021 Not Tracking Money = Not Making Money
If you’re not tracking your money, then you don’t know if you’re making money.
And that means you’re not making money.
“If you’re interested in making more money, you need to be tracking it.”
In this episode, you will learn the following:
1. What happens when you don’t track your money in your business.
2. Why you can’t set and achieve goals if you’re not tracking your money.
3. The different ways you can work with me to learn how to do your own bookkeeping and understand your financial reports.
Resources:
Want to get your business organized? This is the first step: getting those receipts under control! Download Chaos to Calm, my free receipt organization guide.
Other episodes you'll enjoy:
019 Do You Hate Your Money Goal?
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Hey, y'all, so we're going. To go ahead and get. Started today, we're talking about not tracking money and what happens when you don't track your money. It means that you're not making any money, and I'm going to explain this concept to you because this might sound confusing at 1st and you're probably thinking Reagan. How can I not be making money just because I don't pay attention to it and track? Well, we're going to talk about it. I almost didn't record this episode today because I am extremely tired. I had a very sleep deprived weekend and I just wasn't feeling up to it. But once again, I am committed to doing things imperfectly, meaning that even though I may not. Sometimes it's OK. Just allow things to be imperfect to allow myself to be tired and to do something anyways and not in a way where I'm like pushing through and forcing myself and. To do something. Or I'm not trying to make excuses, but it's OK for me to record something and for it to just be me showing up. A little bit tired, a little bit cranky, got a little bit of a headache and that's OK because I still have things that I want to share with you and teach you. And so we're diving right in. What am I even talking about when I tell you that not tracking your money means you're not making money? How does this work? So when you're not tracking your money, you're not reconciling your accounts monthly. Whether you are doing your. Checkbook balancing, balancing your checkbook every month, like sitting down. With like a paper register or like an Excel register or a spreadsheet in Excel where you're tracking all of your transactions and your balancing your transactions on your monthly bank statements. Or it could be actually reconciling in an accounting software such. As QuickBooks or. Gosh, what are the other ones? I don't even know because I don't care. Like 0 is one of them. If you're not reconciling your accounts monthly and that means all of your accounts that contain business transactions, so that's not just your business checking account. That's any credit cards that you have that you transact business expenses in. If you're not reconciling. Your accounts on a monthly basis, or however often the statements come out for that account. That means you're not tracking your money, and that means we can't see how you're making money. We can't know that you're making money. So if you're not tracking your money, that means you're not reviewing your reports either, right? Because that's the next step for me. After reconciliation, I reconcile the accounts. I balance the bank accounts. After that, I review the reports. What reports do I review? I've talked about this before on previous podcast episodes, but we definitely want to always be checking monthly. Our profit and loss statement, the cash flow statement or statement of cash flows and your balance sheet, I have gone over what each of those reports is, what they contain, the benefits of looking at each of those reports in detail on other podcast episodes. And I hope that you've already listened to them. If you haven't make that your next. Stop talking about what accounting software basics you. When you're not tracking your money, you can't even set a goal or a target for your business, because how are you gonna set a goal for your business if you're like, not even sure where you're starting? The whole point of a goal or a target is that you recognize you're at one place in your business and you want to get to a different place. And that's not even just true for businesses. If you're running a race, there's a starting point to the race. And yet, technically, it could be the same starting and ending. Point of the race. The actual race is contained in the distance that you run, like you don't just stand there at the starting line because it's also the finish line and say that you ran a race like the purpose of that was to go around the track or the circuit. So when you're not setting goals and targets for your business. Or when you're not tracking your money, you can't do that. You can't set goals and you can't set targets for your business. Not tracking your money is a bad thing, especially if you have to file taxes, which, like most of us do, there's very few exceptions for people who are business owners to not have to file taxes like. Just not even a thing. So if you're not tracking your money, you don't have anything to put on your tax return, right? And your tax return, like I've talked about. Out flows into every other part of your business. That's what they use. Whenever you want to apply for financing, you want to get a mortgage to buy a house or financing for. A car or. A loan, a credit card, your credit card application even asks you like, what is your income, which is what you report on your. Taxes each year. That's what they're asking you. And then I see people say this, and honestly, this is a thought that has run through my brain too, because guess what, I'm also a small business owner. The crap that you guys are going through the situations and challenges that you find yourself facing. I'm right here with you. We're doing it together and so you may have thought to yourself at some point I deposited so much money this month or last month, where did it all go? And so when we're not tracking our money. We can't even begin to answer that question. The dogs are being round today and once again, I'm not an official. With the little booth. So there may be some background noise. Anyways, why are we not tracking our money? Or like how are we not doing? Really, you're staring at your bank account every day, or maybe every other day, or maybe not at all. Or maybe the only time you look at your bank account is when you need to spend money and you open. It up and. You're like, oh, like, I don't have the money to cover that right now. Why are you not tracking your money? Do you want to live your life that way? Just opening up your bank account? Balance and seeing what is available at that moment, most of the time, if we're sitting there staring at our bank account, it doesn't change while we're staring at it. If someone else has access to transact in your account, maybe if you stared long enough, somebody else would initiate a transaction and so you would see it change. But if you're just opening up your bank account and you're like, oh, like, that's what I have going on, OK, maybe I can't really do that much with that. Or maybe I'm limited in what I'm able to do or you never are wondering how long is that gonna last? Like when is that gonna run out and in this way your bank account is dictating. Of the reports for your business that show the accurate data. So I mean a lot of people operate this way because they don't have the capacity or the knowledge to do their accounting. And so they open up their bank account when they need to buy something. And they're like, this is a yes or no question. I have enough money. My account to pay for the thing or I don't. And so you're allowing that bank account balance at any moment in time on any day to dictate what you can do in your life and more importantly, what you can do in your business, what you have capacity for. But think about it like this, whether you're tracking it or not, the data exist. You just don't have. Access to it when you're not tracking it. So the metaphor that I want to give is, if you were in a dark room like you couldn't see anything, consider yourself someone who can see and that you're in a dark room. And so that sense your vision. Is not accessible to you right now. You just can't see what do you even know if you're in a kitchen or you decide that you wanna bake a cake? You know, do you have the equipment and tools needed in that room? To bake a cake, that's what you wanna do. That's what you've decided you want. Are there ingredients in this room that are needed to bake a cake? We can't tell because we can't see so. This is like when. You are not tracking your business data. You're not doing your accounting on a regular basis. So I mean the data is there. Because you are transacting in your business, you are collecting money and spending money, but if you're not accounting for all of that, and if you're not reconciling and you're not reviewing your reports and making sure that you have things categorized the way they need to be, you just don't see the data. Because you're not doing all of that. You're not doing the accounting, you're not tracking it, and therefore you're not making money because we can't even see what's going on. It's like being in a dark room and deciding you want to bake a cake, but you can't even be sure if the ingredients are there. You can't even be sure if the. Equipment and the. Tools are in there like is there electricity? All of that? Do you have enough time? Like, there's really no way to determine what's going on because we don't have the data to look at. So when you're not tracking your money, you're actually blocked from making informed decisions about your money because you don't have a starting point. So like I talked about before, with the idea of running a race, if you are at the starting line of a race. And the finish line is either the same points you run in a loop or the finish line could be at a different location. How do we know that you're running a race? Unless we say, here's the starting point of the race, here is the starting point of you. Business here's what we know is going on in your business on a regular basis. Why do we want to change it? What do we want to change it to? You can't make those informed decisions because you're not tracking it. Tracking your money is how you determine your starting point and your starting point could be at 0, right? But maybe you've already been operating in business. Per year two years, three years, 10 years, however long if we're not tracking the data, you can't set goals and decide where you want. To get to, you can't set a target, you can't even be sure that what you're doing now in your business is working. Like maybe it is work, it could possibly be the case that what you're doing now is working, but there's no point in changing what you're doing if it's already working, right? If that's already the results that you want. You've already got them, but you just don't even know because you're not doing your accounting. You may think you have too many expense. This is but what if your cash flow is low due to other circumstances? So maybe your business actually has pretty low overhead, meaning that you're operating expenses, the expenses that you have to incur to keep your business open? If that's not actually a high number every month or every year, but your cash flow is low due to another reason. So what could be some reasons that your cash flow would be low besides having too much in expenses going out? So it could be the case that you have loan payments, credit card payments, other business liabilities? Right, because. What do we know about liabilities and loans and credit cards? All of that gets tracked on the balance sheet, making a payment on a loan is not an expense to your business. Making a payment on a credit card is not an expense to your business. The interest on a loan is a deductible business expense, credit card interest, and the purchases that you make. My credit card account can also be expenses, but when you pay off that credit card, that payment is not an expense. However, it does reduce your cash flow, right? That's money leaving your bank. Now to pay off the credit card. But it's not showing up on your profit and loss report because it's not an expense, but it does affect your cash flow. That's why I. Say that not only are we looking at the profit and loss, we're wanting to look at the balance sheet every month. We're wanting to look at that cash flow statement because your profit and loss is not showing you the entire picture. We need to access multiple reports each month when we're tracking our accounting and doing our money. Looking at our money, we need to access multiple reports to kind of view it from different angles because not everything is going to show up on one report. So another reason your cash flow could be low, that's not an expense is you're taking owners draws, right you're drawing. Money out of your account to pay yourself because if you are a sole proprietor or your single member LLC member will not. On payroll, we take owners draws, which is an equity account. Equity accounts go on the balance sheet. So even though that money is leaving your business account. And going into your personal funds, because you're paying yourself owners pay, this is not an expense. So when you take an owner's draw, it does not come out on the P&L. It comes out. On the balance sheet. But that is reducing your cash flow. Maybe you're a business that has periods of feast and famine and you're just not looking at the right timeline. You know, this could reduce your cash flow. For a certain period of. Let's say that you are a project based business and you have projects that last. Months or even a year or more. So if you have a project that is going. To last over six months and you don't get paid in full until the end of the project until it's completed. You could be looking at a period of time that is within that project timeline and so you're not realizing any income from that project in that smaller period of time. So let's say you sign on a project in January. The project is slated to be completed in June of any year. If you're just looking at your reports, your profit and loss from January to March, we're not seeing that full. Project income because we're not looking at the total year, we're not looking at January to June. So if that project is lasting longer than a month, the way that that gets tracked on your reports, it could show up that you don't have that income, maybe they paid in advance, maybe you bill them on a progressive way where you build them like a percentage. Every month, all of that affects how it shows up on your reports, even though you may have a signed contract from that client that they're going to pay you a certain amount in June, but you're not going to see the whole picture if you're not tracking. Appropriately so that can affect your cash flow that can make your. Cash flow look, really. Low and it's not that you have a bunch of expenses coming out. It's just that the way your income is tracked, your business is based on that project feast or famine, and you're not looking at the right timeline. If you're interested in making more money, you need to be tracking. And those are all the reasons why. And the way that you learn to do that is to learn how to do your own bookkeeping. Or to hire. It out and automate it. I do not recommend hiring an employee to do bookkeeping and handing over every aspect of financial control to that employee. In fact, I highly recommend. It is the case for a lot of businesses, small businesses. They hire an employee and they tell that person you're now in charge of accounts receivable and accounts payable. That means you're taking money from clients, and you're also paying the bills. Sometimes there are people who will take advantage of that position in someone else's business. They get hired as an employee and they see it as an opportunity to handle that business's money, and they end up stealing. If you're handing over every aspect of financial control to an employee. You're setting yourself up for trouble. You're also setting that employee up for trouble, even if they don't have the intent to steal from you, you've put them in a position.
To where they.
Could you've made it a possibility for them, which is a liability for both you and the employee. So I do not recommend that you hire an employee to do all of your bookkeeping. Maybe I'll do another episode on establishing the boundaries in that relationship. If you have an employee who does have some bookkeeping tasks, how to set that up to protect yourself and the business. And your. Ye from liability and what kind of tasks they should not be doing. Absolutely not should be doing. If you're hiring an employee to do everything you're gonna put yourself in harm's way and you're opening yourself up to a world of trouble as they like to. Say you can hire out your Boo. Keeping to a third party contractor and in that way automate it. You can pay somebody who is going to do your reconciliation, review your categories and prepare reports for you on a regular basis. And so this. Is delegating and it takes a lot of tasks off your plate. However, even if you're hiring a third party bookkeeper. There still needs to be boundaries in place. You still have to recognize that as the business owner, you have the financial control over the business. It's not that bookkeeper's job to make sure that things get done on time. I'm sorry, but it's. Not as the. Taxpayer as the business owner, you are ultimately responsible for the timely filing of taxes. And payroll tax returns and payment of payroll taxes and sales tax, etc. That's why choosing a good bookkeeper is so important. You could also learn how to do all this yourself. And so I don't recommend reinventing the wheel and trying to figure out how to do accounting, how to do bookkeeping, watching a bunch of random videos, downloading a bunch of checklists. Look, I have videos where I train people for free available on my Facebook. If you just go under the videos tab. My Facebook allies accounting you will see my weekly live Facebook classes and on those videos I'm teaching you certain aspects of. I'm actually walking you through QuickBooks Online tutorials so you can go watch those. I also have checklists available to download. What I'm saying is not to rely on a bunch of information collected from different sources that may end up contradicting each other. If you're looking for one place to learn a system of. Accounting and bookkeeping that will work for you for your brain and for the business you're trying to run. I will have a digital course that will be made available soon that will teach you my system that I use for myself and all of my clients. It's not ready yet. But I want you to be aware that something like that is coming and it is not a replacement for hiring a bookkeeper. It is not a replacement for an accounting degree, of course not. But I wanted to create kind of a prescriptive system for people who are starting a business that maybe actually cannot afford the expense of hiring a bookkeeper. Can't afford something more than just a regular training and want to develop their own system of doing things that they can use in their business to keep track of their money so that will be coming soon. And if you want to make sure that you know about that first, you gotta get on my e-mail. So that's always accounting.com/subscribe. There will also be a link in the show notes. Make sure you're on my e-mail list that you can learn about that offer when it becomes available. But for now, here is what I can offer you. At this moment you can get a training on QuickBooks products with me. I'm your QuickBooks online. Advanced pro advisor. That means that I have taken QuickBooks Online certification course and I've also taken the advanced certification course on their products. I also have. Over 8 years of experience in accounting and bookkeeping for small businesses, so you can schedule a training. With me, the first training will be 2 hours and that will be on QuickBooks Online and that will help you develop some very basic systems for monthly bookkeeping. And we can even tweak some of the procedures and processes that you already have in your business. And I can kind of show you where there might be some weaknesses in your schedule. Weaknesses in your processes and your procedures, and so we can kind. Of tweak those a little bit or. You can hire me for my bookkeeping services. You hire me to do your reconciliation and reporting each month, and if you want included in the bookkeeping services that I provide at your discretion, our accounts receivable and payable support. So that's you receiving money from your clients and customers. You paying money to your vendors and paying your bills. And I support you in those endeavors. Whatever those processes look like for you. I can take over some of those tasks. For you, I can help make sure that you're getting paid on time. I can help making sure that you don't. Miss the bill. Payment all of that good stuff. All of that can be included in the bookkeeping services that ioffer. But if you just need to learn the basics of QuickBooks Online, or you need an expert to look at your current systems and tweak and refine those. On a consult with me for a QuickBooks Online training and if you want to have me do your bookkeeping. On a monthly basis, we can discuss that as well. On a free consult. So the link to look at my calendar for a consult is all ease accounting dot ASP dot me forward slash consult. So once again, there will also be a link in the show notes for a complimentary consultation. It's 30 minutes. It's one-on-one. It's a zoom meeting and we just get together and really most of it is me listening to you, but just kind of listening to what your struggles are, what you're challenged with on a daily regular basis in your business, like where is information bottlenecking in your business, what do you not know how to do that? I can teach you how to do or that I can take over. And you can delegate these things to. Because the whole point of running a business is that it's providing you with income, AKA it's how you make money. And when you're not tracking your money. You can't know that you're making any money. Here's a disclaimer. I don't do everything for my clients, and I won't do everything for you. Number one biggest thing is I don't transact in your business. There are a few ways that I schedule payments for my clients on their behalf to make sure that different tax payments. Get paid on time and that is sales tax and payroll taxes. And any time I would be scheduling those payments. On behalf of a client that is outlined in their engagement with me, that is how much I will pay when it will get paid, from what account, etcetera. All of it is explicitly outlined in the engagement with the client, if that's what they want me to do. Otherwise, I do not transact in your business. That means I don't process my payment. For my services from your business, you have to actively pay me or enroll in auto pay and I don't do like other types of bill pay. I also won't be able to do everything for you, but I do need you to send me information. So for instance, my clients do have to have a way of keeping their receipts, keeping copies of their invoices, handling their own client list, handling their own procedures, and sometimes I may need some of that information. So what I do have is a secure bank level encrypted way for clients to share private information with. And it's basically a document sharing portal that is specific for accountants. And so that is how my client send me information. It's important to me because we are dealing with your financial data that we do have high levels of security on that information. And so I do pay for a software that is compliant with all of the things. And that is a secure way for clients to send me information, because I do need you to send me information. I cannot operate blindly without knowing certain details about your transactions and your accounts and such, so that is the way that I make sure. Your financial data is if you want to do training on QuickBooks Online, or if you are interested in hiring me for your monthly bookkeeping, get on a console with me so there is a link in the show notes. That's all easy accounting dot AS dot me forward slash consult it's a 30 minute complementary consultation. And we want to get you started on tracking your money so you can focus on making more of it. I hope you have a great week. Talk to you later.