Sam speaks with the owner & founder of Orderly Accounting, Katie Ferro. Katie explains how even though CPAs like herself are often adverse to entrepreneurship, the decision to launch her business was one of the best she’s ever made. Later in the episode, Katie walks through accounting and bookkeeping mistakes small businesses frequently make and explains simple steps owners can take to avoid them.
Resources from the episode:
Episode transcript:
[00:00:00] Intro Music Plays
[00:00:09] Sam Chlebowski: Happy Thursday, everybody. Welcome back to Designing Growth. Sam Chlebowski here, Co-founder of Motion.io and host of this podcast, joining you for another episode. On the show today I am very excited to have Katie Ferro with us. Katie is the owner and founder of Orderly accounting, which is an accounting 7bookkeeping service that is online based and for a variety of businesses.
[00:00:35] Sam Chlebowski: So Katie, first up, how are you doing today?
[00:00:37] Katie Ferro: I’m good. Thank you. How are you?
[00:00:39] Sam Chlebowski: Amazing having a beautiful day here in Colorado. It’s going to be like 65 and sunny today, which is nice because it’s been super cold out lately. Where are you located by the way?
[00:00:49] Katie Ferro: South Florida.
[00:00:50] Sam Chlebowski: South Florida. Oh yeah. So permanently warm. Don’t even have to worry about the snow.
[00:00:53] Katie Ferro: Yeah, we’re like 80.
[00:00:54] Sam Chlebowski: So, Katie, if we could just kind of start off our conversation here today and you could give me some of the behind the scenes background information about your business, how it came to be, and yeah, I’ll just let you take it away.
[00:01:07] Katie Ferro: I’ve been working on trying to condense this, but as most entrepreneurs are, the journey that led me here was, a little twisted and surprising. So my background is in accounting. I am what I call a reformed rule follower. So for most of my life, it was head down following, the paver in front of me that was laid out by someone else, just figuring out like what I needed to do to.
[00:01:31] Katie Ferro: to do the right thing. And I was good at math, a good student, and that led me to studying accounting by the recommendation of like adults in my life that were mostly like teachers or people like in schools where they’re like, what are you going to study? I’m like, I don’t know. And they’re like you should study accounting because you’re good at math.
[00:01:48] Katie Ferro: And I’m like, okay. And I really didn’t know what accounting was. I don’t think most high schoolers would know what accounting was. But I ended up studying accounting. And I was I think it’s just relevant in how the story goes, [00:02:00] but I was on scholarships. So at the end of that four years, most accounting students go on and they complete a fifth year and they go like straight into big four or something like that.
[00:02:10] Katie Ferro: But I was out of the scholarship at that point. So I went right to work. I worked in corporate accounting. And it was a great job. I liked the people, it was boring. Then I got a master’s in tax.
[00:02:22] Katie Ferro: So I’m like following the path. Okay, this is paid for. I’ll go ahead and get my master’s in tax. And I ended up taking and passing the CPA exam because that was the next thing that you would do. I wasn’t sure how it was going to benefit me in my career, but, I had an uncle, a great uncle at the time where he’s like, so are you going to take the CPA exam? I’m like, I don’t know. And he’s like, well, would you ever regret doing it? Or could you ever regret not? And so I was like, okay. I went and I took the CPA exam, which led me to working at a CPA firm for a couple of tax seasons, because you can get out of a master’s in accounting, master’s in tax and still not know anything about how to actually prepare a tax return.
[00:02:59] Katie Ferro: So my idea at the time was that at some point I’d be doing taxes from home with kids, which makes me laugh because it’s really impossible. I have three kids now but I had this disillusioned idea of what any of that would look like. So I’m like, let me go to a CPA firm, learn a little bit about taxes and figure that out.
[00:03:17] Katie Ferro: That was a great couple of seasons. I learned a lot about. Small businesses, my history before that was working for really big corporations, which kind of doesn’t give you the pulse on a small business owner. So we worked with a lot of small business owners, helping them get set up, preparing their taxes was really the focus of what we were doing.
[00:03:35] Katie Ferro: And bookkeeping came a little bit after. I did do some bookkeeping in the CPA firm, but the purpose of it there was to look at the year that passed. And get the numbers right for filing a tax return and get them like accurate for what you would then owe the IRS, right? Which I’ll segue into in a minute because this is what I do differently now.
[00:03:57] Katie Ferro: Then I ended up going back to my corporate [00:04:00] job and I found myself 29 years old. Accounting degree, master’s in tax, CPA, a couple of years experience, and my old company had brought me back as a tax manager, so I’m a tax manager of a multi billion dollar company, 29 years old, and I had all the things that I was supposed to do to have climbed in my career at that point, and then I found myself purposefully pregnant with my first child and started to, for the first time in my life, realize how those two things do not run side by side, they’re really perpendicular.
[00:04:29] Katie Ferro: I was leaving the house, Before the sun came up, I was still late to work. I was commuting an hour each way each day and I was like getting home after dark. And I started to think about how impractical that was, but I still didn’t have any plan. And for me, even though I was really inspired working with this.
[00:04:46] Katie Ferro: I’m Small business owners. And I always thought they were like so brave and bold. And I loved seeing their numbers at the end of the year and the things that people could do with small business and how much they could make. I thought that was inspiring, but it was always like risky for a rule following accountant.
[00:05:00] Katie Ferro: I’m like, I didn’t see that for myself, but,
[00:05:03] Sam Chlebowski: cool that everybody else can do it, but I don’t think I can.
[00:05:07] Katie Ferro: yeah. I mean, My whole life was like that. It was really like in the box. This is what you do. 37 and I think now, people that are getting out of college, they understand more the opportunities that are there. But for people my age, we were still very much following the path.
[00:05:22] Katie Ferro: And I think we’re like that generation that’s breaking it. But our parents were very much telling us. And just other adults in my life. Really, these conversations didn’t quite happen with my parents. They were other adults in my life, but it was like, do what’s safe, right? And then the type of person who would be an accountant who likes math and logic and a right answer and I know this because half of my business now is helping bookkeepers break out and do what I did and start a bookkeeping business and surpass your corporate salary working half the hours.
[00:05:48] Katie Ferro: So I know that this is not just a thing for me, but the tendency that would lean towards. Studying accounting in the first place makes you somebody that’s conservative with your risks and wants something that [00:06:00] you believe is secure. And I say that like that because it’s really not secure to have all of your eggs in one corporate basket somewhere, one company, and they’re the ones that are keeping everything afloat.
[00:06:11] Katie Ferro: You never know how that business is doing, and that’s your entire livelihood. It’s actually super risky, but they tell us that it’s safe. And so we do what we think is safe. So that was me. And I wasn’t scheming. How do I make money on my own? But fate led me to being home. Halfway through my pregnancy, I got in a car accident commuting to work.
[00:06:30] Katie Ferro: I was the third car in a four car pileup. We were okay. We were going, you know, the ten miles an hour that we’d be going. So, I wasn’t injured. No went off. But I was sobbing on the side of the road, thinking okay, this is unrealistic. It’s not safe for me to even drive to work. And how am I going to do this when I have a baby in daycare, and I didn’t even know what motherhood was really going to look like, because neither one of those things were at all practical.
[00:06:56] Katie Ferro: Dropping your kid off at 7am an hour away from you, or commuting with a baby. Like, neither one was possible. I know people do it, but it’s still an impossible thing that they’re doing every day.
[00:07:06] Katie Ferro: Literally the next day, which was a Friday, my boss was a really great guy. He’s like, Katie, take the day off, don’t come in, relax, take care of yourself and come back Monday. So I’m out of the office on Friday. And buzz is going on in my corporate world.
[00:07:20] Katie Ferro: I’m getting text messages like our company announced a voluntary separation plan had nothing to do with me. if you had been at the company for five years, and if you combined like my two periods there, I met that criteria. If you’ve been with the company for five years, you had the option. stay on until an undetermined time and choose to quit, take a severance that was like a third of my annual salary as a bonus, and then 12 weeks. so I knew I had to take that, especially with the two things back to back. I’m like, this is not a coincidence. I need to do this. I need to leave. This is obvious. This is a huge parachute into being home and then figuring out what happens next. And I’ll say [00:08:00] it was still a really hard decision for me to make because I felt and I was selling my career. for this amount of money that was nice to have that would expire after six months. I would no longer have my career. You don’t leave a position like that after being there for a year have a baby or two or three, which I did, and then come back to corporate and pick it up like nothing happened, especially in South Florida, where It’s not like you’re in a major hub of a lot of corporate headquarters and you’re gonna go and I’m not a person that’s going to move for a job.
[00:08:28] Katie Ferro: I still didn’t have a plan because I was very much in the weeds of new motherhood. But possibilities and things just started to come. So I say that I unstrategically, haphazardly and accidentally began growing a bookkeeping business because people would start asking me Hey, Katie can you do this?
[00:08:46] Katie Ferro: They knew I had that experience and they knew that I was home. So like the CPA firm that I had worked at that I left, they gave me my first two clients through referrals. Not knowing I didn’t have a bookkeeping business, but they knew I was home and they’re like, this client is a little too small.
[00:09:00] Katie Ferro: This client is a little too needy. Can you do these things for them? They don’t quite fit into like our model. And I’m like, I don’t know. And I just started playing with it because I did have the parachute of the severance and everything and the support of my partner. But we didn’t talk about me being home full time, and so I didn’t feel like it. I could not earn i also have been working since i was fifteen years old so i don’t like to not earn my own money like i want to be able to earn my own money i want that autonomy i want to use the skills i have i’d like it if they could help people and i at that point began to prioritize living my life for the first time like living my life.
[00:09:40] Katie Ferro: Before how like how i was making a living and i always enjoyed my jobs you know so i didn’t hate working but it was definitely like a big piece of my identity for a long time so i would just explore these opportunities one by one as they came and start taking these clients one big one that was still small like they brought in a good amount of money [00:10:00] but i was able to do it in couple of hours a day
[00:10:02] Katie Ferro: and then I had four smaller clients who ended up just coming based on my network. for a while I had just those five, which was good supplemental income. And I thought that I was capped at what I could do. I’ve got these clients. I don’t want to work more than the hours that my kids are asleep.
[00:10:18] Katie Ferro: They were very young and I had them close together. But all of a sudden, when I was pregnant with my third and my first was three, I’m like, I can scale this. I can grow this. And I, it became very clear to me that If I didn’t do something to start replacing fully my corporate income, then when the little one went off to school, I would feel pressure to go back to work, and I didn’t want that.
[00:10:39] Katie Ferro: So I started thinking, how can I make this sustainable? And my goal while I was pregnant with my third was, let me get five to ten new clients. Let me hire some people to do this work so that it’s not all on me. I’ll bring the clients in, I’ll set up the repeating system, and then I’ll train this out to people who can do it.
[00:10:56] Katie Ferro: So in the span of a few months, I went from 5 to 18 clients. I got more than the goal. I hired 3 part time, very part time, bookkeepers who are still with me. This was 2019. And I, just started to realize that we could help more people that I didn’t have to just do it at nap time. And so by the time my third was born, I had surpassed my corporate tax manager salary.
[00:11:20] Katie Ferro: And the tag that I use with that is working only the hours I used to commute, cause it was 10 hours a week or less. And that’s what I was. Commuting in the earlier days, so once you do that, you don’t go back,
[00:11:30] Sam Chlebowski: what an awesome story. And I think A big piece in there really valuable to our listeners is that idea of starting with that goal and working backwards, okay, this is the type of business I want now. Here is a goal to achieve this type of business. That’s going to afford me this type of lifestyle.
[00:11:49] Sam Chlebowski: What are the. Smaller numbers in there that I need to make happen. how many new clients do I need? What things do I need to start delegating some of this ongoing work? And I love that example because [00:12:00] I think that sometimes there is a natural resistance to scale when you are a solo owner operator doing everything and doing the day to day where even though it’s.
[00:12:12] Sam Chlebowski: A lot of times in your best interest and it’s what you want to be doing with your time with your life idea of bringing people on and having to document the processes for working with clients and how you were going to handle things at a more granular level can seem like a huge lift. it starts to feel a lot like less of such a big lift when you break things down and you start with that end goal and you start working backwards from there.
[00:12:39] Katie Ferro: actually wrote down while you’re saying that it’s trust and ego stop you from scaling a lot to I think, especially for women, we struggle with the ego part of it first. We do this in both ways, like we put ourselves on a pedestal while also putting ourselves down. So it’ll be like, all of our clients only want to work with me get over yourself.
[00:12:59] Katie Ferro: And then the other side of it is like just pressure, we’re putting pressure on ourselves and we feel like we can’t ask for help. And then we don’t think that our clients will want to work with our team because we think that they only want to work with us.
[00:13:11] Katie Ferro: if you pretend that you’re going to do it all of you don’t tell them you have a team and you’re not being honest with them, then yeah, you might have a problem. But if you tell them how you work then they know that this is in their best interest because you’re not the single point of failure in your business and everything doesn’t ride on you.
[00:13:26] Katie Ferro: They’ll probably feel better to know that you’re supported so that their needs get met. And the other part of it is trust. And trust can be, I think, an issue with ourselves. Like you mentioned, documenting processes. we don’t have our process organized no wonder we can’t train it out. And no wonder we would worry if somebody is going to come in and mess it all up.
[00:13:45] Katie Ferro: I always say the first step in that is documenting what you do. While you document, you’ll realize what you’re doing wrong, for one thing. We work inefficiently when we’re not following A process, we want to skip that step because it seems like it’s going to take time, but it’s time that we get back a [00:14:00] million fold, especially in a business like bookkeeping, where you’re doing that same task month after month.
[00:14:06] Katie Ferro: So if you’re doing it inefficiently, or if you have to stop for five minutes and figure out what you did, you’re wasting time and you’re increasing risk of error. So if you spend an hour documenting your process one time and then follow that going forward, you’re going to save hours and hours and hours into the foreseeable future.
[00:14:22] Katie Ferro: But the trusting that someone won’t let us down is hard and I get that, like I’m going to bring somebody into my business, they might mess up with our clients or they’re going to do it wrong and then I have to review and I have to hold hands while we do the work and it’s easier for me to just do it myself.
[00:14:38] Katie Ferro: But if you give yourself the time, document the process, and work with the person to train them appropriately knowing that that’s going to give you a long term ROI, it becomes worth it to you. You just can’t expect it to be a shortcut into somebody coming in and immediately being able to take it off your plate to the level that you do it.
[00:14:52] Sam Chlebowski: The way that you phrased that that trust and ego piece that is such a concise and clear way to say that because I can see it firsthand. It’s hard to delegate things.
[00:15:04] Sam Chlebowski: There’s a lot of mental hurdles that you put up in addition to the hurdles that are just a ramification of your limited bandwidth a lot of times when it comes to process documentation and setting these things up. And that’s why I think that for anybody who wants to be able An entrepreneur long term and wants to scale a team.
[00:15:22] Sam Chlebowski: I think the more that you can do along the way to chip away at some of those big lifts and have that sort of end vision in mind, the happier you’re going to be
[00:15:30] Sam Chlebowski: I would love to dig even a level deeper into this. I know that you work with a number of, industries, but a lot of times small businesses, is that right?
[00:15:40] Katie Ferro: Yeah, that’s really where I prefer to focus. So most of my clients on the bookkeeping side are solo preneurs, they’re in business by themselves. And I mean, I have a couple where that’s not the case. They have partners. Some are family businesses, but for the most part, it’s the solo business owner.
[00:15:54] Sam Chlebowski: What are some things that you see are mistakes that solo owner [00:16:00] operators make when it comes to bookkeeping and accounting? What are the things that if I’m launching a business tomorrow, you would want me to know or be aware of?
[00:16:10] Sam Chlebowski: Yep.
[00:16:10] Katie Ferro: So my clients are ahead of the game because they have a bookkeeper. That means that they’re actually looking at their numbers. For the most part, on 99 percent client calls I get to, which by the way, they’re only a tier below the clients that get bookkeepers because they’re talking to a bookkeeper.
[00:16:25] Katie Ferro: Most of them don’t have a system in place. They’re not looking at their numbers. It becomes like year end and then they’re trying to put them together just for tax purposes. So that goes back to me saying that’s what we did in the CPA firm a lot was go back through the history. You have to file a tax return.
[00:16:42] Katie Ferro: You don’t have to do bookkeeping for your small business. You should, but you don’t have to, and you won’t get in any trouble for not doing it. It’s not a requirement, if you’re the only owner, no one’s going to come and be asking you to get it together. So you’re going to neglect it. So the number one thing that business owners do with bookkeeping is neglect it by and large.
[00:16:59] Katie Ferro: I think that if you polled solopreneurs, 95 percent of them would have no system of bookkeeping or a very poor one. to me, bookkeeping should be done monthly. So if you’re compiling your numbers at the end of the year and calling it bookkeeping, it’s close. but it’s not, giving you the insight that you need. when I started like there was a piece of this story where part of what I was doing before I decided to grow the bookkeeping business and after I already had some bookkeeping clients was thinking, these people are coming to me making very avoidable mistakes but by the time they’re coming to me. It is October of the next year because they’re looking at the extension deadline of the next year, right? We just in October hit the extension deadline. October 2023 is the extension deadline for all of 2022. That’s when a lot of people come up out of the woodwork to file their taxes.
[00:17:47] Katie Ferro: Now we can’t do any planning. We’re not proactive. You’ve already set up your business wrong. You’ve mixed everything together. You didn’t set money aside for taxes. And I just have to be the bearer of bad news when you’re already in a [00:18:00] position. That is bad. And we’re already 10 months through the next year and you’re still making those same mistakes.
[00:18:06] Katie Ferro: So sometimes. And I’ve seen it like this is the thing that can send people back to working for the man, right? This is the thing that after two years, you realize I made money, but then I spent it. And then the tax bill came and I still owed it because I still made that money. I just spent it on rent and food and everything else.
[00:18:25] Katie Ferro: That’s not a deduction. And now I have a bill for the IRS plus penalties and interest I can’t afford. And I have to go back to work for somebody else just to make enough money to pay my tax bill. That stuff could have been avoided. And it honestly broke my heart seeing it. And I’m like, I don’t know how to have this conversation.
[00:18:42] Katie Ferro: And this stuff was so avoidable that it hurts me to do. And there’s no solution after the fact. No good one. And so I just really struggled with that. And so I’m like, people need to know what they need to do. And I started telling them about tax things. I’m like, here’s what you need to do for tax and that, that.
[00:19:01] Katie Ferro: And I felt like then I was having a hard time getting anyone to listen to things that they should not mess up with taxes. It just wasn’t where everybody’s focus is. Everybody’s focus when they’re starting a business is on. Hopefully their skill. It’s important. You need to be good at what you’re doing.
[00:19:17] Katie Ferro: And then sales and then delivering that and then hiring a team and marketing and like stuff like that. But the finances are always an afterthought. And to be honest, I can see how it happens. You’re in a rat race of trying to keep up with just bringing money in, and you think bringing money in will be the solution, but if you’re not looking at the money going out, you also don’t have any accurate gauge of what you should be charging, and then that’s a problem, right?
[00:19:43] Katie Ferro: And then you’re not setting money aside for taxes and blah blah blah. I got really excited when I finally realized that I could get people’s attention by talking about bookkeeping. By talking about profit, because the whole statement is profit and loss. That’s really simple, right? If we don’t know what we’re [00:20:00] profiting, we have no idea what we’re doing.
[00:20:01] Katie Ferro: And if we’re not profiting and we’re running ourselves into the ground we’re not ever going to reach the goal that we’re set out to do. Almost everybody starts a business for some form of freedom. Freedom from debt, time freedom to travel, freedom of our schedule, whatever it is, we’re looking for freedom.
[00:20:17] Katie Ferro: If you’re running a business that is not profiting enough to pay for your life or losing money, you are actually going in the opposite direction. You’re getting into debt, you’re spending more time, you have less money. And you don’t have a picture of it because you’re not looking at what you’re making.
[00:20:31] Katie Ferro: So on a monthly basis, if you just totaled up what you brought in and what you spent and looked at it, even if it was in a simple spreadsheet, and I do sell one in case anybody’s listening We can share a link for them, but there is a DIY template that you can just put in your income and expense, and it will total it up and put it into categories for you, and you’ll have the visibility to know how are you doing at the end of the day, because most people know their sales.
[00:20:55] Katie Ferro: Most people know what they made last month in sales. Very few know what they actually profited. The money goes out, and we know as we’re paying each bill, but we don’t have the picture of what it is. The biggest mistake that people make is avoiding this altogether. Sometimes it’s the overwhelm, sometimes it’s distraction of the shiny object, and sometimes it’s really that they’re afraid to look at it.
[00:21:17] Sam Chlebowski: The things that you’re saying are things I’m very much so aligned with already, but some of the value that I have seen, because we track all of this stuff internally down to the level of Hey, what does it cost to bring in a new person interested in our product
[00:21:30] Sam Chlebowski: Let’s look at conversion data within our. Google ads campaigns or Facebook campaigns, Instagram campaigns, things like that. And I’ve seen, just on a personal level how beneficial that can be and having that more granular view it exposes you to opportunities where you see that you can do more.
[00:21:50] Sam Chlebowski: Oh, Hey, great. We’re only spending, 10 to get a lead from this advertising platform, or our SEO is driving in all of these leads [00:22:00] essentially for free minus, the time that we’re putting in, you can really start to pull levers in an interesting way. But I think that the first part of that, and really the heart of.
[00:22:11] Sam Chlebowski: What you said is you’re never going to be able to do those things if you don’t have a Semblance of your profit and losses and what you are spending and what it’s bringing it. And the long story short is like start early and start right away because these things become much more complicated, much more time consuming, and a much bigger threat to your business if you’re not on top of it early.
[00:22:35] Sam Chlebowski: Okay.
[00:22:37] Katie Ferro: I like to be empowering with my message, but there’s no other way or there’s no like sugar coated way to say you risk your entire business when you don’t pay attention to what you’re bringing in. And just like you’re saying with like knowing those metrics, it’s just data.
[00:22:51] Katie Ferro: It’s not emotional, The spiral that we’re in when we’re not looking is emotional. When we compile the data and we look at it, we’re going to realize one of two things. It’s better than we thought which I would say happens most of the time it’s usually better than you think and then you’re like oh okay and then the other side is like it’s not but now you know what to do you know that too much money is going here or not enough is going there or you know you need to increase your prices.
[00:23:16] Katie Ferro: You don’t really know that until you look at what you keep at the end of the day. Think especially as service based business owners because we don’t have a cost to look at. Especially if you’re doing your own work. You can see it in your team if you’re paying a team an hourly rate. But if you’re doing a job You’re charging a fee and then you just have some miscellaneous expenses.
[00:23:35] Katie Ferro: It’s very hard for you to get an idea of what you should actually charge when you see what you’re left with. You can see like the bank fees added up, the tax piece. I didn’t factor in appropriately and blah, blah, blah. And at the end of the day, there were these costs in this team. And so I need to be charging this much in order for me to bring in what I’m looking to actually bring in.
[00:23:55] Katie Ferro: And then that piece of not knowing what to charge becomes less emotional [00:24:00] also. And you can say, this is what I need to charge so that I make work, like I make the money that I’m trying to make so that I can continue to do the thing that I’m doing. Because if you’re not charging enough, you can’t stay in business.
[00:24:11] Katie Ferro: And chances are you’re doing this for your own outcome of what the business can provide, but I don’t meet a lot of entrepreneurs who also aren’t doing it because they have a level of service on their heart and they cannot fulfill that mission with an unprofitable business. You just can’t do it. So that’s the number one thing is avoiding it, and I just want to give that clarity of why we can’t ignore it and why bookkeeping is more fun than taxes, because taxes are just a piece of it.
[00:24:37] Katie Ferro: When your bookkeeping’s in order, tax is going to be easier, and you’re going to be able to have a better idea of how to budget for it and not be surprised. But tax is just this thing we know we need to do, where bookkeeping is something that we can do to see, how are we actually doing, and how can we improve this thing?
[00:24:51] Katie Ferro: So one of the simplest things that you can do to help your business and make your bookkeeping easy is keep everything separate. And it’s shocking how many people don’t do this. Some do, and others don’t.
[00:25:03] Katie Ferro: And then others will have the business bank account, but they use it and they swipe for everything. You just want to get a separate account for business. A separate bank account and separate credit cards that are used exclusively for business. If you’re receiving money through, Stripe, PayPal, whatever, you want those transfers to be going into your business checking account.
[00:25:22] Katie Ferro: You want your expenses to be paid out of your business checking account. You want a separate credit card for business that your business checking account pays for. And as a solopreneur, you can move money between your business and your personal account, but that should be the way that it is transfers.
[00:25:37] Katie Ferro: So if you’re in a startup season and your business isn’t making enough to cover all of its expenses, still pay them out of those separate business bank accounts, but do transfers from your personal into the business. So that you have the cash flow there. This will also, just this practice, even without totaling it up and going into bookkeeping, will help you realize, I’m having to put in money from personal a lot [00:26:00] to cover these expenses, so something’s gotta change.
[00:26:02] Katie Ferro: You’re gonna start to see just in the cash that it’s not profitable. It’s easy to bury that if you have it all mixed together, especially if you have some other form of income, like a day job. You can be eating away at your day job money. With an unprofitable business without really feeling it too fast.
[00:26:17] Katie Ferro: So keeping it separate will help you keep a pulse on that. And then if your business is making enough to cover everything, and it’s paying for your personal life, then just do a transfer back to your personal to pay for your personal expenses out of your personal. This step should be done. Especially as you grow, if you’re going to become an S Corp to save money, this is a bigger conversation than we can get into today.
[00:26:36] Katie Ferro: I do have a podcast episode on it. We can link up if people are curious about what an S Corp is and how it can save you money and when it is and is not right for you. But if you want to get to the path of becoming an S Corp, which I think should be the goal because it’s a profit based goal, so you want to make enough to make that election worth it.
[00:26:53] Katie Ferro: Then you don’t want to be mixing your business and your personal. You want to treat them as two separate entities, so it’s good to get in that habit. But the biggest practical tip for why you’re going to feel a difference today is even if you don’t use bookkeeping software and even if you don’t hire a bookkeeper, you’ll be able to pull those statements and the transactions and easily total them up into something like a Google sheets template to keep track of your income and expenses without having to dig through all of your accounts and figure it out.
[00:27:21] Sam Chlebowski: That specific piece of advice in like working towards the S Corp, I think is a really good piece of advice. I don’t hear a lot of folks, discuss quite frankly, and we will link to that episode in the show notes of this episode. So everybody can go back and check that out. One of the things you have on your website. I wanted to talk just very briefly about because I think this is a big question that a lot of people have. they feel like they can’t get started with an accountant with a bookkeeper because everything’s a mess and they’re like, Oh, I just have to like put this together first before I hire someone.
[00:27:53] Sam Chlebowski: You address that Right on your website where there’s a question that says, my books are a mess. Do I need to do any work beforehand? [00:28:00] You say very clearly, no, you do not, We’ll take care of that for you. I would love to know what do you do within your onboarding for a bookkeeping client that allows people to not have those types of things prepared ahead of time? Because I’ve worked with accountants in the past where I need to come with a whole bunch of stuff
[00:28:18] Katie Ferro: what you need to come prepared for is your tax preparer. And that’s what makes this different. I don’t actually prepare taxes. So even with my active CPA license and my years preparing taxes, I don’t do it. I don’t even do my own taxes.
[00:28:32] Katie Ferro: We have a line in the sand where we’re focused on the books. And we have our clients work with tax preparers so they can find them themselves. We do have some that we refer. I actually prefer not to be involved in that because it can get tricky. But I do have people that we can refer and we just need you working with a tax preparer, but it helps everybody stay in their zone.
[00:28:51] Katie Ferro: Because bookkeeping is a constant repeatable process with a lot of nuanced details, especially for the way that we do business these days, where we have a whole bunch of different platforms and pieces that we need to connect to make the picture clean. And then when we have that full picture, given that I have the background of tax and know what tax preparers need to look at, they have their statements where they can say, okay, this is what happened.
[00:29:13] Katie Ferro: Now here’s the tax impact. Here’s the tax planning piece of it. Or here’s what we need to do. So if you’re not working with a bookkeeper, but you’re trying to get your taxes done, it would make sense for them to say, give me the numbers of what you did so that we can get to the tax preparing part without having to charge you for a bookkeeping cleanup or something like that.
[00:29:32] Katie Ferro: So for me, if you come as a bookkeeping client, I don’t even want you to touch your mess.
[00:29:37] Katie Ferro: I prefer when my clients have no books over messy books and we can work through things together. So what it would look like in terms of onboarding is on the call, we’re figuring out, are we the right fit? Are you the type of business? Can we make this a streamlined process? Are you able to afford the fee? And, um, like what is our best option? How do we get you in? I’m always focused [00:30:00] most on the monthly, the cleanup being just a piece of it. We’re going to have to do it no matter what. Even if you were in bookkeeping software, even if you were in the bookkeeping software I use, which is Xero, in case anyone is curious, I prefer that software then We still are going to have to look at things.
[00:30:14] Katie Ferro: We’re going to have to make sure that everything is right, because all of the numbers in accounting continue to flow forward and they need to be checked. So when I can start with a blank slate and come in, that’s fine. Even if you’ve been commingling your business and your personal on an onboarding call, we would be looking at that.
[00:30:30] Katie Ferro: I’d either be extracting data out and we’d be figuring out what’s business and personal and I would have a way of getting it into the software. Or we would be looking at mostly business data and figuring out what’s personal and coding it that way and we’d be mostly focused on going forward. So like we’re gonna deal with the mess and then we’re gonna stop creating the mess and you wouldn’t know that.
[00:30:49] Katie Ferro: The average business owner wouldn’t know what the mess is or how to stop fixing it. people have a lot of shame around what their numbers look like, but I’m not the only bookkeeper that will say, I don’t care what this looks like. I would never expect it to look good. You’re not an accountant and you’re not alone.
[00:31:05] Katie Ferro: There’s nothing unique about this. It’s like being a gynecologist and somebody being afraid It’s like we’ve seen it a million times before. This is the job. People come to us with messy books. Our job is to make them un messy.
[00:31:16] Sam Chlebowski: And I think that’s the biggest piece for overcoming those, potential feelings of discomfort of somebody, taking a peek behind the curtain to see, what your books, what your numbers look like is that it’s ultimately more work for you if they would try and clean that up.
[00:31:31] Sam Chlebowski: Because you’re just gonna have to go redo everything anyways, and I think hearing that, I’m like, oh, yeah, okay. It’s much better to just go right into the process to get things cleaned up so you have that process, you have that structure
[00:31:43] Katie Ferro: Yeah. And we’re not emotional about it and we’re not judging. We’re like very matter of fact it’s basically like picking up clothes around the house and going What bucket does this go in? What bucket does that go in? Sometimes I ask my clients questions about their expenses. And I get the feeling that they think that I’m like judging or care [00:32:00] about it.
[00:32:00] Katie Ferro: I’m like, no, I literally just need to know, does it go here? Does it go there? I just want to complete the task. Where does it go? And I don’t even care if it’s, a big expense, because another thing that I work on is believing that my clients are capable of making business decisions when they have a clear picture.
[00:32:16] Katie Ferro: It’s getting the clear picture of what happened that is hard and just a complete brain shift from what they’re doing in most cases. They may be able to do their own books, but is it in their best interest? Is that the right task that they should be focusing their headspace on? Or should they stay within the zone that comes naturally to them, that is the thing that’s their bread and butter, and let this get done, so that they can then look at a very simple profit and loss or balance sheet when they know what these things are, and then they’re able to see that made a lot of money, and I like it.
[00:32:45] Katie Ferro: That made a lot of money, and I hate it. And if I stopped doing that thing, I could do more of this thing and make more money like they know what to do and they know what the expenses. Felt like they know what they got out of it and they know if they should keep that or not. They know if they’re investing in something that’s going to have a future ROI.
[00:33:02] Katie Ferro: I honestly can’t know that from the numbers. I can’t know if your business decision is a good decision or not just from the numbers, but I do trust my clients to make their own business decisions when they have the picture.
[00:33:13] Sam Chlebowski: you like At the end of the day are coming in there not to consult them on what they are spending money on, but to help them organize those expenses and gain a clear picture so they can keep making decisions as their business grows and moves forward. So I really appreciate your thought process behind in the way that you explain that.
[00:33:32] Sam Chlebowski: we’re almost out of time here, Katie. It’s been amazing talking to you. I’ve learned a lot myself too, best practices and things to strive for when it comes to business finances. So thank you so much for sharing your time and your expertise.
[00:33:47] Sam Chlebowski: If people want to learn more about you, connect with you, learn more about the work that you are doing, where should they go on the internet to find you?
[00:33:53] Katie Ferro: Instagram’s the best place to connect, which is at @orderlyaccountingbykatie. And you can always just [00:34:00] head to my website for everything else, which is just my name: katieferro.com
[00:34:04] Sam Chlebowski: Amazing stuff. Thank you so much. We will put links to those things in the show notes this episode. With that, Katie, my final question here to wrap things up today is a fun one. It’s tradition on our show. Within the last year, give me one for each category. Best things you have read, watched, and listened to.
[00:34:22] Katie Ferro: Oh no. All of the above. I thought you were just gonna ask one. with Red, I’m just gonna say the four agreements even though I didn’t read it this year, but it is just always my standing favorite and something that I refer back to all the time. might not be what you would expect from a bookkeeper or accountant, but I just find that book to be, like, the greatest for bringing you back.
[00:34:41] Katie Ferro: To yourself and like reality, because the reality that we’re actually in is not real most of the time. So the four agreements is my best. What did I watch? I don’t know. Honestly, I just binge through series on Netflix and right now I’m on suits. And I’m not sure why. I’m not even sure if I’m really loving it, but once I get in, I commit. And then for listened to, well, I’m always listening to podcasts, but I do that mostly while folding laundry and I listen to, I’ll just give one of my clients a shout out, Megan Yelaney all the time. So I’m always listening to her podcast and catching up on my laundry.
[00:35:15] Sam Chlebowski: Amazing stuff.
[00:35:16] Sam Chlebowski: Katie, thank you so much for sharing all of your expertise. Your advice has been a phenomenal time talking to you here this morning. I hope everybody out there is having a great week. If you enjoyed this episode, it would mean the world to us. If you went ahead and gave us a five star review on Apple and Spotify means a lot to me personally, and helps us get these episodes out to more and more people with that.[00:35:36] Sam Chlebowski: Everybody take care, Katie. Thank you again so much. We’ll talk to you next Thursday, everybody.
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