521: Boosting Profits with Better Bookkeeping with Lindsey Roberts
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Are you leaving money on the table by not tracking your expenses effectively? In this episode, Lindsey Roberts of Harquin Bookkeeping shares expert advice on how proper bookkeeping can boost your profits and improve your decision-making. We explore key tax deductions that many small business owners overlook, the importance of consistent record-keeping, and how staying organized year-round can make tax season less stressful. Lindsey also offers tips on how to set up your business for success, whether you're hiring your kids or considering purchasing a company vehicle. Tune in to learn how better bookkeeping can elevate your pet care business.
Main topics:
Importance of accurate bookkeeping
Maximizing tax deductions for businesses
Managing personal and business expenses
Benefits of hiring a professional bookkeeper
Utilizing vehicles and home office deductions
Main takeway: Bookkeeping isn't just about taxes—it's about making smarter business decisions.
What does your bookkeeping look like? Bookkeeping is more than just a tool for compliance; it's a strategic asset. Accurate and up-to-date bookkeeping provides valuable insights into your business's financial health. By regularly reviewing your financial statements, you can identify trends, forecast future performance, and make informed decisions on where to allocate resources. It enables you to assess profitability, control costs, and plan for growth. In essence, bookkeeping helps you steer your business with confidence, allowing you to make proactive decisions rather than reactive ones, ultimately leading to better long-term outcomes.
About our guest
Lindsey is one of the nation’s top rated QuickBooks ProAdvisors and the owner and founder of HarQuin Bookkeeping. She and her husband, Jason, have seven children, enjoy working together and spending time as a family outdoors with their animals. HarQuin has been providing affordable, quality bookkeeping, consulting, payroll and sales tax services for over a decade and serves over 1,000 small businesses each year. Lindsey always welcomes the opportunity discuss the future of your business and how we can assist in helping you achieve your goals and dreams. Connect with us to see what makes HarQuin different!
Links:
FINCEN: https://fincen.gov/boi
Facebook: https://www.facebook.com/HarQuinBookkeeping
Email: admin@harquinbookkeeping.com
Previously on: https://www.petsitterconfessional.com/episodes/339
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A VERY ROUGH TRANSCRIPT OF THE EPISODE
Provided by otter.ai
SUMMARY KEYWORDS
business, bookkeeping, deductions, year, people, tax, pay, quickbooks, account, expenses, tax deductions, cpas, professional, important, balance sheet, kids, track, put, pet, client
SPEAKERS
Lindsey R., Collin
Collin 00:00
Music. Welcome to pet sitter confessional today, we're brought to you by time to pet and the National Association of Professional pet sitters, bookkeeping and keeping good records in our business is a proverbial topic that never goes away, and it's something that we need to stay on top of, not just because things change, but also our businesses grow and adapt and evolve. And so today, we are really excited to have Lindsay Roberts with harquin bookkeeping. She was previously with us on Episode 339, so it's been a minute. So really excited to get caught up on how things are going and get some new information on what it means to be well organized things that we can do in our business to stay moving forward and stay compliant with all of the taxes stuff that come down the road. So Lindsay, it's an absolute pleasure and super happy to have you back on the show. For those who haven't listened to 339 Could you please tell us a little bit more about all that you
Lindsey R. 00:57
do? Yes. So my name is Lindsay Roberts. Me and my husband started our business back in 2008 that's so that's 16 years ago, and our team has grown slowly over time. We do bookkeeping, payroll, sales, tax and some consulting for small businesses all over America. We have approximately 130 team members right now, and a little over 850 clients we serve. And so we serve people from ten million in gross revenue to $10,000 in gross revenue for a year. So we we try to be helpful to anybody who is in need and that that can be from, hey, I need to get registered with sales tax to, hey, my QuickBooks is very ugly. I need your help. We are also our QuickBooks Pro advisors, so we help people in whatever stage they're at and what, whatever their whatever's going on in their business.
Collin 02:00
Well, there's, there's always something going on, unfortunately, both good and bad. But you know, we're sitting here kind of in the in the middle of the year, and so from your perspective, Lindsay, what are things that we can do right now or try and get ahead of to have a better tax filing come
Lindsey R. 02:19
next year? Right? So we can talk about some generic things. I do want to end with a very time sensitive thing that popped in my head i We can't forget about. So don't let me forget that. But So generally speaking, so you hit it on the head, Collin, you're talking about adapting like, yeah, we're touching on this, but now you last year versus you this year is different because your business is different, so different things apply. So as always, bookkeeping is super important. And I'm not just saying that because I'm a bookkeeper. The reason we are in this business is because it is so important. And I'll explain why. So there is no magical cure or magical list of exemptions. I know there's a lot of you're probably seeing lots of ads on Instagram and Facebook and whatnot, just saying, like, you know, listen to this seminar, and we'll tell you how to pay no taxes and all that. Jess, well, some people walk away thinking, there is some secret list. And mind you, there probably are some really high level thing for millionaires to you know, if you real you do real estate investing and all these things, and with depreciation, you can pay no taxes. Sure, there's that. But for, generally speaking, everything you pay for your business to operate your business is tax deductible. So where I find, especially with pet sitters, where people are just aren't aware that they're doing things, some people will even just take their point of sale, like, list, like, here's how much I made, gross and not realize mileage, even food that they buy, office supplies, computer, internet, cell phone. Like, they're missing the like, the more obvious things, because they think, because your business is so simple, it's not like you're you're owning a retail store where you have to buy $100,000 a product just to start making money. So you guys are a service space. So it's a little different. Um, so, so think about it from an outsider's perspective. What do I have to use in order to run my business? Well, internet is obvious. Cell phones, obvious. Um,
04:42
mileage obvious, and then office supplies, and then food if you're buying stuff, if you're buying food while you're out, that is generally a business write off, I know, even though, if you're if you're you and your spouse run your business. You go out to dinner, make it a business meal at least half.
Lindsey R. 05:09
There's a lot you can do. And so, yeah, so I just want to give you guys encouragement. So first of all, it's not as complicated as it sounds, especially the people on the internet when they're trying to sell you something, make it sound like it's mysterious, and you know, all you have to do is pay for something and you'll get the cool answers. And it's more of a lifestyle when you're an entrepreneur, if you live in a lifestyle of your tax deductions are all around you. I touched a little bit about home office, and I can kind of go over what that is.
Collin 05:44
I think home offices is, is really important for us to know, because we run a lot of times. We don't, we don't think we're eligible for things like that, because, well, I don't have a place that I go to. I just do this at my kitchen table, or I just do this in a bedroom or something like that. So what is a home office. And really, how does it qualify? Right?
Lindsey R. 06:02
So the IRS would qualify as a dedicated space that's used exclusively for business. Will they ever know if it's 100% like a lot of people will use a spare bedroom, and they'll have a spare room in there, you know, a bed in there, and it could be technically used for other things, but it's, it's, it's your main point of business. So what you do is you take that square footage of that space, so say it's 100 square feet, and you take the total amount of your home square footage, and then you divide that out. So if it's, I'm just going to use numbers because off top my head, because I don't trust myself to do good math on top of my head. So say your home is 10% sorry, your your home office is 10% of your home. That means you can write off 10% of your utilities if you rent 10% of your rent, and even repairs and maintenance. So if you add on to your home, or you repair part of your home, if it's if it's your office, that's 100% deductible that part of it. So that is an awesome thing, but normally you have to be your own advocate when it comes to tax deductions. So but keeping track of that, a lot of people think, oh, it's because I'm paying for my mortgage or my rent out of my personal account. So that's not a business deduction. It's not a part of regular bookkeeping, but it is a part of what you're going to give to your tax person at the end of the year and say, Okay, here's my home office and here's all of my home expenses, so that they can do the calculation and put it on your tax return. I
Collin 07:44
think that's what's really important there. Of most of us think, Oh, I use my business account, my business bank account, to pay for this piece of gear. So that's an obvious deduction. I think that's where a lot of us stop. But then it's going well, did you use any personal stuff for a percentage of the business, and that's where it sounds like you really do get a lot of lot of power in finding extra deductions,
Lindsey R. 08:10
right? And I and that's why it's just really wise to even watch your personal bank account. I know that all of us are guilty of maybe putting something business on the personal or personal on the business card to watch that. But yeah, yourself. Cell phone, I think, is the biggest one. And I think, you know, if you're in a family plan, it doesn't make sense for you to move it all to the business account or start a new account just for one person. But you just have to keep record of what you paid and how much of that, you know Bill is for the business, and then you, you and you can get that as a tax write off. And
Collin 08:48
that's a, that's, that's actually a question that I was thinking of there Lindsay of the cell phones, because I know we live and breathe and run our entire business on our phones. In a lot of cases, what's the decision tree of? Okay, I need to go instead of getting just the percentage deduction for my personal that I use for my business, when does it make sense for me just to go and have the business pay for its own separate cell phone and plan and everything like that?
Lindsey R. 09:16
I would say it's purely if there's savings. Now, sometimes there is savings. I know when it came to our family, when we were deciding between internet providers, it actually made more sense to go with a business account instead of personal. I would just say it's purely if you can save money with us, with our business, we're 100% on the internet, so internet's like extremely important. So what we other factors we had to take in consideration is customer service. Like, if there's a problem, how soon can we get it fixed? So we learned that the hard way, like we switched to Starlink, and it was going great until we had a problem, and then we reached out and we only got AI. I was like, oh, yeah, that's important.
Collin 10:02
Important. That is a really good point. And a lot of cases, the business version, it's, you know, it's the same internet speeds, it's the same hookups, it's the same everything. But the person you talk to on the other line, a lot of them, they'll have your direct business representative and a direct business account. I know for we have a we have two different locations, so we have a home office, and we have a remote office and our other service area, and that's the thing. We signed up and they went, Oh, it looks like this is a business. Here's your direct here's your little code that you enter when you go through the help that kind of pushes you through to get to somebody more more quickly whenever you need it, because it is imperative that, well, I don't have time to sit here on an hour long phone tree, so I I'm wait. I'm wasting a lot of things right now,
Lindsey R. 10:47
right? And so with your business, it could be, could be yourself, providers you have to do. You have to weigh out like price and what you get for that price. It might not make sense, or it makes a lot of sense to stay just with your personal account, even insurance. When it comes to insurance, that's another thing. Is it easier to group things together or to separate? I would look at it both ways and see pros and cons.
Collin 11:13
It is all about going, Okay, what? How do I what make the best decision, and really understanding what's important to us? Because just the face value of, well, I may save some money, maybe a little bit more expensive, but what's the experience of using that? And do not discount the the importance of having good support and a good helpline. Because that's again, just like you. We when we went down that road one time where we thought we made a good decision with softwares and stuff, and then we were like, oh, there's nobody
Lindsey R. 11:41
here, yeah, and you're left alone, and I'm losing this, oh
Collin 11:45
no, like, it's one of the worst feelings to have, and that's so so far removed from just a pure tax decision. And I think that too we can swing both ways. Can't we have too often we're like, Well, this is the hard by the numbers decision, and we lose track of the more the more important stuff or interactive kind of value? Yes, exactly, yeah,
Lindsey R. 12:10
yeah. Trust me, I'm an accountant. I tend to go to the cheapy route as much as I can. But as I grow my business, I'm like, You know what? My time is more valuable than my money, and a lot of cases so And either way, it's a write off. So it's like, okay, if it saves me a lot of time and I have to pay a little more, it's still a write off. So I'm it's good, and I can't afford it well,
Collin 12:34
and that's important, too, as you mentioned, I have the money for this. I'm not just going out and spending money that I don't have just to get something so I know a lot of times we get the hit midway point of the year, and we start looking at what the last six months were doing, some projections for the next six months, looking at some anticipated taxes and stuff like that. And you can get into that mindset of, oh, I have. I'm going to owe a lot more this year, so where can I spend versus what deductions Am I not taking advantage of?
Lindsey R. 13:03
Right? And that's why one of the reasons of having a professional bookkeeper is so helpful, because they're already looking at other people's businesses, and it's like a second nature to them. They notice what's missing and what's not there or or the reverse is true, like, Hey, I think it looks like you think this is a business run up, but it's not. We've had a couple interesting times where people slip something, try to put something in, and it just flat out wasn't a business expense, like plastic surgery and whatnot. Like, yeah, it's true. So we oh, well, like, Okay, well, let's let your you know your tax professional decide, we'll still put it here in its own special category, but it's nice to be able to bounce things off of people like, Hey, what are other people doing? Some people work it out with their CPAs, where they can actually pay themselves rent instead of doing a home office deduction. Yes, there's special rules about that and how that's done, but it's but it when you and you have a tax professional on your side that you're bouncing ideas off of, you can make a plan that works for both of you and saves you tax deductions.
Collin 14:14
Well and on the deductions aspect here, I don't know if this is a fear of anybody else or if it's just me, but sometimes, whenever we're sitting down taking deductions, I can start to worry that I'm taking too many and I can feel like, oh, is this bad that I have all of these here listed here is it? Is that a thing? Is this just in my head?
Lindsey R. 14:33
It's a really it's a really bad thing. Actually, a lot of people do that, and we actually have even people overpay purposely on sales tax, because they feel like if they just throw extra money at the government, the government leave them alone, and it actually, I, I'm mad on their behalf. There's a lot of people who miss out on deductions just because they don't. They're afraid that they're they're overdoing it. So there, there is a. Ground. I know there's two ditches on every side of every every topic, but I would say as long as you have a system where you justify it, you you have a system of writing things down, you're going to be just fine. I know one of the major deductions that people don't utilize is paying their children as employees, that's a huge, huge one. You can pay your kids tax free, up to $12,000 a year each for wages. And yes, you can do that. And there's people that have abused it. They didn't write down what their kids actually did, and they just basically, you know, gave them money for free. But if as long as you document, well, that's, that's a huge tax deduction that nobody else has tax free. Your kid is getting that money without having to pay any unemployment, federal tax, state tax, local tax, it's all tax free. So, but again, I know a lot of people who are afraid, like, won't that put the target on my back? I don't know. I've never known anybody who who got audited because of that. I have heard some stories of people getting audited, but it always ended them. You know, with paying over six figures of tax, like, well, if you're paying over six figures in tax. You were doing a whole lot of lying. That wasn't just, you know, a couple here's and there's where people don't understand is the IRS does compare how many, how much you deposit versus how much you claim the sales. So I think there is a, is an algorithm, I guess you would say, but I've never heard. I mean, we've been in business 16 years, helped 1000s of businesses, and we've only had one client ever get audited by the IRS. And it's because I might tell this story last time, but it's because she had a bookkeeper before us who just filed her her taxes with only half the bookkeeping done. So it was her first year in business, and she ended up owing $18,000 in income tax. And obviously that's wrong. If you own a restaurant in the first year you owe $18,000 in tax. That's kind of suspicious. So she had us redo the bookkeeping. Found out she actually lost $20,000 so she asked for the money back from the IRS, and they said, Okay, we'll give you the money back as long as we can audit you. Yeah. I mean, that makes sense. If, I mean, if you're asking for 18,000 back, that makes sense. Um, so, so you can learn from her lesson, do it right the first time, because they don't give money back for free.
Collin 17:49
Well, and it's, it sounds like, as long as that justification is there right in your in your because, again, that deduction is there. It's not an illegal deduction, it's not a loophole. It's there on the books meant to be taken it's just on us as the business owners to take it responsibly and take it in the right way. Because, yeah, you can abuse things, but if you have, if you're, if you are aware of that, if you're intentional about what you're doing, you're, you're keeping track of things, writing things down, you know, then there is justification for that. Because I think it's also important to note that just because you get audited might not mean that you did something wrong. You just fell into the random audit pile that year, and they're just trying to dragnet and see what's going on.
Lindsey R. 18:30
Praise the Lord that they have a short staff. When we first started our business, there were a lot more audits. It was a more of a real threat, but over the years, it's dwindled a lot, just because the IRS is struggling so bad. So So, yeah, I would just be more confident in in tax deductions and again, throwing more money at the IRS isn't going to help your your, uh, help you at all.
Collin 18:54
Have you heard of time to bet? Dan from NYC, pooch has this to say,
18:59
time to bet has been a total game changer for us. It helped us streamline many aspects of our operation, from scheduling and communication to billing and customer management. We actually tested other pet sitting softwares in the past, but these other solutions were clunky and riddled with problems. Everything in time to pet has been so well thought out. It's intuitive, feature rich, and it's always improving. If
Collin 19:19
you're looking for new pet saying software give time to pet a try. Listeners of our show will say, 50% off your first three months by visiting time to pet.com/confession. Well, you mentioned the the hiring of kids and in a business, and you know, especially for our own kids, I think that's what's important here, is we're hiring our own kids. If you have kids, not not others, there's labor laws for that, but, but okay, what does that look like? Because it's out there, it is a little weird of what that would look like. So what kind of things do we need to prepare for that, and how do we get that set up appropriately?
Lindsey R. 19:53
So yeah, so what that looks like is, i. When you set them up on payroll, you whoever's doing your payroll needs to know that they're your child and that they're tax free. There can be some confusion. There not a lot of like, again, not a lot of people take advantage of that. And so you wouldn't want them to pay taxes on accident and have to get a refund. So that's the first thing. The second thing is, you can not be an S corp. So if you're an S corp, you cannot pay your kids tax free. You can still pay your kids. It's just not tax free. You lose that benefit. So if you're an LLC, taxed as a sole proprietor or a sole proprietor, you're allowed to take advantage of that, and our current tax code says you can earn up to 12,000 without paying federal income tax. So, so yeah, so that's why, that's where the 12,000 comes into play. But yeah, so you pay them on a regular basis, and just like you would another employee, except no taxes. The big thing that people, I've heard of people in the past that abused this is they didn't document what their kids did. So you should have a process in which they document now, for our kids, we use harvest I think it's called harvestapp.com or something like that, or go harvest or something like that. They can set up a free account, and as long as they only have, I think, one client, it's free. So that way, when they do work, they're clocking their time. We're not the always the best at it, but we do our best. And one thing they also take in consideration. Is that a lot of states have graduation requirements that require them to work in businesses um in order to graduate. So you can be tracking time for paying them, but also tracking time for graduation purposes. So which is really cool. Two burgers, one son.
Collin 21:59
I had no idea that that was a requirement for some people, either. So, yeah, and this is, you know, for us in the pet sitting world, you know, it, it's finding, I think, what people can also get hung up on, it's, it's finding the right tasks that are age appropriate for kids to do, right? It's, it's not, oh, I'm going to have my, you know, my eight year old, do an overnight where they stay at a client's home by themselves. No, it's not that. It's it's going, is there some paperwork as they're filing? Is there cleaning of the home office? Is there other things like that that they can do?
Lindsey R. 22:33
Right? And I mean, even being an assistant or shadowing like, kind of like an intern situation where they're watching you with your customers and how you how you handle yourself. That only, not only is going to, you know, meet all the requirements of working and getting your hours in for, you know, graduation purposes, but you can also, I mean, Lord willing, pass this business onto them in the future, like this might be something that they really love, and you're teaching them how to be an entrepreneur, good customer service, working hard, going over and beyond. That's not something people generally just pick up. It's something they have to watch. So there's a lot of benefits, like, not just the money part either.
Collin 23:17
Yeah, you're building your own little human there, right? And building in adults, right, to go off and do more more things. And that aspect too, of going, Yeah, I if I'm thinking beyond myself and my business, how do I know to whom I can pass this down or to what happens whenever I'm done with the business? Is it? Do I sell it? Do I have a procedure for passing it down to somebody else? Do I need to bring in another partner or whatever. But yeah, if we've got kids going, Hey, are you interested in this? And the only way that they're really going to know if they're interested is by being kind of a part of it. In short, my fee, we are going, Well, my seven year old is in my business. They're not going to buy it tomorrow, but what they can do is develop skills so that they're they're that much more ahead of the curve when it if that time does come where they need to take over some aspect of it,
Lindsey R. 24:03
right, or just start their another business. Entrepreneurship is so there's so many hats you wear, you know, marketing, customer service, accounting, operations. There's just so many, so much wisdom to be learned and just a small business.
Collin 24:22
Yeah, I know we, we recently actually did hire our own, our two kids in our business, and having them do the paperwork and do that kind of stuff. I think that was a big aspect, too, of sitting down with them, like with the with the we had the, you know, with the job offer, and having them read the job offer, because the number of times that I've heard of people who didn't read the job offer, and they're surprised by the requirements, like just little skills like that that come out of going when somebody hands you a contract, you read it, because that's because you don't you need to know what's in that. And this is why that's important. Those all those skills are so much more like you said Lindsay, above and beyond. And just paying them a payroll so you can get tax, you know, you know, tax free money for them.
Lindsey R. 25:06
Yeah, I'm just thankful for the people who lived hundreds of years ago who put that in the, you know, or 100 years ago, who put that in the tax law, because, like, that is important. I think our society has kind of moved past that to where we're more we're not. We don't have the mindset so much anymore that we're investing into our kids life skills. So, yeah, I'm just super thankful that that's there and and it's starting to get more popular again. So I'm thankful for that. Well, yeah, because
Collin 25:35
it used to be that kids really just naturally be part of the family business, and so they were doing all this work anyway. So it's actually a tax advantage to go, Okay, well, this is a way that you've been operating. Here's how, another way for you to benefit from that and for them being involved again, when it's your kids, specifically, that you're trying to get involved in the business. And with with that, you mentioned the tracking of hours. I know we talked a little bit about this, as far as the tracking of expenses, I know, in QuickBooks and in other softwares, there feels like there's about 1000 different ways to classify each expense or each things that comes in, or the categories that they can fall in for expenses. How granular do those need to be, or should they be for proper record keeping.
Lindsey R. 26:23
So I'm glad you asked. This is one of my soapbox things that I like to educate people on. I think as human beings, we tend to make things as complicated as possible, like when we dive into things, we're all about it, and we're like, I'm going to be as granular as I possibly can be. But then when you go on to the next month, you figure out, like, Man, I just made this super complicated. So what I recommend is going as simple as possible. What and ask yourself, what do I want to know now? They're you know, when you open up a QuickBooks account, there's general accounts on your chart of accounts that will come in, and that's generally what your tax professional is going to need in order to do your tax return. But we I, as a pro advisor, I see a lot of people that go over and beyond that and make it granular. So for instance, you might have an example of where a retailer has their travel expenses broken down by airline, fuel, travel, meals, conveniences, taxi, like at Harvard, bookkeeping. We don't need that because we hardly ever travel. So I don't need that grant. I'm not tracking like, how did I do versus last year on how much airlines I paid for? But if that's something you want to know as a business owner, then I recommend you do it, because you can make decisions off that data. Another one might be insurance, like, if you pay for multiple types of insurance, you might want that with subcategories you might not. Utilities. Is another one that's often use, automobile expenses, you could you could just lump them all in, or you could have sub account, lease, fuel, registration, maintenance. Do you want to know that data? So that's what you have to ask yourself, is, what do I want to know next year? This time? What I want? What do I want to compare? Am I paying more for a thing or not? Because that's really when you cross over from using your financials as a just to get my taxes done till you're crossing over to using as a tool. Where can I improve dues and subscriptions is normally a big one, where we, we, we will sign up for a subscription and then kind of forget about it, because it's little and and it accumulates. Well, you can compare last year to this year and say, Okay, well, this subscription went up a lot. Can I can I pull that back? Um, meals and entertainment went up a lot. Can I pull it back? I know a lot of them. You know, when you're you're doing really well with your business meals entertainment kind of follow that pattern, because we're so busy we don't eat right, and we are doing quick meals and all of that well. Sometimes that's one of the things we can check ourselves. Like, okay, I can cut back in this category, but you only do that if you're looking at your financials as a tool and not just surviving until January, like what you know, because, I mean, I'm not, I'm being honest. Like that is a really important number, whatever that bottom line, is that super important? But when you kind of graduate as a business owner to I want to do better. I want to I want to be around in five years. I want to turn make my business into an asset, which is a big thing that we're we've been pushing at harquin for a little over a year, and we kind of touched on it earlier, about having a legacy and passing this business. On whether selling it to somebody else in the future or passing it to our kids building it, so it's worth something when we're done with it. And the one I mean, look at all the old rich families. It's all about their finances. It's all about how you manage things, and not doing bank balance accounting where, oh, I have money in the bank. I'm good, and I've been there. It's just we have to graduate from
Collin 30:26
that. You mentioned the finances as a as a tool there, and how that really starts with, with understanding what you want out of it, what data do you need? And that's understanding, what kind of business do we run? How am I operating? You touched on, like, the the car expenses, like, that's a that's an amazing thing to keep track of in the pet sitting because we use our cars so much, because you might find, oh, I've crossed that break even point to where now my business should probably be buying a car that I'm leasing back, or whatever that looks like for us. But I'll never know that unless I'm keeping track of all of these expenses on both my business and my personal side, whenever you know. Because again, if it's a personal side, the bit you know, we're going to we're going to be buying the maybe buying the the oil changes out by ourselves and so the business change do that. But if those add up, because we get really busy and we're doing a lot of business, and we're consistently that way? Well, that may need to switch over at some point, but we don't know, unless we track but also, the other part of that is, you mentioned, like, Okay, what about a year from now? Because I know what I do is I make all these beautiful categories that I remember for exactly 11 seconds, and then the next time I open to look at it, I forget that I've made any of them. Oh,
Lindsey R. 31:40
yeah. And what does that mean? Like, I made that category. What's that mean? It could be this or could be that, I don't know. And, yeah, yeah, that's exactly right. 11 seconds,
Collin 31:50
because I found that I would make a category, and then I would forget and go back to the next month, and I'd actually make the same category, but it would be worded differently, and then I'd have duplicate categories for the same stuff. And I was like, Oh, right. I just simple, simple Collin, because you don't remember anything. Well, yeah, and back, and
Lindsey R. 32:08
I have two points. So back in the day, when we first started, back in 2008 we I would, I would look at someone's financials, and it would say, like, telephone expense, phone expense, cell phone expense, and long distance expense, and they're all the same thing. Yeah, I used to make that joke, but long distance doesn't make sense anymore. You can't really make that joke anywhere, but you brought up a really good point of something that we are. One of our adamant points about arkwin is when we do our clients books, we always have a second pair of eyes that look at it because of those duplicate entries. Like, for instance, if you pay for a quick book subscription, one month you might put in software, one month you might put in dues. I see that all the time. It's so inconsistent, and so we want to make sure those are all going in the same category. Because how can you compare and see their I mean, their prices are going up. How can you say, okay, I can afford that or whatever, if they're all in different categories, and then you don't really have good data, right? Yeah, and then
Collin 33:10
you, and then you, you can't make those good decisions. Of, do I need to move off this? Do I need to be allocating more towards my business operating expenses here? Or do I need to go out and try, you know, how do I allocate my personal resources of, do I become a do I need to become a marketer for a couple days so I can try and drum up more business? Or do I just need to go and do more work, or whatever that looks like, so that you can make that, you know, make the finances work right?
Lindsey R. 33:35
So, yeah, consistency is very important. So we always recommend after you do your bookkeeping and you reconcile it, you always go back and look at your PNL detail and just glance through it. Does it make sense? And maybe you look even at the last six months and say, am I being consistent? Because that's where you're going to find your mistakes. Another one we often see is we see interest expense get posted to insurance expense, just because people are going too fast when they're doing their bookkeeping. Also looking at your balance sheet. If you've ever sat in any of my classes, I always talk about the balance sheet. It's the most neglected report, but especially if you're using like QuickBooks Online who and you connect your bank account. If it doesn't know where things go, it can put it in this account called Uncategorized assets, and it's just expenses that aren't being written off, and people don't even know it's there, and it just accumulates. So look at your reports and make sure you know what they mean, especially if you're doing your own bookkeeping, because a lot of people assume their tax professional is going to dig in their reports and make sure they make sense, but they don't. Um, this is kind of another soapbox. There's a an accounting accountant short shortage right now. Um, they said 75% of all CPAs were retiring um, or hit retirement age in 2020, so people don't get paid to care anymore. Um. So because the dynamic has changed now, it's like a desperate plea to get everyone as fast as possible. It's like, it's just, it's different. There's no more competing about good quality. It's like, it's like, more like a farm production, like next get them in the door. So you have to be your own advocate. And I'm speaking from personal experience with all this. You know, we work with hundreds of CPAs every year, and when we inherit a file, we do the legwork to make sure we're understanding their QuickBooks file and where all the data is. And I can't tell you how many times we found giant mistakes that the CPA did not catch, and they have to either refile or fix it on the next tax return. So be your own advocate. Look at the balance sheet. Make sure there's nothing there, because if there's expenses being posted there, that means they're not on your PNL, which means you're not getting a write off. Today's
Collin 35:51
episode is also brought to you by the National Association of Professional pet sitters, or naps. They're the leading non profit organization supporting professional pet sitters and pet care professionals naps offers valuable resources like certification programs, continuing education at a nationwide network to help you grow your pet care business, whether you're just starting out or looking to take your business to the next level, naps is here to support your journey. Join a community of dedicated pet care professionals and elevate your services with naps today, Learn more and become a member at pet sitters.org. Turns out, knowing some no just running a few simple reports and but also just reading them and understanding them, because at the end of the day, it's not your CPA who's going to be audited. It's not your bookkeeper that's going to be audited. It's you the book. You you the owner, right? You are going to have to justify and explain what happened or pay the associated fines, that's just what happens, right? So knowing, and I love that of running two or three different kind of reports and going do all of these make sense, because that P and L and getting that big summary, looking at the categories that are there, like you'll really be able to see, oh, because that's where actually I ended up catching some duplicate categories eventually, because I was running that, and I go, those are kind of the same, oh, I've been right. I've been okay, right, right. And so I was able to go and merge all those together and make sure that it was a lot simpler. And so knowing I have, I have, reports are powerful. So you mentioned looking at the balance sheet. You mentioned running P, L, any other kind of reports that you think that more business owners should be looking at or running regularly? Yes.
Lindsey R. 37:25
So another big mistake that I see, especially if you hook your point of sale up to your QuickBooks account or your QuickBooks Online account, is look at if you see on your balance sheet accounts receivable or accounts payable you want to run the open invoice report if you have accounts receivable listed and unpaid bills, detail if you have accounts payable listed. And what that's going to show you is everything that QuickBooks says is an open AR or an open AP. The reason why that's important is because if you have something in there that's not supposed to be there, it's affecting your PNL, your bottom line. So here's a good example. I back when I first started, probably a couple years in probably about 2010 I went to an order woman's house, and she rented houses, and so she was receiving her deposits to accounts receivable and not to sales. So accounts is a balance sheet account. So when I looked at her PNL, her income was, let's just use simple numbers, was $10,000 or her net income was $10,000 but her balance sheet had her accounts receivable at negative, like, 600,000 and I was like, Hey, I think you're entering these payments wrong. Because you're putting them to the balance sheet, you're not putting them into sales. Um, it would make sense if you had an invoice and then a payment and applied them together. But that wasn't the case. She just did the payment without the invoice, so just a negative accounts receivable. And I had her look at her tax return, and she hadn't claimed her sales in years. She was doing her own taxes, and because it didn't show up as an income, she didn't do it. I don't know if she was super interested in owning up to that, because she was a DIY type person, and I think she was just going to move forward. I was like, That's between you and the IRS. I just want you to know I've documented but when you and I just saw some the other day who had their point of sale that was just dumping every single sale in but wasn't recording so what it was doing is recording the invoice and then recording a deposit, but wasn't connecting the two together. So this QuickBooks was double counting. There was a client we took over who had been. And her stuff for years, and we found out where QuickBooks Online was double. Both downloading data, it doubled. Downloaded all the data, and because it was double, it reconciled right when she just select all reconciled. It reconciled because double of everything she she double counted her sales. So I'm, I'm kind of a leery person when it comes to connecting things to my QuickBooks just because I like, I like to enter things and know that I put it in the right category and not just hope. But we also have to be aware that when we connect things to our QuickBooks Accounts and it's just auto dumping data in, you're now responsible to find all of it in. There's a whole business. There's a whole industry out there just cleaning up people's QuickBooks files. And there's a reason why,
Collin 40:51
well, and that's a good reminder, too, of as there become more automated processes, as AI becomes a tool that a lot of I know QuickBooks is looking to use AI and a lot more of its products. And other financial institutions are looking to figure out, how can we automate a lot of this? Have little help tools. Have little widget tools. Again, it doesn't matter what's being placed before you. If you don't either a understand it, or if you b Aren't double checking, none of that matters, because that's there to assist you. That's not going to tell you, because numbers won't. Numbers will tell you exactly what the numbers are meant to do. But if you don't understand what that number is, it's completely meaningless,
Lindsey R. 41:29
right? And again, your balance sheet normally tells you if you're if you're off. So if you do, if there's something on that, you need to ask somebody for help. If you go on there and you go on there and you don't understand something, ask somebody for help, because it could have bigger ramifications than you realize.
Collin 41:46
I did want to touch on vehicles for just one more moment here, because, again, we use vehicles all the time. Any you mentioned, mileage is important too. How is there a proper way that we should or should not be recording mileage and keeping track of that, right? So, um,
Lindsey R. 42:10
it's, it is simpler than a lot of people make it out to me, there's, there's a lot of cool apps, and some of them cost money, some of them don't. You just have to find a tool that works for you. You can even get an Excel spreadsheet that just keeps track. It's just basically recording your odometer begin and end for a trip that you do. You could do that, or if you use have the same client every week, or, you know, you you service them, you know, 10 times a month, or whatever, you could just say, okay, client a is five miles times 10. So that's a 50 mile write off. You can do it that way. Um, but yeah, there it's, it's whatever works for you that makes it easy. Um, you just have to have a system and then stick with it. The only time that you might be thrown off if you do that system is if you go to a one off situation, or you you go to, like a convention, or, you know, something that doesn't happen every day, every day. But other than that, as long as you're keeping track of your appointments and how many times you went to that appointment? I think it's really easy. Some people even use their calendar. They'll, once a month go through their calendar and say, Okay, here's how much I use for the month.
Collin 43:31
How does mileage checking change? If we're using the home office deduction,
Lindsey R. 43:35
it shouldn't change a whole lot. So so for instance, if you guys had a standard office that you went to. So I know you said you have a remote office. You can't count the mileage from your home to your office, because that is going into your place of business, but from your house to your different clients, that is a write off.
Collin 43:55
Yeah. And again, knowing that, okay, I can. I can use that now where before it wouldn't have been counted as a write off. But I can now go, oh, well, I have a home office. I'm going to my clients, and I can, I can include that, yep.
Lindsey R. 44:07
And then, like I said, if you go to a conference, you go, you have to even go get something for your business. So say, you have to go to PetSmart or something to pick up something that's a write off too, getting supplies, you just have to have a system that works for you, because if you forget about it, it's not work, it's not working. So you have to have something, a piece of paper so you don't forget. Yeah,
Collin 44:31
yeah. I know they used to have log books and cars and things like that, and just whatever, however your brain is going to function best that you can be consistent with them,
Lindsey R. 44:40
right? Consistency is key.
Collin 44:44
Well, in our industry, and I know a lot of people face this too, of going, Okay, I use my car for business so much, and I kind of alluded this to this earlier with the cell phone thing. Have you seen any instances where you kind of it starts to make. Sense where maybe the company needs to just buy a car, and you need to just have a company vehicle for the kind of work people do, right?
Lindsey R. 45:06
So where I would say it makes the most sense is if you can get a car that is more energy efficient, it's going to cost you less gas, less insurance, then go ahead and you're at that point where you want it's time to buy something. Talk to your tax professional, but most of the time, it does make sense for your business to go ahead and purchase it, especially if you're only using it for personal a very little amount. But yeah, and then, you know, you can get advertising on the side of it, and you can go crazy, and that's all right off. So work with your tax professional, because if you don't have a plan with them, they might misinterpret what you're doing and say it's all personal. So that's why I always just recommend having a relationship with a tax professional. You guys come with a plan, and we stick to the plan, and you guys can, you know, communicate what you're going to what you're going to do with your vehicle, but yeah, if it saves money, and you're at that point in your business where it's time, you can go ahead and purchase the next vehicle in your business's name, especially if you're driving a lot of miles, if you have a personal car that you want to convert to business, I believe it's called the Section 179 deduction, and you can do that, you just have to talk to your tax professional to make sure it's done properly. Yeah,
Collin 46:27
it's a little bit more than just the business writing you a check to you deposit in your personal account. There's some paperwork that goes along with with marking what's going on there,
Lindsey R. 46:37
right? And and there's also state regulations. That's why I just always want to put things on people's radars, like, this is a thing, but you have to work with your tax professional that way. It's well documented too. So if ever anything ever happened to them, you go to a new tax professional. It's it's well done and not chaotic. Lindsay,
Collin 46:55
I really want to thank you for coming on the show today and walking through these, these big topics. I know that sometimes this can get very overwhelming for people, mostly because we already have a lot on our plate, and we can suddenly become, oh, that's just one more thing. I can't even guess, just too much. So I appreciate you breaking these down for us and encouraging us to to try to document and to seek after those deductions and be diligent about those and making sure that we are recording things properly. I know there's a whole lot here. This is, again, a topic that it never gets any smaller as what I found. It's always just more and more things to worry about. So if people want to get in touch, pick your brain or see everything that's going on at harquin How best can they do that?
Lindsey R. 47:38
Yes, so you can reach us@harquinbookkeeping.com so it's H, A, R, Q, U, I, N, bookkeeping, and that's a weird word.com, and just reach out to us. You can also email admin at Arkham bookkeeping if you have any questions, it can be forwarded to me. You can reach out to us on Facebook or Instagram. But yeah, we'd love to help you. We know it's confusing, especially even applying things to your own individual experience. Like, here's my situation. How can, how can this help me? So, yeah, we'd love to help you. There's one more thing I wanted to say that is kind of time sensitive, and all of you that waited till very end can hear this. But so there's something for 2024 that all businesses that have to do, if you're an LLC or an S corp, that you have to do is called the boi, the beneficial ownership information act. There's some kind of act that happened in 2021 where the federal government wants all business owners to register with the federal government right now, when we register our businesses, we do it through the state. The federal government wants us to register with them because to help them understand who owns what business and to prevent fraud. So if you started your business in 2024 you are required to do it as soon as possible. If you started your business prior to 2024 you have until December 31 2024 it's not hard to do at all. Basically, all you have to do is, I think it's, you can just Google it. It's like f sin or something like that government website, and you just have to give you your personal information and upload your driver's license or passport, and that's it. It takes probably 30 seconds. The only thing that would be a little more complicated is if you started in 2024 they also want to know the personal information of who start helped you start your business. So if you had a lawyer help you register your LLC, or something like that, they want the lawyers personal information too. So it's kind of weird. It ain't gonna lie. You know, you can do that, and it asks you all the questions. But if you had your business, or you're the one who started your own business. This like, you know, filling out the Secretary of State website information in 2024 or you just have been in business longer than 2024 it takes probably you less than five minutes to do I just don't want you to forget to do it, since it's new to this year. Ah,
Collin 50:20
yes, and I will have a link to that in the show notes, because that's been one of those things that it can they announced it at the beginning of the year. And I think a lot of us were like, oh, yeah, I'll get to that. I've got 365 days. Absolutely no. A lot of people still have either a not heard about it or B, it's a Save tab in our browser that's still sitting there. We need to do something about
Lindsey R. 50:41
it. And I can attest. It only took me five minutes.
Collin 50:44
Okay. Well, very good. Well, I will make sure thanks in the show notes and to your website in the email as well. Lindsay, thank you so much for coming back on and encouraging us all this. I really, really appreciate
Lindsey R. 50:55
it. You're welcome. It was nice being with you. It's always a good time
Collin 50:59
to review not just your expenses, but how are you preparing for tax season? And whether you're getting all the advantages that you possibly can the number one thing you can do right now, whether we're approaching the end of the year, starting a new one in the middle of a year, whatever it is, get organized. The best tax professional in the entire world can't help you if they don't have good data to work with, if you're not tracking things, if you're not categorizing them right, if you're not keeping things in an organized manner, no amount of professional help can benefit you. It starts with us taking ownership and letting the onus fall to us to know that we have to do that aspect of this so that when we go to ask help, when we go to make big decisions, we have the data to back it up, and that makes for a really powerful business. We want to thank today's sponsors. Time to pet and the National Association of Professional Petz for sponsoring today's episode, and we really want to thank you so much for listening. We hope you have a wonderful rest of your week, and we'll be back again soon. You.
