Small Business Tips From A CPA

I invited Niedra Johnson, a Certified Public Accountant and Certified Financial Planner to give us a quick run down of the most common mistakes she sees small businesses make from a CPA’s point of view.

Here is what she sent me:
I find that often small business owners will come to me after they are already in trouble. The best thing they can do is come to me before they start their business, or at least in the very early stages. When they come to me in distress, sometimes I feel like a doctor trying to revive a patient that has never even had a check-up! So I’d say the top mistake is waiting too long to obtain a CPA who can be such a vital part of your business plan.

The other common mistake I see is that business owners too often mix personal expenditures with business expenditures. You shouldn’t be using the company accounts to pay for personal items that are not business related. Such as home furnishings, or clothes for the kids etc. You must keep your accounts separate, and only use your business accounts for business. If you find yourself needing to use the business account, then it might be that you need to pay yourself more!

Thanks for that input Niedra! I know you had mentioned several other items to keep in mind, so hopefully we’ll get more tips and input from you in the future!

IF YOU CAN'T AFFORD A CPA, YOU CAN'T AFFORD TO START A BUSINESS.

There are so many angles that must be considered when starting a business, but certainly the most important, yet...most BORING..is the financials of that business. Sure the dreams of making lots of money are exciting, but it cost money to make money. So the question is...how much is it going to cost? Now, this subject alone could take up an entire book, but I want to just hit the highlights here and keep it basic, so as not to bore you.

Of all the mistakes I've made in my lease option business, I'd have to say the financial end of it are in the top two. My company was moving so quickly I could barely read the road signs going by. I was working 60 plus hours a week, AND I was trying to do the books on my own. Writing the checks, paying the bills. I got QuickBooks and I tried to learn it. I even had someone show me how to use it. UUUHHGG!!! Give me a freaking BREAK!

Here's the deal people.

I had a CPA (Certified Public Accountant), but I only saw that CPA twice a YEAR! Once to drop off, once to pick up. I didn't know what was coming or going. I was a financial TRAINWRECK!

I LOATHED Quickbooks! A plus was a minus, a minus was a credit...WHAT?!?!

I'll discuss some of the financial details and errors in future blogs, but for right now I want to focus on one thing here.

If you want to start a business.....get a CPA! But there's more to it than that. Get a CPA that is easy to reach, easy to get a hold of, can answer your questions, and give you continual guidance as you need it. You will also want a bookkeeper. Some CPA's are bookkeepers, but not all bookkeepers are CPA's.

You want a CPA that is either a bookkeeper or that has a bookkeeper by their side that work hand in hand with the CPA. Think of the bookkeeper as the person doing the checkbook. The bookkeeper will be the one entering the data into the QuickBooks or other software, keeping all the accounts and records of those accounts straight and up to date. This includes not only the checkbook, but credit cards, lines of credit etc.

The CPA will be the one that not only does the actual taxes for you, but will ideally give you guidance, whether on a quarterly basis or whatever is deemed necessary, as to how to tighten up and strengthen your company's financial position.

Let me make this clear.

YOUR job is to grow and operate the business. NOT...I repeat...NOT to try to unravel the mysteries of the inner workings of bookkeeping software!

"But how much will getting a CPA cost me?"

To give you hard figures, I'll use my actual expenditures to give you some idea.

I was spending about $125 a month just for bookkeeping. I was also spending about $500 for the companies taxes to be done and about $350 for our personal taxes to be done. But what I found is that I needed much more guidance and help.

Visiting the CPA twice a year wasn't getting me the actual hands on help I needed. I needed someone to take the company financials by the reign, and get a serious plan in place for us to pay off any debt we had, and build our company into what it really could be. So I switched CPA's, and went with someone that would be MUCH easier to communicate with on a daily, weekly or monthly basis if needed, and that would meet with me to discuss where we were, where we wanted to be, and what the plan was for getting there.

I now pay $300 a month which includes EVERYTHING, including the yearly taxes, financial planning and guidance, and bookkeeping.

I want to go back to my previous statement. YOUR job is to focus on the company. Don't think that because you are paying someone to do the books makes you look like a financial dummy. Balancing your personal checkbook, and doing the company financials are as far apart as building a bird house and building a real house! Trying to do the books on your own takes away from your very valuable time, that could be spent on creativity, business planing, and growing your company. $300 a month for me allows me to go out and make 10 to 20 times that versus the time I would have to spend to try to do the books myself....EASILY!

In one of my upcoming posts I'll actually have a guest CPA come on board to discuss some of the problems and mistakes that she has seen small business owners encounter.

SO, YOU WANT TO START A BUSINESS!

Over the next several weeks, I want to discuss a number of things to do BEFORE you even go into business for yourself. Too often, people will have an idea for a business, or a business they want to go into, and all they can do is think about how happy they will be "if only", and all the money they will make "if only". But they have no prior business experience, and no business background.

So they go to the local bookstore, and buy some books on small business. The problem that they will face with these books, is that you have either the "Goofball's Guide to Biz", which has fairly useless information such as "Your customer is your business!" or you have "How I Ran the Largest Company in the World!" which tells you NOTHING about how to start a small business. My goal, with this and a large number of my posts, will be to help those that want to start a business, even if it's not real estate related. What I've learned in my years of business is worth a fortune. At least, that's what it cost me! But I hope that you can learn from my mistakes, as well as my good fortunes, so that perhaps your business education will come with a scholarship, so that it can save you a tremendous amount of time and money!

The first topic which we'll cover in the next post will be about something you can't afford to do without. A bookkeeper and CPA!