month. If you're receiving your financial statements from your money team every month, you should see on there how much money you have outstanding. And when you actually see that dollar amount, when you're paying attention, it's enough to keep you up at night. And so if we're ignoring our numbers throughout the year, if we're— if we don't have a money team keeping track of this information and sending it to us and it's not in front of us, it's so easy to just dismiss it as not my problem right now until we need the cash, right?

And I tell people, like, when you don't get paid right away, I mean, I've heard, you know, oh, it's costing you 2 to 5 basis points. People don't even know what a basis point is, but it's costing you money every day. Like, so if you owed $20,000 and you're owed at the end of 30 days, you still owe $20,000. Even if you start collecting that money, that's not the dollar for dollar. And that's what people don't get. Like, it's not dollar for dollar. I, you know, whatever, that could be 10 invoices for $2,000, right? That's not $2,000. If you collect it 45 days later, that's not $2,000 anymore because you already spent the money buying whatever it was, paid your employees. It's let— it's not worth $2,000 anymore.

Yeah.

And the amount of profit you made went down.

Yeah.

And you probably called the person 10 times.

Paid someone to call the person 10 times, right?

Or pay the person, right? So here's another dilemma that I always try to explain to people like that are in like solopreneur businesses, right? You know, don't be— if you're going to be a 1099 worker or have your own small business, even if you're a solopreneur, I tell people you need to go set up your S corp or your single, single LLC, whatever that's called, right? So that you, so that you can keep more of the money that you earn. Explain like why that's so important to do.

Yeah, great topic. I just recorded a podcast episode for my podcast on this very topic. It I'm gonna say this in two ways. I'm an accountant, not an attorney, so I, I do wanna explain why we wanna become an LLC in kind of those two directions. As an LLC, you now have liability protection. So I don't want anyone to ever do business as a sole proprietor. Like, please do not ship a single product. Do not collect money from a client. Do not create a vendor relationship. Ever as a sole proprietor. We have the opportunity in the United States to create a limited liability company, which means that once you have formed a company, that you now have protected your personal assets because you are now separated from your business assets. Um, from an accounting perspective, from a CPA perspective, you— whether you're a sole proprietor or an LLC, it's the same taxation. Meaning that you are what we call a pass-through entity. Sounds very confusing. All that means is that the net income— sales minus expenses— that net income number at the very bottom of the income statement is going to flow through to your personal tax return. When you go to pay taxes on those dollars, you are now going to pay income tax and self-employment tax on the net income. However, you're now considered a business, and so you get to write things off. That means that anything that you purchase to operate your business, any fees, coaches, consultants, accountants, bookkeepers, VA, you know, all these things are business expenses. So you are going to reduce the amount of net income that you pay, and then you're going to pay self-employment tax and, and and an income tax on those dollars. Now, I want to pause here because the next way that we save money is becoming an S corp. But does that answer your question about becoming an LLC? I don't want there to be any even negotiation from anyone. We need to have an LLC in order to do business.

Oh, yeah. Because people don't realize when they're operating as a sole proprietor, unless you have a separate bank account and something like that and you're tracking all your expenses, you're not able to deduct that. You know, I've talked to people like, if you do this, you're going to— it's going to keep more of your money. It's just simple. Yeah.

Well, let's touch on— let's touch on that personal expenses versus business expenses before we go into an S corp, because the minute you become an LLC, or a sole proprietor, I want you to have your own business checking account. Very simple. When you pay for a business transaction, client pays you, or you purchase literally anything for your business— this pen, right? I purchased this pen for my business. I use the business checking account. Um, and when I go to pay my daycare, my mortgage, I take my spouse out to eat, um, I buy my, my, my kids' haircut today, like all those things, those things need to come outta my personal account. You, it does not matter if you feel like you are your business, you are not your business. Your business is a business and you are you. They have to be treated separately. And so your business account should only contain business transactions. If you are putting your own personal transactions in the business account, you're doing what we call piercing the corporate veil. Again, not an attorney, but I am telling you that you are then the liability protection that you created by creating the LLC. You are now piercing that. And so I want you to have legal protection as an LLC. But also we had this client come to us and she said, Danielle, I am losing money. I don't know what I'm doing wrong. I know I'm losing money in this business. I just don't think it's working. We did what we call a catch-up. We got all the transactions into QuickBooks. We got her all set up, looked at her first set of financial statements. She did not have a business problem. She was very profitable in her business. She had a personal spending problem is what she had.

Okay.

She, she was commingling all of her business and personal spending. So every time she did DoorDash, every time she went out to eat, every time she was paying for anything, she was putting it through her business. And so she didn't understand what the health was of her business. And so when we separate those two things, we now know how healthy our business is. We can hire a bookkeeper to do our bookkeeping, we can file an accurate tax return, and we can have the legal protection.

Oh yeah, it's super important. Commingling funds, like you got to be really careful with that. So yeah, that's what they talk about. You know, I talk to new business owners all the time and they're like, oh, what do I need to do? I'm like, You need a legal entity, you need a federal tax ID number, then you need bank accounts and you need credit cards. And I remember I couldn't even get it when we first started this business in 2001. We couldn't even get a credit card at first.

So most people can't as a brand new LLC. And so if you can't, I just want you to separate the two. You know, maybe you just have one, you know, your Chase credit card you use for business and your Discover card you use for personal. Separate them, because what's going to happen is that you're going to need— you have to do your bookkeeping. Like, literally, actually, you have to do bookkeeping as a business owner because you have to file your tax return. So when you go to hand those books over to somebody or those bank transactions, you're handing them over a clean set of records. So you have only your business transactions coming through your business. And here's the other thing. I think when we come into entrepreneurship, most of us want success, right? We want success, we want growth, we want to create healthy, sustainable businesses. And I want you to have habits that are going to create an opportunity for growth. And so start the habits from day one, like having a separate business, personal, taking owner's draws and then paying and paying yourself from the business. And then those personal expenses go through your personal checking account. File your tax return every year. Like, those simple, simple habits. As your business grows, um, you have the opportunity to be taxed as what we call an S corp. It's just a taxation election, but you have to be an LLC to become an S corp. And I always tell people, you need to have 3 things to become an S corp. You need a business and personal expenses separate. You need to be paying yourself consistently through owner's draws, and you have to have net income of about $75,000 per year for 2 years in order to become an S corp. And once you have those—

Don, I want to go back to— yeah, a lot of business owners that I talk to, they don't have a payroll service when they're just solo, or maybe it's 2 people, a husband and a wife, or it's 2 partners. I tell them it's super important to actually give yourself a monthly or biweekly actual paycheck, because otherwise you're not going to have Social Security later.

So as an LLC, you're just taking owner's draws. So when you're an LLC, before you file an S corp election, you're just taking owner's draws. So that means you're transferring the money to your personal account.

You're going—

you're going to the cash ATM of your business. So go get the cash through transfer checks, transfer to Zelle, whatever. Once you become an S corp, Once you have that election, you are now an employee of your business. So you're no longer self-employed, you're an employee of your business. Please, if you are— if you, if you elect for an S corp, go get a payroll system right away. Um, we use Gusto with all of our clients. Super easy to set up, they make it foolproof. Um, Gusto is a fabulous, um, payroll provider. And then you're responsible. The IRS says, not Danielle's rule, IRS says— I try to be clear because some of these things are a little ridiculous. I'm like, I didn't make this up. IRS says you have to pay yourself a reasonable compensation as an S corp. So in order to get the tax benefit of being an S corp, you need to be on payroll through a payroll provider paying payroll tax. So to your point, you want to be paying into Medicare and Social Security, and you have a paycheck stub. Now you go to buy the house next year, you go to buy a car, you show them your paycheck stubs.

You have—

you are an employee of your business and it creates credibility for both you and your business.

Yeah, it's super, super important. So if you have to give people 5 tips, it could be a little more. 5 tips about bookkeeping so that your business is successful. I mean, you gave great tips in here about collecting money. It's, it's so important to collect, to, to, to speed up your collections of money and not, like you said, don't let things go out the door without getting paid, you know.

Yeah. Um, have the right systems and people in place. Okay. Um, when— that's my number one tip. Always. You're not meant to do it all alone. You are not meant to do it manually. You, you need— it is your responsibility. It is your responsibility as a business owner, okay, to put the systems in place to allow yourself to be able to collect cash. It is your responsibility to hire a money team, to surround yourself with the people who are going to help take things off of your plate so that you can do the things that only you can do. So You know, um, put these things in place so that you can be the CEO of your business. Your responsibility is to look at the numbers, to make business decisions, to carry and see the vision of your business. Let the people like you and I take care of these other pieces for you so that you can do what you need to do as a CEO. And then help us out, right? Like, help us out by Having proper record keeping, separating your business and personal. Once you become an LLC, keep your agreements in one place so your tax accountant can collect them easily from you. You know, help, help us help you. So, so, you know, the things that we talked about today are really going to set you up for success. Separate your business and personal expenses. Have that business checking account. Take regular owner's draws so that you're able to separate and that you're, you're setting yourself up for success to become an S corp. Once you become an S corp, get on payroll and pay yourself. And most importantly, look at your numbers every single month. Please look at your numbers every single month. You're going to see how much people owe you and you're going to want to have systems and people in place to help you run a more successful business.

That's super, super, super important because when you want to grow, Once that's all in place, you're going to be able to grow at a better clip and smoother because you're going to— whenever you have to supply somebody with information, you're just going to be able to call your bookkeeper, go into your QuickBooks, run those reports, and then poof, you know, you have it. And, and that— and also gives credibility because when you're handing it over fast, they're like, oh, this person is organized and they're have their business together, you know? Yep. So I want to thank Danielle. How can people find you if they want to find you, Danielle?

Go to kickstartaccountinginc.com/gift. We have some really awesome tools on, on that web page. Kickstart Accounting on Instagram. And then we have our podcast, Business by the Books, where we talk every single week about how to use your numbers to make better business decisions.

All right, great. And what kind of free gifts are on the website?

How Much to Pay Yourself, a financial goal setting worksheet, and the top tax deductions for every small business owner.

Wow, that's pretty— that's some good information. So I hope everybody enjoyed today's podcast. Thank you to Danielle for being a guest today. And you can follow B2B Vault on YouTube. We're on Facebook. Instagram. We're on LinkedIn. You can probably find both of us on LinkedIn, and you can listen to the podcast on Apple Podcasts, Spotify, any other podcast app that you use on your phone. And you can watch on YouTube if you'd like to watch videos. And I appreciate you coming on the show today because this bookkeeping and accounting is one of my main pet peeves when I'm dealing with business owners. Like, hey, you guys have to be organized. It's super important to be organized because people will ask me, what's a good tip for, you know, I'll speak to a group of, you know, budding people looking to start businesses or somebody starting a business. I'm like, you got to get bookkeeping in place. Please put that in place so that you can be organized and successful in your business.

Thank you. Thank you for championing that.

And check out Danielle's website, kickstartaccountinginc.com/gift. And check out some of those things that she has on the website, because I'm sure they're useful for any small, medium-sized business owner that's out there. Thank you, everybody. Peace out, and carpe diem— seize the day.