Why You Need To Get Financially Literate With Your Bookkeeping

Hey, it's Mark Podolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and today's guest is really one of those people that are going to take one of the biggest pain points in your business and solve it. But before we talk to our guests, I'd be remiss if I didn't properly introduce my co host. You know him, you love him. Scott Todd from scotttodd.net landmodo.com posting domination.com land geek if you're going to automate your Craigslist in your Facebook postings. And now knowledge is power investor ninjas.com Scott Todd, how are you, Mark? I'm great.

How are you?

Pulse is still normal. Respiration is fine. But you know what? My books are a freaking mess. They're just a mess. Scott, why?

Why? You haven't executed what I taught you in accounting for land investors. Come on, man.

I took the accounting for land investors course. You know what? I'm just, it's not that I don't understand it. It's that I don't want to do it.

There you go.

I don't want to do it. But you know who does want to do it? Our guest bookkeeping, Ben Day from lionshare bookkeeping.com Ben, if you don't know, Ben Day is the owner of Lion's Share Bookkeeping. And he gives business owners back three things that you got into business for. Time, money, and sanity. I'm really excited to learn what this guy is going to do and to help us out because he specializes in small businesses and real estate investors from wholesalers, flippers, rentals, and let's face it, Ben Day, Real estate bookkeeping is complicated. How are you, man?

I am doing well. I am so excited to nerd out about just all of the fun things that bookkeeping isn't and all the things that we can get done. I'm doing well. But yeah, I mean, real estate isn't necessarily something that you can just niche down and say, oh, yeah, it's just this goes here and that goes there. It's so there's so many moving pieces that it really eats people's lunch every day.

Okay, so let's rewind the tape. Tell us how in the heck did you start and why did you start lionshare bookkeeping.com sure.

So I'll be 26 in a month. And I graduated from the University of Oklahoma with a bachelor's degree in music and a bachelor's degree in accounting and only one of those I wanted. The other one was the. Was dad saying, hey, someday I want my grandkids to eat, so would you please get something that'll get you a real job? And so I went and I got the music degree and I loved it. And I was working as the contractor for a music guy in town and doing a lot of really cool projects locally and internationally. And. And then the. The funds dried up, the money dried up. The guy was really passionate and was really doing what he loved, but had no idea how his money was working. And so over, really, literally overnight, we lost the funding and a project that we were working on that was in the six figures turned to a project that we were doing out of somebody's garage. And it was just. It was. It was just not good. And I'd been in enough businesses and seen enough of this happen in multiple realms and multiple venues that it was like, okay, one. I really don't ever want to depend on somebody else for a paycheck ever again if I can. I know how money works. I've got this figured out. I'm good with it. Let's start a business that helps other people do the same thing and everybody wins. And at the time, I just read rich dad, poor dad, maybe like the third time or something like that. And it clicked for me. It was like, you know what? I should just become financially literate, get financially clear, find some clarity on what's happening, and see if I can't help other people do the same. I wanted to help people. I wanted to help microbreweries because I'm a beer junkie. I love a good craft beer. And very quickly, I realized that Oklahoma City may not be the scene to break into that for. But real estate, I tell people all the time, you can go to a different real estate meet up three times a week in Oklahoma City if you're doing it right. And so it just. I got in front of people. My dad is a community bank lender. He does single family rental loans all day. And he was really sick of looking at numbers off of a legal pad or a post it note or a bar napkin. And so we just sort of. We got together, figured out a system, and we've just been helping people really leverage their money and their time and figure out how to pay themselves and all of that stuff for the last two years now.

Wow, fantastic. So my first question is, why is bookkeeping killing people's businesses?

Oh, my gosh. So, and here's kind of the. Especially in real estate, right? Some businesses, you can just lean in and say, okay, I'm just gonna go sell, I'm just gonna go sell, I'm gonna move my product and, and that's fine. And we just live off of a bank balance and everything is peachy. And then at the end of the year, you owe a whole bunch of taxes and you're like, oh darn, I better go sell some more so I can pay these taxes. Real estate sometimes has that luxury and sometimes it doesn't. Sometimes you can just go solve the problem by, you know, pounding the pavement. But if your cash flow isn't like that, or if your cash flow, if you don't even know what your cash flow is in the first place, you're really setting yourself up for failure. So what do you do, right? You do you go buy QuickBooks and learn how to and basically super glue the bookkeeper hat on in addition to the handyman hat and the legal assistant hat and all of this fun stuff. Or do you loop your aunt in or your sister in or your cousin in, somebody who wants to help but really doesn't know what you need, doesn't know the language, isn't a professional on the software, but is willing to help you out for cheap, and suddenly you're two years down the road and you've got this empire, but you actually have no idea what you're doing. You have no idea what your numbers say. And the person that's been doing your books has no idea how to answer those questions. And now you're sitting on this two year mess, right? And this is, this is every day for me, like I'm helping a guy today, right now actually, who has had a different bookkeeper and accountant of both every month like clockwork for the last three years. And it's just because they don't know what's going on. And nobody knows what's going on. Nobody's willing to engage him, ask the hard questions and give him the help that he needs so that he can go talk to bankers and lenders and say, here's really what my portfolio is. And he can't go talk to investors and say, here's how our last deal performed. Do you maybe want to give me some money that we can leverage in a private money deal? We're just helping him begin to kind of peel back the onion, so to speak, can really find the good stuff and how he can begin to grow his business. And you just can't get that without good bookkeeping. So it's like, you know, can you go sell? Sure. But Bookkeeping is killing your business by keeping you in the dark. So if you can build that part out now, suddenly the world is your oyster. If you can do all of that other stuff as well. This is like, I'm too lit up about this all the time. I could ramble about this forever. But just to start, without a good bookkeeping system or a good bookkeeper in your corner, you no idea what's going on. And that is how it kills most businesses.

Scott Todd.

Well, look, the reality is that in my experience, when you start to do your bookkeeping, a lot of times people, they didn't go to school to become accountants or bookkeepers, and they start this business. So then all of a sudden, you have this business flowing, all this money's around, and. And without knowing the concepts, the basics, the whys behind it, what happens is you abdicate here, just take care of this stuff, and then you get these numbers at the end of the year, and you're like, well, are these even right? You know, like, because you don't understand the foundation or the concrete behind it. And as Ben said, if you have a bookkeeper that's just going through the motions, well, accounting. Accounting is very. You can systemize accounting, right? Like, it doesn't take. It doesn't take. I mean, anybody. Like he said.

Exactly.

Yeah.

It doesn't take a genius to get the bookkeeping done. Yeah. No, but it's the knowledge behind it that's really critical.

Yeah. And so, you know, essentially, if you don't have, you know, the foundation of the why. Why this is occurring, and, you know, that's what we kind of teach in accounting for land investors.

Right.

There is the fact that you're making this transaction because this is the impact on it. So what we do is, you know, like, we're teaching that class, we're teaching the transaction, then we're teaching the fundamentals behind it. So we dig down into it, too, so that. So that everybody can understand, okay? It's this approach, because now when you go sit down with your banker, or more importantly, with your cpa, all of a sudden you're educating your CPA on the way to do this. And then they're like, oh, okay, I got it. No problem. And so now you're coming up to speed. Well, Mark, funny story. Like, we, you know, this last tax season that went through 2019 tax season, it's funny because we did accounting for land investors. We gave our students the knowledge that they needed to do the one, two punch on their accountants. I can't tell you how many people came to me after they met with their accountants, said, my accountant said, I can't do this? And I'm like, here's the tax code, by the way, and here's the why behind it. Here's the accounting principles behind it.

Tell.

Ask them why you can't do it. You know, no one came back to me. No one ever came back to me and said, my accountant says, you're wrong. It doesn't happen. Because what happens is they are so accustomed to just saying the same thing over and over again. Sometimes you have to have the foundation to say, stop. That's not right. Here's the reality. Oh, okay, that makes sense. So you really need to arm yourself with some knowledge here. If you're going to run a successful business. You don't have to do it, don't do it. But you need to understand the foundations behind it.

Yeah, absolutely. I mean, so many people, I mean, you know, just blindly take their CPA's advice without knowing. Like, no one person can completely understand the entire tax code. It's massive. So you've got to go to somebody that is a specialist in your niche and then, you know, maybe you've got some good advice there. So, Ben, that leads me to your next question. What's some of the worst advice you see or hear given in bookkeeping? Sure.

So there's this. And this is.

This is a.

This is a big spectrum, right? I mean, there's so many, like, I'm obviously not your cpa, whatever disclaimer I need to throw in here, but some of the worst pickles I've ever seen people get into are things where the accountant just didn't know and the investor didn't know how to talk about what they didn't know. So I've seen. I'm working on a set of books right now where it's a house flipper who did a whole lot of capital improvements to the property, but he claimed them all last year and now he's sold the property this year and he's setting himself up for a huge failure in taxes. He's just going to owe way more because he claimed it all in the wrong set and his cash flow is not going to match. That's a big issue where unless your CPA is living with you, they're not going to know. And you're. And you don't know unless you know, unless you've learned, unless you've gone through something like accounting for land vestors, where it's like, hey, some of these words are really important. And you really need to be able to say this one word in this conversation to move the needle and get what you actually want. That's just on the tax side. So another really big thing for at least on kind of the rental or the cash flow side is working with bankers, right? I mean everybody, nobody wants to pay taxes, right? Everybody wants to pay exactly as much as the government needs them to pay. And then, please leave me alone. I don't, I don't want to give you any more of my money, especially right now. And so everybody goes to their CPA and the knee jerk reaction is how do I pay absolutely nothing in taxes? How do I make sure the government doesn't rob me? And some CPAs will say, okay, we can do that. And they'll jump through all of these hoops and they'll pull out all the stops and the 179 and all this fun stuff and then they're like, okay, cool, no taxes. And they go to the bank and they can't get a loan because now there's this whole, there's this whole other spectrum of financing in real estate that makes it so powerful. But if you don't, if it doesn't look like you make any money, nobody's gonna give you any money. And so now there's this balancing act. And so when we begin to work with people, we're like, how can we bridge either in knowledge that we give you or we can just be the bridge between you and your partners, your tax preparer and your banker. And the big mistakes are, are you calling things the right thing for your tax perspective? Are you calling them, you know, capital expenditures instead of expenses? And then it's, you know, are you, do you know what you're spending that you're not going to spend again next year? Did you have $100,000 in rehab that makes you look like you're a horrible business owner when in reality that's just the name of the game and you've got this rehab and then you're going to cash flow and it's going to be great and you'll flip and you'll do your capex to your land, your carrying costs, you'll move it, you'll make your money and we're good to go here. Easily two of the biggest issues that we run into consistently. And is those two big things?

Yeah, I mean, that's a really good point. I want to ask you, when people are just starting off getting set up, is there a certain way of setting up today that you are recommending as opposed to like let's say a one person llc, S Corp, C Corp.

So, and this is always fun. So whenever we kind of get into this area, people are asking from like a, from a protection perspective or like a tax shelter entity perspective. The answer will always be it depends. But I don't ever like to lead with that. What I like to lead with is do what it takes to get the deal done. Because you're first and foremost a business owner, right? I mean, people are sweating. You know, how many LLCs do I need? One property per like LLC or like how do we split this up? And the truth is that if you're spending all of your time figuring out what legal entity is going to be housing whatever deal that you're doing, you're not actually doing the deal. You're spinning your wheels. A lot of people lose valuable time or don't even ever take action because they're worried about the legal protection. And so while I can't officially give any guidance on that without knowing a whole lot more about you, the first thing I'll say is just do the deal. Like just, just go do, do one, make some money and then you can go, then you can afford to go pay somebody, whatever it takes. In Oklahoma, it is incredibly easy to form an llc. You can do it in an afternoon with a pen or an email. And so it's like, why like form an llc, Get a little professional, it wouldn't be that hard. And then you can just go do deals. That, that is the most important thing. And that's, that's where we always start people with. Unless you're a partnership, in which case partnerships, the conversation always starts the same way. Do you have an operating agreement? And if you don't know in your heart that you're getting married to that person and you need to have a mediator get involved as early as possible, otherwise you're really setting yourself up for failure. So that is a very common question. And the answer is make sure that your operating is right first.

Yeah, I mean, speaking of setting yourself up for failure, as far as bookkeeping are just the tools. So Scott Todd is a zero sort of proponent. Ben Day, what about you? What are you more of a proponent of as far as just getting set up the right way from day one with your software tool?

Sure. So I've, I've stocked accounting for landvestors. Scott Todd. I've seen all of the stuff. I saw the REI tipster, whatever, and I think it is an excellent program. So much so that I'll say that the first tool you should use is mentorship. Every time, get education, get training, because it's not your job to reinvent the wheel, it's your job, have a wheel, right? And so by all means go and get in an educational program where someone is going to hold your hand, help you set that up. When I first started, I was zero certified. I was running my practice out of that. Since then we've actually moved everybody to QuickBooks Online. Plus and then some people actually need the new version of QuickBooks Online, which is QuickBooks Online Advanced, which is a whole other hot button. But really it's you first and foremost need to get involved in something that'll give you per property and overall business numbers. So class tracking or category tracking I think is what it is in Xero is so critical. And then the next big thing that you need to realize is that if you're not going to be doing it yourself, you need a system that someone else can use. So don't like, you can go use a property management software for your record keeping if you want. But now your criteria for hiring people is understands, you know, Buildium, understands Cozy, understands Corkon, Whatever it is, the more complex and niche that you make that, the harder it is to find a person to fit that role. So really if you're gonna pick a system, categories or classes and someone else's system gotta be.

Got it, Got it.

Scott Todd I always say, look, you gotta find the, you gotta find the tool, you gotta find the website, you gotta find whatever you, you feel like you need that's gonna connect with you. Sometimes Xero connects with people, sometimes it doesn't. Sometimes QuickBooks connects, sometimes it doesn't. At the end of the day, I've had people tell me like, oh, I can't use Xero because my accountant uses QuickBooks. I'm like, well, tell them to use Xero if that's what you want. That's like letting the tail wag the dog. It doesn't happen, right? The dog wags the tail like you cannot, you cannot run your business based on what your accountant uses to run his business or what he likes. That's not the way that it works. And so if one's gonna work for you better, great. I think that the, that the most important thing is not necessarily which application you're using, but do you understand the fundamentals as to why and how to use it? Because if you don't know how to use it and you never go in there to look at your numbers, well then you're, you're, you're not performing as a business owner because the business owners knows his numbers. That's like rule number one a shark tank, isn't it?

Oh my gosh, it really is.

It really is. You know, rule number two is.

What's that?

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Sure. Just for people to get started. Yeah, I mean the simple ones are best. Usually the popular one that I use as a reference that not many people I think will reference in this context is like rich dad, poor dad. I mean, it's. What do you need? You need to get financially literate. You need to understand that there's assets and liabilities and that what you're calling them may be different than what your accountant is calling them. But here's how we also have, you know, we've got references, we've got free stuff all over the place on our website that people can go check out for this. We actually just launched a free mini course all about accounting terms for real estate where it's, you know, here's the weird stuff, here's what your chart of accounts can look like and here's why it's starting just to build in that, just that little bit of content, that little thing that's going to give you the language and know what questions to ask and how to Talk about stuff. But for people that are just getting started. Go read Rich dad eight more times. Understand that. Yeah. Some of these words mean different things than what you think that they mean. And you need to get involved with somebody that can help you get to the next step.

Phenomenal. Phenomenal. Scott. Todd.

Man, I didn't have a plan on this one, Mark. Let's see. I'm going to pull this one out, right?

Oh no, we're not going to the tip of the week yet. I'm not putting you on the spot like that.

What happened?

I just. I just thought you seemed like you had something on your mind.

I was worried about the tip of the week.

Right now. Yeah. I'm gonna give you time. Don't worry about it. And I can always bail you out if you need a tip. All right, so Ben, let's just, let's just skip to it now, should we?

Yeah, sure.

I'm ready.

I mean, he's the guest scout. Let's just put Ben on the spot.

Go ahead. I do have one now. Now that we're talking about it. So we'll hear what Ben says.

Alright, so your tip of the week. A website, a resource, a book, something actionable where the art of passive income listeners can go improve their businesses, improve their lives. What have you got?

Sure. So whether it's your accountant or your VA or your business partner or whoever it is, communication is always the hardest part of any business, regardless of the business type. For communication, what we've started doing is using a website. You can find it at Useloom.

And.

Loom is. It's a Google Chrome. Chrome. Google Chrome. There we go. Plugin. Or I can just click play. I can record a video. It'll have my face on it, it'll have the screen on it. I can click around, show people whatever I'm talking about, talk through content, build a slide deck, whatever it is, and immediately email that and send that to people. I think that they just started a paid plan for like 10 bucks a month. But you get your first hundred videos for free. I've used this to like, I think 99% of my communication now is in an email with the words that I said in the video showing them what's going on. And then when I get feedback, it's the exact same way. So there's no more. Oh, I thought you meant this.

No, no, no.

Click this button. Go here. Communication problem solved. I love Loom. Huge proponent of that. Go use that tool.

Love it. Love it. All right, Scott, Tip of the week.

All Right. This is going to be self serving Mark. But it's okay, right? Look, we just made a change, okay? The change is that we took Posting Domination and Accounting for Land Investors. We put it under the umbrella of Investor Ninjas. Look, you don't have to buy it separately. Go to Investor Ninjas. It's included. Accounting for Land Investors is included on Investor Ninjas with your Posting Domination. Go learn how to build your basically your accounting system for your business. Go do it.

Why not?

It's there. Go check it out.

Yeah, absolutely. You know, you know what is cool? I'm going through the Zapier course right now. Automating your business with Zapier in Investor Ninjas.

Pretty cool, right?

It's so cool. So I mean I've got Posting Domination here. I've got WordPress 101, I've got yield, my favorite metric, crowdfunding, your real estate investments, the accounting for Land Investors, automation and more to come. I love it.

There's a community one's coming out this week. It's, it's cool. You, you, you already know this one, but it's LastPass. LastPass has come out this week.

Oh, LastPass.

So good.

We're gonna walk you through how to use LastPass and share the stuff with your VA. This is the, the tools that everybody needs. This is what we're talking about on Investor Ninjas.

Yeah, yeah. Awesome. And my wholetailing course is going to be in here.

It is, yeah, yeah.

Which in launch kit I think is coming in there. I got a bunch of land stuff. All right. So Ben Day, do you want to know my tip of the week is?

I would love to know your tip of the week.

It's going to be get your sanity back. It's going to be get your time back. It's going to be focus on making some money, get yourself out of bookkeeping, let the experts handle it and learn more. Go to lionshare bookkeeping.com. focus on working on your business and growing your business and allow the bookkeepers that are experts in it to make your life better, improve your cash flow, do some tax planning. Lionshare bookkeeping.com I'll have a link to it. Ben Day, are we good, man?

I think that's great. I could talk forever, but I don't know if I could say anything else after that.

Alright, well, I want to thank you so much for being on the podcast. I want to remind the listeners the only way, the only way we're getting the quality of guests like a Ben day from lionsharebookkeeping.com is if you go on the interwebs and you go on the social medias and you share the podcast, your favorite, your favorite podcast episode, go ahead and share it. And then you got to subscribe, you got a rate, you got to review the podcast. Send us a screenshot of that review of that review. To support the Land Geek Calm, we're going to send you the $97 passive income launch kit course for free. So please do that. Scott. Todd, are we good?

We're great, Mark.

All right, well, let's do this. One, two, three, let freedom ring. Ben's like just, I forgot all about.

This until it was like, oh, wait, yeah, we're doing that Liberty Bell stuff. Whatever it is, Liberty Bell.

He's like, man, are they geeky.

Love it.

Love it, man. All right, well, thanks everybody and see you next time.