Messy Books Kill Profit and Scalability (Fix Your Numbers Before They Cost You)

What if the real reason you feel stressed about money in your business is not sales, not taxes, not even cash flow, but the fact that your books are too messy to tell you the truth? Today's conversation is for the business owner who's working hard, making money, but still feels financially blind. We're talking about bookkeeping, profitability, confidence, and why clean numbers are not just optional. If you want to grow. Welcome to the Small Business Credit Minute with S.E. Day, the podcast helping business owners build stronger business credit and real profit growth without the confusing finance speak. In minutes, you'll learn how lenders actually evaluate you, how to align the 3 pillars that decide approvals: business credit, cash flow, and compliance. I'll break down underwriting signals in plain English, show you what's hurting your fundability, And give you one clear action you can take immediately. If you want to become lender ready to receive business loans and business credit cards, stop wasting credit applications and build bankable business strength the right way, then this is your credit minute. Qualify first, apply second. Let's get you funded. Stay tuned. I'll be right back. In today's competitive world, your business deserves more than just hard work. It deserves the financial freedom to grow. Building business credit is the key to unlocking opportunities. With strong business credit, you can expand faster, invest smarter, and reduce your personal risk. Start building your business credit today because your dreams deserve the chance to grow just like your business. Secure your spot at the next Small Business Credit Survival Bootcamp. Welcome back. Today I'm joined by Christian Graham. Christian is the CEO of Six Figure Business Coaching. And the creator of Love Your Profit. Today, we're digging into the most overlooked drivers of business strength, bookkeeping. Not the boring version, the real version, the kind that affects profitability, owner pay, decision-making, and whether your business is actually positioned to scale. Kristen, welcome to the show.

S.E., thank you so much for having me. I could talk about finances and numbers I know, I'm right there with you.

Right there with you.

We're geeking out.

Okay, so let's dig in. What is the biggest bookkeeping mistake you see small business owners making?

Yeah, so it really surprised me because the biggest mistake that they're making is they've invested time and money to create an LLC or to incorporate their business. so that they have legal protection so that if someone were to sue them, they couldn't come after their home or their retirement or personal assets. What they don't understand is an LLC, you know, incorporation has rules, rules you have to follow.

Mm-hmm.

One of those rules is you, you cannot commingle your funds. Your monies need to be kept separate. The number of small business owners that are commingling their money, I don't think they understand they could possibly be opening themselves up if they were to get sued that they wouldn't have the protection that they think they have and that that lawsuit could then maybe go after their personal assets. So, and I get it, like, you know, it's easy to do. So, that's, that's the biggest challenge I think most business owners have.

You know, Kristen, I did a show on that and I had a financial planner on. And one of the things that he said is, you know, be careful when you buy that ice cream cone on Sunday evening on your business credit card or you're paying for that out of your business checking account. So, you're exactly right. I've done several shows. shows on commingling and how it's, from a compliance standpoint, you're shooting yourself in the foot. Because if you go to a bank, they're looking at your bank records. They're looking at, you know, you want to borrow money, we're looking at your bank account. And if you're commingling funds, that is one of the biggest ways to get in trouble.

Right.

So the issue— so, so the issue hasn't been software when it comes to bookkeeping, it's, it's more of a behavior that you're looking at.

I think it's a lack of information, a lack of knowledge, right? Again, it's just people don't always know that there are rules attached to those LLCs. And let's face it, most of us started a business. We, we knew we'd have to wear a lot of hats. We didn't know what all those hats would be. And bookkeeping is one of them. I'm not a bookkeeper. Could I do our bookkeeping? I can. Do I enjoy doing it? No. Do I always put it off? Yes. Is it like pulling teeth when I do it? Yes. So I'm not the— I am the ideal client for a bookkeeping virtual assistant. I'm the ideal person to delegate my bookkeeping. And I think that's where a lot of people fall. And we also have to realize there's a lot of shame and guilt around money. I think we think, okay, well, I started a business. I should know how to do this. Whether it's, I should know how to do my bookkeeping. I should know how to be my IT professional. I should know how to be an SEO expert. I should know how to be a marketing expert, right? So, we put all this pressure on ourselves when the reality is we can outsource a lot of things that will help our lives, either help us do what we started our businesses to do, serve our clients and not have to learn a million new things.

You know, and that was leading right into my second question of why do so many entrepreneurs avoid looking at their numbers in the first place. And I think you just hit it. It's an emotional involvement.

Yeah. And it's also, again, you know, most business owners can understand their profit and loss statement, but balance sheets and cash flow reports, those can be a little bit confusing because of the way bookkeeping is set up. And so, again, you know, and a lot of times they've been made to feel stupid. Maybe a CPA talked down to them or belittled them. I've heard that a million times. You know, maybe they're riding that income roller coaster, so they just feel like they're hanging on for dear life and they just kind of want to put their head in the sand around the money. But the reality is the business owners who can start to learn how to understand their numbers, understand their profit loss balance sheet, cash flow, those are the businesses who are going to grow, who are going to scale. And nobody wants to hear that because bookkeeping is not sexy. It's not fun. You know, everybody wants to hear about marketing and things like that. But the foundation of your business is finances. And if you're not doing that, your business is really being treated more like a hobby and it's— and it will grow like a hobby.

And Kristen, that is a very strong statement. People avoidance becomes a profit leak. Okay. And that's the last thing you want is your profit going out the door and you don't know where it's going.

Absolutely.

So Kristen, what's the difference between bookkeeping and accounting and why does it really matter?

So bookkeeping, I think of it as the day-to-day. you know, expenses, income, where it's coming in, where it's going out. When I think about accounting or tax filing, that's the person, the CPA, who files your taxes. So your bookkeeper is someone who can be on your team. They do all the day-to-day. You can meet with them weekly or monthly to really dig into your numbers. You know, they can show you things in your finances that maybe you don't see because they are experts. In that information, you're empowering yourself to become the CFO of your business. Now, at tax time, the best part is when your bookkeeping's up to date, you have everything in place to just hand it off to get your taxes filed. But also you are more knowledgeable. And so you are now in a position to have great conversations with your CPA about different tax advantages that maybe you haven't been taking care— taking advantage of. So bookkeeping is really the information that empowers you to make strong financial moves. And it's the information your CPA needs to file your taxes. to help you maximize your write-offs.

You know, I've been talking about compliance for the last, I would say definitely the last month on episodes we've done. And hearing you speak of bookkeeping, bookkeeping falls right in line with compliance. I mean, so you could look at bookkeeping as the foundation of what you're building. You know, accounting is, is, is the analysis built on top of it. But bookkeeping is the true foundation.

Yeah, absolutely. And the cool thing about having a great bookkeeper is they can help you do the analysis. They can help you really see your numbers in different ways. Because again, that's, that's their jam. That's what they're so great at, right?

Right.

And then you can actually take that information and go to your CPA and have a great conversation about all the accounting that's been done and then strategize around that information.

Okay. So, I'm a brand new entrepreneur, right? And I'm about to take that leap. I've started my company, got everything set up. At what stage should I start taking bookkeeping seriously?

Day one.

Day one.

Because you just said to me, I started a business. You didn't say I started a hobby. You said I started a business.

True.

The minute you treat your business like a business, it will, it will reward you with a great salary, you know, Peace of mind, things like that. But if you avoid that, then you're in a place where you're not taking your business seriously. And again, when we know we're not doing things in our business, it eats away at our confidence. That little voice in the back of your mind, or you know, maybe an opportunity comes up and you don't know if you can take advantage of that opportunity because you don't really know your numbers. You don't really know your cash flow. You don't really know what's going on with your business, or you end up in a lot of debt, right? So we see that all the time too. So taking your bookkeeping seriously from the beginning is really important, and you don't have to do it yourself. That's that's what's so. You know, having a bookkeeper for $9 an hour is very affordable, right? So, people often say, well, I just started a business. That's not something I can afford. But yet, I see people go and spend $10,000 for a website that they end up redoing in a year and a half or 2, right? So, people spend money on what they value. But it's funny because you start a business to make money, but you don't value money.

Very well put. You know, that lines up with how I think about fundability, right? Sloppy records early can lead to expensive endeavors later.

Yes, absolutely. And again, if you're going to, you know, you have a choice. You start a business, you can learn how to use QuickBooks or Xero or Zoho or FreshBooks. So, you can spend the time learning it and you can do it yourself. But the reality is, would you rather have somebody who's an expert who could coach you? To have someone on your team who could actually really help you? Um, understand that information and make the best decisions going forward from day one. And if someone else is doing it who loves doing it, and that's their, their expertise, it frees you up to focus on your clients. The other thing is pricing. How do you price your services if you don't really understand, you know, everything that goes into providing those services?

Right.

And most business owners, when it comes to market research, you know, McDonald's will spend Millions of dollars to decide if they're going to put a location on this corner, or they'll spend millions of dollars to decide if they're going to roll out the McRib or whatever. A small business owner very seldom will even spend half a day doing market research for their business. So whether that's around marketing or whether that's around finances, these are things that are important. 90% of the time, the things that make our clients more profitable— obviously they find money that they're wasting. That's one. Two, they realize they're undercharging and that if they want to stay in business, if they want to have a salary, they need to change their prices. Maybe they need to let go of something they offer. Maybe they need to add something else on. Maybe they need to find a better way to communicate the value that they bring to the table so they can charge what they need to charge. But pricing is huge. And if people, you know, they just kind of guess at it. Like, let me just guess what I should charge for this. So having your finances in order gives you more confidence. to charge what you're worth.

You know, and that was, that was going into the next question. So, you're like spot on, right? Questions that people actually want to know. And one of the things, you know, small business owners hear expense, expense, expense, right? How can this make me profitable? Well, you just hit it. If you don't know what you're charging or you're charging inappropriately, you're actually hurting your business and your profit margins.

Absolutely. And then small business owners leave a lot of money on the table because they don't have tax strategy. We all think the IRS wrote the tax code. They did not. Congress writes the tax code.

Exactly.

Rich people writing tax code for rich people, right? And so then we have to figure out how can we take advantage of some of those things? And this is what's really cool. I think you're familiar with the Augusta Rule.

Mm-hmm. I am.

So the Augusta Rule says that your business can rent your house for 14 days a year and you can write that off of your taxes. But there's some compliance and there's some paperwork that goes into it. Most CPAs never talk about it, probably because they don't have the time, because we do have a CPA shortage, to deal with doing all that paperwork.

Yeah.

But now, now with technology, there's software that can do that, right? So it allows business owners who maybe it wasn't affordable to have all the compliance paperwork done, to take advantage of that write-off. Now it is available. Or you can pay your kids anywhere between $13,000 and $15,000 a year. And these are, these are all cool things that you can do in your business. But if you don't know about them, you can't take advantage of them. Or maybe it's the first year you've had an amazing year and you're like, holy crap, I've got a lot of taxes to pay. Well, that's where your CPA and you talk with your financial planner and you decide how much of this money could I put away tax-deferred for my retirement?

Right.

If you don't know that information, you can't strategically take those steps. So, you're, you're leaving money on the table. You're paying more taxes than you need to.

You know, I've had— I've started over 25 companies in my years. And believe me, I've been putting in the Augusta Rule. I, you know, one of the things that I like to say is, years ago, I looked at Larry Ellison of Oracle. I was reading an article and it was about talking about the richest people in America. And I'm reading the article and it says, He has zero reportable income.

And I was like, how does he do that?

How is he living with zero reportable income? And over the years, I understood it's not how much you have, it's how much you control.

Yes.

And that makes a big difference. We want to run around and have the big numbers in our account, but what you don't realize is that's going to your bottom line. And your bottom line is what the IRS looks at and they're going to want— Big Brother is getting his money. It's just that simple, right?

Yeah. And I think most of us, we don't mind paying taxes, right? We want to contribute to roads and education.

Absolutely.

We want to contribute to those things. We know how important it is for us as a society. But the business owners who often need the money the most are the ones that are overpaying on their taxes.

Exactly.

And it just has to do with avoiding the bookkeeping and avoiding learning how to have conversations about tax strategy.

Well, that goes into, can bookkeeping help a business owner pay himself or herself more consistently?

Absolutely. One of the things that we talk about in our program is the book Profit First. And I think you and I spoke about this before.

Yes, we did.

So Profit First, you know, I, I feel like it was kind of the first book that came onto the market that kind of said, okay, If you make $0 to $250,000, this is kind of what your finances should look like. And again, every business is different, but it was kind of a general guideline. And what they said was, you know, out of $100,000, let's just use $100,000 a year. The business owner should have $50,000 in salary.

Mm-hmm.

The business should run on 30%, which is $30,000. The business owner should put 15% of gross revenue away for taxes. That's $15,000. And there should be 5% tucked in a profit account. So it was really, I think, the first time for a lot of business owners, they started thinking about that. And it's interesting because I'll see how I can say this one.

Say it, go for it.

When someone's bragging a lot about their revenue, right? You see it. Oh, our business is doing $5 million. I want to know, what was your profit margin? What was your salary? What was your operating expense? So I have friends and we are having conversations about operating costs. Like, who can operate your business most effectively at the lowest rate? Okay. So, when we're comparing those things, we're geeking out over that. And again, it can be fun once you understand what you're looking at.

Exactly. And folks, that's not a key— that is a key distinction in what she's saying. If you're doing random draws when it comes down to your compensation system, that's not proper. And that looks funny. And Kristin and I've talked about Uh, owners paying themselves consistently. You may be the owner, but you are an employee of your company, right? And you want to pay yourself on a regular basis because if you don't, it looks weird to the bank and to the underwriter that you're doing random draws. Keep more money in your account than you draw out, okay? And pay the things that you need to pay, not the random draws. They will get you in trouble. So, Kristen, what is the relationship between bookkeeping and scaling a business? Okay.

Yeah. You can't, in my opinion, businesses that are set up to scale, what that tells to me is that they've got their offer dialed in. They've really dialed in who their target market is. You know, their landing pages, the things that they're doing are converting well. So once that all is in place, scaling is often about more exposure. So, you know, one of the things that people don't realize, and again, people might not agree with this, but generally if you want to run Facebook ads, you know, I think that Facebook ads, I want a professional to do that. I want somebody who's in that account tracking the metrics, who knows what they're doing. So I'm going to pay someone to do that. So that's a cost. And then I'm going to pay for the ads. So let's just say in order to run Facebook ads to this really awesome converting offer, you probably need to commit to 3 months at $5,000. So you're looking at $15,000 because it takes a while for the algorithm to learn who your ideal client is. But ideally, if everything is in alignment and it's converting, you want to make sure you have that money there to invest in bringing in that business. Or maybe you have a plumbing company. And your business is taking off, but now you need to buy another van and you need to hire another person. It's really important that your finances are in order and you start to plan for those moves ahead of time. You know, I've got a client who is moving into a second, a second location in a different state. So what's really cool about that is he has all the systems and processes in place. So what he does is an awesome working model. He's just going to Replicate it down there. So, that's really cool. But that takes money. It takes money to make those kinds of moves. And so, people talk about scale your business, scale your business, scale your business. But the finances have a big role in that because if you don't have a solid financial foundation, you're not going to have the money to make the moves that you need to move to go up in revenue.

Absolutely. Absolutely. Now, we're all business owners. We're busy, man. Busy, busy, busy. How often should a business owner review their financials?

Okay. First of all, we've all heard the saying, it's important for you to work on your business, not in your business.

Right.

What does that actually mean? And I'm gonna give you an example. Doing your bookkeeping is working in your business. Reviewing your financials with your bookkeeper is working on your business. So if you're in a place where maybe you're behind a couple of years in bookkeeping, I would say meet weekly with your bookkeeper to get everything up to date and that type of thing. Once everything's in place, and again, it depends on the business, either meet with them weekly, twice a month, or once a month. It really depends on the size of the business and what's going on as far as growth goes. But at a minimum, you should meet with your bookkeeper every month. You want to review your profit and loss. You want to look at your cash flow. You want to see, is there anything wonky, especially in these days with scams and things like that? Have you been charged for something you shouldn't have been?

Yes.

So, you want to make sure that you're really kind of reviewing everything. So, again, this puts your CFO hat on and you're reviewing your financials. You're working on your business. So, weekly, twice a month, or every month, once a month, depending on the business.

So, it's not necessarily creating an obsession of, I got to look at them. I got to look at them. But it's more of creating a leadership rhythm.

It is.

Yes, absolutely.

Got it.

Working on your business, not in your business.

Well, once you understand what your expenses are, now you can track your weekly revenue. You know, if, if, if your expenses, you know, are $10,000 a month with your salary, you know, your profit margin, paying your taxes, all your expenses together, then, you know, you've got to look at what you need to bring in weekly to meet that.

Right.

So it gives you a good idea of, it's a very important number to track as far as tracking your revenue once you understand your expenses.

So, what are some habits that build financial confidence for entrepreneurs? What would you say to that?

Yeah. First of all, stop beating yourself up because again, you know, if you didn't go to school to become a bookkeeper, you know, or an accountant or a CPA, a lot of it just doesn't make sense, to be quite honest, especially, you know, the balance sheets and things like that. So, first of all, give yourself some grace. The second thing is, and I know it's hard to imagine because, you know, I love what I do. Like, I love outsourcing. I love empowering business owners to build bigger businesses. I know you love helping people get financed. That's your superpower.

Absolutely.

Sometimes we forget that other people have different superpowers. And as a business owner, the sooner you learn to bring on people, what's that saying? Bring on people that are smarter than you.

Yes.

Right? So I want my bookkeeper to know bookkeeping 100 times better than I do, right? I want them to be a pro. I want them to know and know how to ask me good questions. That's important to building your confidence with your finances. It's all about starting to build the right team. And then again, I see it all the time with our clients. You know, I wish I'd done this sooner. I had no idea this was going on in my business. Or I just feel so much more confident. And I love this one. I feel like a real business owner now that—

Ah.

Right? I'm meeting with my bookkeeper. I'm learning really about my finances. I'm understanding what I need to do to build a bigger business.

You know, this is excellent. This is excellent advice, people. Confidence is built. It's not wished into existence. You know, and I totally get what you're saying. And I follow those principles. I am passionate about what I do. I'd like to know a little bit about all the things that are rolling and working around my business, but I don't have to be an expert at all of them. And one of the things that I've said on previous shows, Kristen, is when you step into the world of being an LLC or being a corporation, S corp, whatever you want to have, you're stepping into the world of Fortune 500 business. Start acting like a Fortune 500 business. And what part of that means is you need to be able to put money aside to pay for services. If you want to grow professionally, grow, um, where your, where your bank account starts to get larger, you need to have a team in place. And a bookkeeper is part of that team, just like a lawyer, just like a CPA. These people are part of your team to actually help you grow. So I totally agree with what you're saying.

Yeah, I think, you know, again, I think it can be control issues or it can be just, you know, fear of not knowing how to outsource or things like But yeah, we want our business to be bigger than us so we can serve at a higher level. And, you know, again, there's something magical about, you know, whether it's delegating tasks to a bookkeeper who loves bookkeeping, that's their superpower. So now they get to do what they are meant to do. Or whether it's outsourcing, you know, I have a VA who books me on all my podcasts. So that's her superpower, right? So letting her do what she does and let her shine. And she earns an income from doing something she's passionate about.

And she's good at it too, Kristen, by the way. She's good. Believe me. Believe me, she's kept me on point.

Yeah, she's on top of things. That's for sure. But yeah, so when you outsource to people, you start to build that team, you're doing a few things. One, you're letting other people work in their superpower. Right? So, you know, the lady, the young lady that books me on podcasts, her name is Bea. You know, she's fantastic at what she does. She's been with us for a long time. She's had different roles in the company, you know, but I'm excited that she gets to do something she's passionate about. And we always give our team members opportunity. to change roles or to learn something new. Because again, we want them to develop the skills that they want to develop and to be able to do things that they're passionate about. And the other thing I also like to focus on is, you know, we do a lot of outsourcing. So we're giving employment to people halfway around the world. So we're pairing wonderful clients with amazing virtual assistants for long-term relationships. And that is magical because They get to count on having a steady income. Even if your bookkeeping's, you know, 3 hours a month or 10 hours a month, that bookkeeper is working for enough clients to have a full-time salary. And that's amazing. You're changing their lives. But also, people are, people will sometimes kick back on the outsourcing. I'd rather hire someone in the US.

Mm-hmm.

Well, if you have a business that is supported initially with very affordable help, it's going to help you grow faster. And I have a really good example of that. We have a client who, um, she's a professional organizer and she's very good at doing her own marketing. But what would happen is she'd market, she'd get busy, she'd stop marketing, the client work would come to an end, and then she's got to pick back up on the marketing again.

Right.

Once she finally put a marketing virtual assistant in place and was able to consistently market, her business steadily grew. And now she employs 5, last time I talked to her, 5 other professional organizers taking care of their areas. So, it's not either or. But again, initially, outsourcing is the easiest way and the most affordable way for business owners to get support.

Absolutely. So now, continuing on, what is one financial metric every entrepreneur or business owner should track weekly?

Revenue.

Revenue.

Because again, it doesn't— you need money coming in to pay the bills that you know are going out, right?

Absolutely.

And again, I think when people really start to understand what their expenses are and, you know, what type of salary they want to give themselves and how much money they need to set aside for taxes, they start to understand that, okay, I need to bring in this gross amount of money. Like, this is what I have to bring in just to cover the basics of what I— lifestyle that I want right now. And then they can start to up that based on as they grow the business.

You're right. And that's critical. Revenue is loud. It's very loud. But people having a bookkeeper on board, your margins tell the truth about where you're standing. You can have a ton of revenue coming in, but if you have more expenses going out, you're in trouble. You're in trouble and you need to reassess. All right, Chris, so we're gonna go into some rapid-fire questions, right?

Sure.

All right, so we can close this out with a, uh, with quick Practical advice. So, if you would finish these sentences. Bookkeeping is not—

It's necessary, right? It's essential to growing your business. So, it's not a luxury. It's not something that kind of should be done. It's not. It is really, it is the foundation of your business. Your business, you started a business to make money and money needs to be taken care of. You cannot make the best money if you're afraid of it. So, bookkeeping is important to your success.

A business owner who avoids the numbers is really avoiding what?

Building a financial foundation to have a successful business.

The first financial habit to do this week, this week is what, Kristin?

Well, we have a free offer for your people. Go for it. We host a masterclass. Yeah, we host it. Yeah, we host it twice a month. You can go to lessmoneymoremath.com, lessmoneymoremath.com.

I'm going to put it in the show notes. So we're great. Yeah.

And Jeanine and I host a class where we just talk about, you know, what it's like, what things you may be missing for tax write-offs. We talk about what it looks like to work with a bookkeeper overseas, and we just give you knowledge and information. We are always live and then we do Q&A at the end. So we want to be here to support business owners. So that they can really start to build, you know, the businesses of their dreams.

The entrepreneur who wins long-term is the one who what?

Treats their business like a business.

I love it. I love it. Kristen, this was excellent. People, clean books are not just about looking organized. They're about becoming more profitable, more fundable, and more confident as a business owner. One of the things Kristen said is Some people are like, I really feel like a business owner now. So for everyone listening, this is the takeaway. Stop treating bookkeeping like a back office burden. Start treating it like a leadership tool. Because when your numbers are clean, your decisions get sharper. And this helps in ensuring business— your business is compliant and you're profitable and can grow. Kristen, thank you so much for being on the Credit Minute. I really appreciate it. Do you have any parting words?

I see. Oh, I'm just— I see. I'm just so grateful that you invited me on today, and I'm just looking forward to us continuing to have great conversations. I think you're doing great things in the world.

Thank you.

Podcast is awesome. So love it.

Thank you, people. If you want a simple roadmap to start building business credit the right way, grab my free business credit starter kit at our website. It's listed in the show notes. It'll walk you through the first steps to get your business lender ready starting today. And remember, your business credit isn't just a score, it's your company's future. Apply first. I'm sorry, I should know this. Qualify first, apply second. Thank you for tuning in to the Small Business Credit Minute. I hope you enjoyed today's episode of Messy Books Kill Profit and Scale: Fix Your Numbers Before They Cost You with If you got value from this Credit Minute, please subscribe, download the podcast, share it with a fellow business owner, and leave a review so more business owners can learn how to grow smarter and faster. Until the next episode, your dreams deserve a chance to grow just like your business. Thank you, Kristen.

Thank you for having me.