Online Event Archive Recorded December 19, 2022
Join our webinar for insights on decoding your financial statements to strategically operate and grow your business. In this session, you’ll gain knowledge on:
- Developing and examining key financial statements, including the balance sheet, profit and loss statement, cash flow statement, and other essentials.
- Effectively budgeting and creating insightful financial projections. Don’t miss this opportunity to enhance your financial literacy and empower your business growth!
Transcript:
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
Speaker 1 0:00
Thank you, Daniela. Hello, everyone. I am Stephanie Magnus. As they are mentioned, I am a business counsel with the DC Women Business Center. I’m here to assist you in all your business counseling needs. Whether it’s like whether is is starting your business, you have some registration issues, just whatever it is, please feel free to schedule a session, so we can best assist you. So we’re gonna get started with our presentation, which is welcome to understanding financial statements. So what are financial statements? Before I go, I want to make sure that we always want to give a disclaimer that all the training that we’re doing is not to be intended for either tax or legal advice. If your situation is a little bit complicated or unique, individual attention, please consult one advisor before making any business structural decisions. Okay, so financial document housekeeping. This is, you know, we want to make sure that we have all the documents, we need to make sure that we are ready for any opportunities, whether it’s a grant, a business loan government contracting, we want to make sure that we have all of our documents that we’re supposed to have in our business. Thank you. So what are financial statements? So financial statements are the most important documents any business have, they show how your business is operating, and it shows your financial position. So for me, having these financial documents is the first step to reaching your goals, whether you want to enter a new market, develop a new product, or Salako, move on, you have the numbers to back your decisions. So the three main documents that we’re going to talk about today is balance sheet, profit and loss and cash flow statements. Document one, what is a balance sheet? You probably hear this all the time. And you probably thinking the word means what am I balancing. So it’s not like you’re balancing anything, but as you’re going to be balancing more of your assets versus your liabilities. So this is a record of your business assets and liabilities along with this capital is your net worth. So this is the things I always tell people is what anybody always asked you, Hey, what is your what is your net worth? What is your valuation? What is your business valuation? You if you have your balance sheet, you’re able to give that number. And a lot of times investors partners, or even lending institution want to know what your net worth. And I always tell people, if you had to liquidate assets today, how much would you be worth. And that’s what the balance sheet kind of gives you. So I put it on the right hand side a sample balance sheet. And on the left hand side, you’re gonna you’re going to list all your assets. And on the right hand side, you’re going to list liabilities. So your assets or anything like I said that you can liquidate that you if you needed to come up with the cash, you could do it. If you have the cash on hand, petty cash in the accounts receivable that’s like if you have invoices coming in. And so you know you have purchase orders coming in and you have invoice coming in that you’re going to be making money off of that’s kind of accounts receivable, you can add that up, that’s a tangible number that you can list, any inventory value, a lot of people will have inventory that were valued, they can sell it today, they can liquidate it or sell it wholesale or going or doing even going out of business sale, that inventory value is an asset. So if you have to think about it, if you have a storage unit full of say if you own a bath and body company, you got a lot of products in your in your in your storage unit, you can actually have a sale tomorrow and liquidate some of that inventory value investments. If you play the stock market, whether you have a stash account or a Robin Hood account or you play the stock market or you invest it in other people’s business and you get a return on investment, that investment is also going to be your balance sheet. Any prepaid expenses, land, land improvements, building vehicles, anything that you own, again, I can say that you can sell today. So your liabilities is what you owe people. And so you’re not the least is this point is going to be your accounts payable who you owe who who has given you an invoice that you have not paid yet, any notes payable, any long term liabilities taxes if you owe taxes, federal property, miscellaneous, payroll, audit is your liabilities. So once you take your assets and you subtract it from your liabilities, that’s going to be your total net worth. So that’s how the balance sheet works and this is a Good tool when you want to present your case, to an investor or a lending institution. So the key area is, is, it’s a long term view or track record of how your company is doing. This is the most important because if you have too many liabilities, let’s think about it. When you have personal, you have your personal when you go buy a house and look at the debt to income ratio, this is the same thing, you want to make sure that you have more on the left hand side, which is assets than you have on the right hand side, which is liabilities. That way number two, this is your profit and loss. This is how you can say okay, this is this now we’re talking about the first document was more of your assets. This is your income that’s coming in. So now we’re going to do we want to examine your income. And this is where bankers or investors or partners, anybody that wants to be part of your business or give you money or grants, wants to know what is your total income, and then what is your what is your loss, and then you need to come up with your net income. So Profit and Loss basically is the summary of your business earnings, expenses and net profit over a specific amount of time using the year. So if your fiscal year is January to December, then you would just put starting date would be like January 1 to December 31, which is in the fiscal year. And so what you want to do is report all income, you have national gross receipts, that’s anything that you have brought in from the business, whether you sold a service, you sell merchandise products, people have given to you maybe you did some crowdfunding, any grants, loans, anything that you’re going to bring bring in that you want to prove that it’s revenue. A lot of times, even when you’re trying to get a lending institution, they want to know that you would make enough money to pay the note back. And then cost of goods sold. So we I call it costs. That’s the cost of goods. So whatever you sale, you’re going to make that put that there. And that’s going to be your gross profits. Now we’re going to talk about expenses. And so if you typically, if you’re a sole proprietor or L LLC, or partnership, or SOC corporation, you are allowed certain amount of expenses. And so I’m going to use sole proprietorship and LLC for this example. So as a sole proprietor or LLC, you’re allowed to write off a numerous number of expenses, whether it’s rent or mortgage, utilities, office supplies, internet, phone, travel, meals, things like that, you want to record that as your expenses. And so for example, like for meals, up until December 31 of this year, if you’re not aware of this, all meals are 100% deductible. This came from the American rescue plan. And so if you have not gotten your receipts and stuff like that, for your meals, make sure you do that, because after December 31, it goes back to 50%. But that’s something you want to record in your expenses, office supplies, if you booked computers, so those gonna be your expenses. And the key thing is when a lender or investor, or the SBA wants to know what your net profit is, you’re able to give them because you have your profit and loss statements. And this profit loss statements going to help you do your schedule, see when it’s time to do your taxes. So the end goal is you need to come up with your net income. And again, that’s gonna be your bottom line. So a lot of times people make the mistake when they think their income is just what they brought in. And they don’t take into consideration that the expenses there occurred. So keep that in mind, your profit and loss statement is the most one of the most also the most important document, because it’s going to help you prepare for your tax season. So again, just to recap, it’s revenue plus expenses, equal net profit, or revenue minus expenses, equal net profit, your profit and loss statement is important because it gives you an idea how you how profitable you really are. It doesn’t matter if you have brought in $10,000 If you have $15,000, but to the expenses. So keep that in mind is that this is going to help you get a big picture of how you’re really doing. Either you’re going to rejoice at the end of the year, where you’re going to you’re going to you’re going to tell yourself, I need to make some adjustments for next year because I’m spending I’m spending more than I’m bringing in.
Speaker 1 9:46
Document Number three, this is your cash flow statement. This is like your flow through this is how you determine what’s coming in and what’s coming out. And this is going to show your actual inflows. So basically what happens is that you’re going to show what You have brought in, in a cash flow statement. And typically you do it month by month. This is what they call an accounting, you do your accounting, and you want to see what you’ve paid for, like, for instance, if this December, what did you bring in in December, this will help you create a budget for next year as well when you have your cash flow statement, because you can kind of see where you are. And the good thing about a cash flow statement is, you can start to determine what your slow months are. Because if you’re doing it month by month, you can say, well, in June, it’s it’s been it’s been last two years, it’s been a slow month, maybe you know, that’s the month that maybe we just go on vacation, or we need to revamp our marketing packets to make marketing taxes, make sure that we’re hitting our mark, in those months that we see some fluctuation of sales. So the cash flow statement is going to be you’re seeing what’s coming in, and then what’s going out. And at the bottom line, you know exactly what you do, because it kind of gives you a big picture. Because in the other ones you just kind of do on like your total number, like total office supplies, but this one, you can be a little bit more detail. And kind of this is like that time people know, you know, what’s your cash flow, you know, this, this is how to determine how accountable you are to yourself to your business. And they want it this is how they see how you’re managing money. If you’re spending too much on meals and travel, that may be a red flag to some people, they might not want to invest in you, etc, etc. So cash flow always remember, it’s the inflow and outflow is what’s coming in and what’s coming out. And so this is another type of document all three of these documents, typically is what like the SBA requires, if you’re trying to do any certifications, they’re gonna want to see some of these documents. So this is why these three are so important as you’re growing your business. Again, to recap, a cash flow statement is where’s my money coming from? And where is it going. And this is going to be key, because a lot of times we can look at this to see, sometimes we try to figure out where we need to cut costs. And when you do and that you can kind of see right away, say, by the second quarter, you’re gonna be like, well, we’re spending too much on meals, we’re to cut meals, because we’re spending too much on meals, and we’re not making much money. So when you if you’re tracking your expenses over time and your income over time, you’re able to catch these errors before the end of the year. So that way you don’t be in the race, which the negatives, you want to show a profit, especially if you’re trying to get a loan, or get investors, they’d rather see you in the black than in the red. So you want a cash flow statement you can able to catch where you have your high spending. So again, why are financial statements are important, you probably asking yourself, you probably asked yourself, since you started your business.
Speaker 1 13:11
So it gives some solid solid financials to help you get loans and attract investors. I’ve said it since the beginning, your business financials are essential for lenders and investors who want to see hard figures before putting money into your business. They want to make sure that they do have a sound investment, they want to make sure that you have the money coming in to pay back what they’re giving you. In a trend investors, they want their return on investment. So if they’re investing in it, and they want 5% back, they want to need to know they’re gonna get their 5% back from what they invested in you. And so it just it just kind of is kind of your blueprint to say hey, I’m a valuable business. Please Invest in me because I can pay you back. I’m, as you can see, I’m worth it. I’ve done my balance sheet, you can see my assets. So this makes me look this makes me very attractive to investors, and lending institutions. Number two, these reports give you an overview of your business’s financial health, how healthy are you, you go to the doctors, you get a checkup, right, they tell you if anything wrong with you, they may give you a thumbs up, they might put you on medication, whatever, these documents will do the same thing. They will allow you to analyze your business see how healthy you are. You may have to prescribe your company something that could be maybe I need more cash flow coming in. Maybe I need to readjust, readjust my products, my sales, maybe I need to increase my margins by increasing my my product sales. Whatever this is want to make sure that you have a financially healthy business. Just like going to the doctor’s you want to see what’s wrong with yourself. This will give you a big picture on how healthy your financial state of your business is. Number three, it’s going to be, I didn’t put it on here. But number three is, is security. Knowing that you have these documents in place, you feel more secure going forward into the future. So number tip, tip, produce regularly, a lot of these documents, if you get into a habit of producing these documents regularly, you will kind of be it becomes a habit. And I always say keep them current, you set the schedule, you know, I always say with the cash flow statement, you should do it every month, with a balance sheet, maybe every quarter profit and loss statement, that’s something you would kind of do annually to get ready for the next tax season. So what this is what you’ve already accomplished today, so give yourself a round of applause. Because now you are a now you have identified three financial statements. So if you you, if you’re thinking about getting a loan or getting accreditation, or even get into the government contracting system, you already know what type of documents you need to start preparing yourself for today. You’ve also learned the beneficial the benefits of each of these statements for your business. So you’ve already accomplished this today. So now, you need to start if you have not done any of these documents, especially now that especially the profit and loss statement, because December 31 closes out the IRS cycle. So in expenses up until December 31, we’ll go on to the 2023 tax season. And so if you have not started your profit and loss statement, this is a good time to do it. Now, if you have an accounting system, like QuickBooks, or WAV, or I think the other one you should already be if you have been keeping your recordings in that is simple is to go to the reporting system, click on profit and loss statement. it’ll generate it for you. If you’re old fashioned, and you’ve been doing Excel spreadsheets, this is a time of the year to start looking at your spreadsheets and make sure you’re prepared for the upcoming tax season. Especially now that as you know we’re moving into a new Congress, there may be some opportunities as we saw the last three years, from the cares app to the American rescue plan. There’s a lot of opportunities that they’re going to be presenting to small business owners like yourself, and you just want to make sure that you are you have everything in place so that you don’t miss any opportunities that may arise in the next year years to come. So so that’s kind of the presentation on understanding financial statements. So if you have any questions at this time, the floor is open Daniella.
Speaker 2 17:59
Yes, thank you so much, Stephanie. That was a lot of helpful information. We do have a few questions. But if you have questions, please include that in the q&a. And or you can just include it in the chat or just reach out to us as well. So the first one is, what is the best way to account for owners investments slash bootstrap dollars
Speaker 1 18:21
store. So I talked about in the cash flow statement in the profit and loss statement, you want anytime that you put money into your business, that is going to be income. So what you should have done was in your chart of accounts, you need to have make sure when you have your income, you can include your chart of accounts and backup. So chart of accounts is like line items in your accounting system, you label it. And so under income, you can actually label account system as owner’s contribution or owner’s equity, or partnership distribution or something like that. So that’s how you account for it on the income you want to do a line item, and you’re going to put in their owner’s contribution, that that is income because you put money that’s remember I told you about in the cash flow statement. That’s the money that’s flowing into your business. So that’s how you report your own your own contribution into your business. Hopefully you have this, whatever you put in, hopefully you have reflected into your operating agreement what specifies the owner the owner’s contribution. Thank you. You’re welcome.
Speaker 2 19:34
We do have a second question is Do you offer any training on how to use QuickBooks? Daniela? Yes, we are planning on having on how to use QuickBooks in the next year 2023. So again, stay tuned and keep looking at our website and I’ll be sending an email on that as well. So The next question is, can I find these financial documents on QuickBooks? Or should I simply download them from Google?
Speaker 1 20:07
So if you have QuickBooks, in the reporting, if you have diligently put your stuff into QuickBooks, you just go to QuickBooks and run reports, you can run a balance sheet, you can run the cash flow statement, and you want a profit and loss statement. It’s all dependent on you how diligent you were in doing it in QuickBooks. Now, if you had a verb, like a bookkeeper, or a VA, virtual assistant, hopefully they did their job and submit it. But in QuickBooks in order for that, for this, for this, that financial darkness to work, you have to put the information in there, who so when you go in there, and you set up your QuickBooks, you put all your information in there thoroughly and to the best of your knowledge. So that way, you can get an accurate depiction of what your financial state of your businesses and so or should you download them from Google? Yes, you can Google balance sheets, profit loss statements, and you can download cashflow statements. Or you can come through us at the DC Women’s Business Center. And I have all three of those documents handy that I provide to our clients. And so I hope that answers your question. It’s all about how diligent you are with QuickBooks. A lot of times people just know a little bit about QuickBooks to put the information in there. But they don’t know how to put all that information in there. So I know like the day or so they think we’re gonna have a QuickBooks training, but it’s all dependent upon what you put in there. So I hope that answers your question.
Speaker 2 21:38
Thank you, Stephanie. We have another question simulates the QuickBooks it will quicken do this, or does it have to be QuickBooks?
Speaker 1 21:47
They all do what all financial system do, again, is based upon what you put in and how you set it up. All of them have reporting issues, because typically like quicken and QuickBooks, and in square, they also have a capability reporting to the IRS as well, your income. And so if you’re doing 1090, nines, things like that, it will also help generate those type of documents as well.
Speaker 2 22:16
We do have a question, but it’s more related to me. Sure. Hey, Janelle. This is Daniela. And if you did want to schedule another session with either myself or with Mrs. Stephanie, you can go to the website, you won’t have to, again, do the lengthy application, you should be able to just schedule another session. However, if you’re having any difficulties, you can always email me my email is DDJ Iog. So DDJ IOGN ad ncrc.org. And I’ll send it to you later. We do have another question. I am a new business. I don’t even know where to get started. Is it recommended that I do my financials by myself? Or should I hire an accountant?
Speaker 1 23:02
Oh, that is a really good question. It’s all about your comfortability level, right? Some people you know, they’re comfortable. They’re they they’re they like Google University. They watch YouTube videos, and they feel comfortable secure. Now if you don’t feel confident, secure and you still have questions, you know, you may want to seek the help of a bookkeeper or accountant or CPA to get started but it all depends upon only you kind of know where you are and your comfortability level with these financial statements. I have some climate clients like you know, I don’t really want to deal with finance. I don’t like numbers at all. It I’m just probably gonna hire somebody but only you can understand, know your comfortability with levels of of that of getting your financials. Again, you can start off small, you can just basically say, you know, I’m going to go to Google. I’m going to download these documents I’m going to play around and see, or I’m going to invest in the system. A lot of these systems like Quicken QuickBooks, wave accounting, they all also offer demos too for for new clients. So you can schedule a demo. And a lot of times I know so many systems, you can customize it to your business needs. But again, it’s all about your comfortable comfortability level with numbers. Okay, thank you, Stephanie.
Speaker 2 24:27
We have another question from Georgia, whatever about new businesses who are applying for certifications, and those certifications require financial statements, but the revenue is low since they are just getting started in these newer businesses. Should we simplify any information or just report is as it is?
Speaker 1 24:51
So it’s twofold. So I understand you know your new business you may not have all these financial statements. Of course you’re not going to have Have a whole year, if you just started this like three or four months ago, of course, you’re not going to have a full year’s cash flow statement, or your profit and loss statements gonna look very weak. But my opinion this is my opinion only is that I think you should report as it is when you’re doing these certifications, because they understand that when you’re starting a new business, you’re you’re gonna probably be more on the red side than the black side. However, if you if only if your expenses are justifiable, what I mean by that is, don’t show if you don’t, I wouldn’t put frivolous Be careful what you’re spending on, they’re going to understand that when you’re starting a business, you’re gonna have to buy a computer, right? You’re gonna have to buy have office supplies, if you can show that these expenses was justifiable, it looks better for you, then, you know, I wouldn’t show a lot of meals or anything like that, but and your financial statements, they already kind of know that you’re going to be in the beginning, you’re going to spend a lot of money getting your business set up. So I have clients who have gone through the certification process process, and their revenue, net income is kind of low, but they have showed that they pay for a website and they justify their expenses. Okay. But a lot of these certifications want more than one year as well, too. So you didn’t specify what certifications that you are referring to. But if you go on to show low revenue, make sure your expenses kind of justify the need of your business.
Speaker 2 26:39
Again, thank you, Stephanie, for action question. Another question, if I do not have the revenue, and I am a new business, how and where can I find an accountant at an affordable price? Sure,
Speaker 1 26:54
there’s a lot of places that you can find an account accountant, affordable, polite, affordable place, is you can go to a site called Upwork. You can and then Thumbtack. Thumbtack is a great place, because what thumbtack like about Thumbtack is it’s thumbtack.com is that you can go in there and you set your budget. And then accountants can reach out to you based on your budget. And so like for instance, I’m on Thumbtack and, and so basically, you put your services on there. And then if something comes across, I’ll get alerts like somebody need an accountant, I might get an alert that says that Danielle needs an accountant. And I got click on there and have the budget so Thumbtack is a great way to find accountant, because it’s based on your budget, you can say I don’t want to spend no more than $200 a month, it’ll find new people and then you can bet them on yourself. So the key to is, you know, they always say the good old rule, you get what you pay for kind of thing. So you want to just make sure that even though the price is seeing know that you’re vetting them as well, because if they’re pricing too low, are you really getting the services that you really need for your business. And so I think it kind of weighs it out and you don’t have any money also is take some of these courses like Daniela talk about we have a lot of webinars coming up. Maybe for a while you just do it yourself. Or seek the help of a counselor, a counselor can help you kind of be kind of accountable and help you review your financial statements, these services, counseling sessions, even that woman Business Center is free. So if you sign up for counseling, we can kind of help you in the beginning, set up your financial statements, and kind of give you key points. And we can also even look at what you already created to give our opinion on it.
Speaker 2 28:55
Great. Again, if you have any questions, again, feel free to use the q&a. I really want us to be interactive and again answering most of your questions. And actually all of your questions. Question that I have is do you have any best practices to get started? And again, when do I do my financials? Is it at the end of the year? Is it monthly? Is there something I should revisit frequently?
Speaker 1 29:23
I would say for me it’s monthly because you don’t want have to scrounge around at the end of the year trying to get everything together. Especially who you don’t your financials and I didn’t talk about and that could be another session. Daniela is the record keeping part of this. So like for the IRS, when you’re doing your financials, those receipts are going to be key in your into your in your in your your financial statements. The IRS a lot of times the misconception is bank statements and credit card statements are enough for reporting. It’s not it’ll help you build your your your your financials. But the IRS requires you to have the actual receipt. And it’s in their retention policy, you’re supposed to keep the receipts up to three years. That’s because that mirrors how long back they can audit you. And so you don’t want to wait to December track trying to find receipts, especially the ones that you have lost. If you if you do your accounting month by month, you can find errors before it gets to that point. I’ve seen a lot of clients scramble, especially around tax season because they did not do their financials month by month. And so if you want to organize business, and you want to stay ahead of the head of everything, my suggestion is make it a habit doing it month to month by month. Now, people always say they want to be compact, compact, competitive, and be competitive to their competitors, right. I’m going to tell you now, most of these fortune 500 companies and I’ve worked in several of them, we start we do month to month financials, we do quarterly statements, and we’ve done in the year. So that way you can get ahead of I talked about in earlier, when you’re doing your cash flow statement, you can find some issues. So if you do it month to month, you can say well, I didn’t make no money this month, you can then readjust for next month, you can say you know what I’m going to curtail my spending, and really focus on my income. That’s why it’s best to do a month or more because you can catch those things. If you wait to the end of the year you like it’s kind of too late in the year, the fiscal year ends December 31. And you have spent what are you made, because you did not do the analysis and do an analysis month by month. So that’s my recommendation. I know it’s a little tedious to do, but I will get in the habit of doing it month by month. So that way you can see what your wins are and what your losses are. Way before December comes.
Speaker 2 32:02
Thank you Stephanie, you’re welcome. And like, like Stephanie said, if you are having any issues, or you just want a business counselor to review your your your business financials, or if you have any additional questions, you can always reach out to us at the CW abc.or RG, or you can email me again, emails is on the it was on the slides and also on the website. So feel free to email us and again, seek out that session with Stephanie she’s amazing washing doors. And so again, because when and learn from her because she’s again, she’s very amazing.
Speaker 1 32:43
Daniela, so one thing to also is, is if so what you need to start doing best practices because you mentioned press practice is it starts figuring out where your money is coming from, like, make sure that you sometimes I’ve seen people that do startups in their in their stuff is all over the place, meaning that they got money coming in from Square, they got money coming in from Cash App, figure out a way to make sure that everything comes together in one report. Because a lot of times it’s small businesses, we take money different ways. If you are like a vendor type of business, where you have an e commerce Store, but then you also on the weekends, then at the Easter mark at the at the flea market, or at one of these little pop up shops, you may be doing cash. So what you want to do is start from, you know, making sure that you put all the money together, because I’m gonna tell you now, if you’re using third party companies like Square Cash App, they’re going to report that income to the IRS anyway, that became effective as of January 1 of this year, anything over $600 is going to be reported to the IRS anyway. So you want to make sure you don’t want to be able to get that cp 575. Notice next year because you you failed to report an income that’s the notice that the IRS will send you that says, hey, you failed reported income. Now you this is just down you have a statutory deficiency and now you owe interest in penalties because you forgot to report income. And that’s key in doing this. Because of that. We want to make sure that we’re recording all sources of revenue, whether it’s cash f square PayPal, because a lot of times we have those different things because you know, it suits our needs. We use PayPal for E commerce web outselling we it’s easy to use swipe, because we can swipe people’s cards or you square because we can use the square and we can use the tax. So just make sure that when you’re doing this, that’s why it’s important to do it month by month so you can kind of see you don’t want to be caught off guard in the year or during tax season.
Speaker 2 34:51
Great. I would do we do have one last question. And the question is, in terms of financial statements is that some Seeing your door every few years or is that something you still do as you’re doing your financials,
Speaker 1 35:05
you do it every year. You do it every year. Because it shows your history that is your history of your business. Just don’t do it your first year. Maybe that’s why it’s the thought of doing this terrifies you that scares you, then you may want to use a now we will, you might want to understand each role. And that’s key, Daniela is that people don’t understand the role of a bookkeeper will have an accountant and will have a CPA. A lot of times we think of countin. But this something like these financial statements can be easily done to a bookkeeper. And you’re going to pay less costs. Because typically, you kind of paying for people’s credentials. And so if you use the CPA, which means Certified Public Accountant, they have gone through four years of school, they have passed the CPA exam. And of course, now they’re going to be a high ticket, high dollar ticket service. But sometimes as easily is just starting out. A bookkeeper could be sufficient enough. That’s why I said is when you bought to hire somebody that them, ask them some questions. First, the one question you can ask them is, have you ever dealt with a business like mom before? First of all, have you ever had any business clients? Okay, yes, you had. Okay. Um, you know, have you had any clients in my industry, because everybody’s financials are going to be different. It’s not a one size fit all Daniela may have done yet also have a different financial state statement than I do. Because maybe Daniela owns a carwash, that’s gonna be a whole different type of thing. Because remember that balance sheet acts if you own land property. Typically, if you have a car wash people own that, that building. And so everybody is not a one size fit all just keep that in mind. So make sure that you’re vetting when you’re vetting people, you ask the right questions, because there’s the ugly truth in business that people do get taken advantage of when they’re not knowledgeable. And I always say knowledge is key. Ignorance is not bliss. So you want to make sure you vet ask the question, you know, my industry? I’m a hairdresser. No, I have a hair salon. Have you ever had clients that work there are similar to mine, it doesn’t have to be a hair salon, maybe a barber shop, somewhere like that. I work in the food industry, you know, we have different costs, you know, we definitely have cost cost of business. So have you worked with somebody in this industry before? That’s going to help you find the key person to yours? Or they might say no, I have not. But this is what I’ve done for other clients. So he is when you hire outside people is the vetting process, making sure you ask the right questions. And of course, here at the DC boom Business Center, we can help you craft those questions, to ask to help better vet people for your business.
Speaker 2 37:59
Awesome. Again, last last question. I’m so sorry. So what? What are some few mistakes to avoid? When you’re again, starting this process? Like what are some lessons learned?
Speaker 1 38:13
So I mentioned one of the big mistakes I see is the receipt part, not keeping your receipts, as I mentioned, you know, a lot of times we throw away every See, so one of the best practices I’m gonna give you for receipts is make everything automated. When you buy online, always select, always select send in, send receipts to your email. That way, you know, it’s always in your email, right. So that’s kind of a best practice is even for your billing, do everything electronic billing electronic invoice, because those are the things you can you can track in your email, you can able to go to your email, get the receipts, because the IRS will accept digital receipts. And so that’s kind of best practices. Now, when you’re on the go, and you’re out and about, the best thing I tell my clients is to take a picture, get pick up your cell phone, right, and then snap the picture of the receipt, guess what, now you have the receipt, you don’t have to worry about you can actually throw it away. This make sure you have enough data or whatever you call it on I’m not familiar with, I can’t remember the name of the term but make sure you have enough memory in your cell phone, the whole this stuff, always back into the cloud. So that way you have because again, the IRS will accept digital receipts. So just keep that in mind though some of the best practices is, you know, kind of doing that’s kind of a best practice. Another best practice is take all the courses that you can can take for your business, especially the free once it’s going to be beneficial for you because as I always say, knowledge is power. Information is key. And when you have a business I’m I’ll give you a tip here. And this is from the legal world that I’m in, is if anything ever happens, typically in your in your personal life, ignorance is bliss. But not when you have a business. It’s in the in the law books, it says ignorance of the law does not exist. And so what that means is that you’re supposed to know everything about your business. And so that way, because in the day, if you accept you have an LLC or corporation, you have to show that you have you are running a real business. And how do you do that? How do you keep your asset protection, if you’re being sued, the courts gonna look to see if you actually had a real business, and there’s a look at your financial statements. They don’t ask you, did you keep your financial statements? Did you separate your personal and your business? Those are the things so yes, it’s important, especially when you have like an LLC or corporation, where you’re going to eventually may have to show that you’re a real business and how do you do that? Again, with the IRS, as they call it, burden of proof, you have the burden of proof. So that means that you’re gonna have to prove that you have a business. So I know that’s kind of wordy and long, but again, that’s what we’re here for, to kind of help you understand these terms and how it benefits your business.
