Do you like the title of this post? Hooks you in, doesn't it? If I titled the post “A System For Record Keeping” most of my readership would yawn and click on something else. But... I really did make over $500 doing this tedious but necessary business task, so read on!
As our business grows, accurate record keeping becomes more and more important. Record keeping is important for even the smallest business, but it's not something Steve & I have ever been good at. For us, record keeping has always been that pain-in-the-ass afterthought. Oh yeah, I gotta do this for taxes. Oh crap, tax info has to be to the accountant by when??? Let me cancel my life for the next month so I can pull it all together...
I've been doing these workshops with other entrepreneurs in New York, and have buddied up with a guy from Stroudsburg, PA (a little more local to me) who also flips houses and has experience with rentals. Keeping clean, accurate records is a big part of the philosophy of success with this group. Unfortunately I find it as stimulating as watching beige paint dry. Until yesterday! (Don't worry, after a little background I'll get to how I made over $500 doing this task!)
A System for Record Keeping
The last couple of weeks, I have written blog posts about Systems. Systems are how a successful business is built – you figure out a specific way to deal with each task, tweak it, perfect it, and teach it to the employees who will eventually replace you as you graduate from having to do everything yourself. I have written about my Systems for Delinquent Rent Collections (read) and for handing out Lease Violations (read) I am writing my first Systems for tasks I absolutely hate to do, but that are necessary. Systems automate the process, make it easier to deal with. Now I'm moving on to the third largest thorn in my side, which is Record Keeping.
I have committed to sit down in front of my computer at least once a week, for two uninterrupted hours. I go through all of our bank and credit accounts, entering all business income and expenses on a spreadsheet. Steve and I have committed to entering cash transactions into Podio, which is an app we can both access from our smartphones – that way we can do it on the fly. We both have the MileIQ app installed on our phones, which automatically tracks our mileage.
At some point, our accountant is going to set up Quickbooks Pro customized for our business, so all I have to do is data entry. Quickbooks will then replace the spreadsheet. I feel like I'm one of a small minority of business owners who doesn't understand Quickbooks. I tried to figure it out once, even bought the Quickbooks For Dummies book. I tried to do a Chart of Accounts, and my head exploded. That was in 2013. I'm still scraping the brains off the wall.
I'm willing to try again, though. One thing I'm learning in these workshops is how to get past shame, which stands for Should Have Already Mastered Everything. I find that once I get past shame, I can build a system that works for me. If you're already a master at Quickbooks and your record keeping was immaculate from Day 1, then good for you! I won't ask you to teach me, though, because other Quickbooks experts have tried and failed. I need to build a system that works for me. Perhaps we can get together and you can show me some tricks after I've been entering data into Quickbooks for a few months. Right now, it would be like trying to teach Mandarin Chinese to a cow. I get it, and I'm no longer ashamed.
But I still have to do accurate record keeping, the IRS insists. And the success of my business depends on it. It's kind of the Key to Everything.
Found Money
So yesterday was my day to sit down for two hours and do my Record Keeping. I had my soft music on, the sandalwood incense burning, a good cup of coffee. My screen door let in the fresh air and my cat purred curled up on the rug at my feet. Did I mention I love working from home?
These pleasant surroundings help me do an unpleasant task. I set my timer for two hours, knowing when it beeped I could get up and go to the gym, then come home for lunch – a leisurely two hour break for two hours of work. Did I mention I love being self-employed?
First I go through all the cash transactions in Podio. Then all the checks from our two business bank accounts – we have one for the rentals and another one for the flips and construction. Then I go through the Lowes and Home Depot accounts. Home Depot has this great thing called Pro Extras that will track expenses by project. Lowes has a card-scan program called My Lowes that does the same thing, but it's kind of a pain because you have to have the right card on you at point of purchase. If we purchase materials from another source, Steve will enter the property or project into Podio.
I also go through the business credit cards, which we are trying not to use as much. When we do use them, we pay off all the purchases before the statement due date to avoid interest. They come in handy for recurring subscriptions, like fax.com and Bigger Pockets. And LoopNet.
LoopNet is a commercial real estate listing service. If you subscribe to LoopNet, you get far greater access than the free site, so when I first saw a charge on one of our MasterCards for LoopNet, I didn't think much of it. It was $129.95. A little pricey, but not bad for a year. If Steve needs that for his wholesale business, that's justifiable.
But yesterday, when I logged onto that credit card statement, there it was again. I had to check back on my spreadsheet for May to make sure, yes there it was. I sent my husband a text, “Are we REALLY paying $129.95/month for LoopNet???”
His response was chilling, “No. We don't have an account.”
I went back and found LoopNet had been charging this credit card $129.95/month since March 19th. March, April, May, June. A total of $519.80. Steve called LoopNet, and they have no record of him as a paying customer. He says he does remember looking at LoopNet for a deal he was working on, but he has no memory of giving out a credit card number. So I'm calling fraud on this one and getting my money back.
I wish I could make $519.80 for two hours of work every day!
Having a disciplined Record Keeping system helps you find the holes in the boat. I'm looking at the $52/month we're paying for our Grasshopper phone tree, on top of what we're paying for Verizon's supercalifragistic phone and data plan. Do we really need both? Or would we save money going with Verizon's business plan and using their phone tree? Or would it be better to keep Grasshopper and switch to a cheaper carrier like T-Mobile?
This kind of uptight Record Keeping is uncovering patterns of spending I never noticed before. It was all unconscious, automatic. The charge went on the credit card unnoticed and I just paid it and carried on. Spending these two hours a week (twice a week is better!) is creating so much more awareness, giving me information I need to think strategically about our business.
And that is a lot more exciting to me than watching beige paint dry!
As our business grows, accurate record keeping becomes more and more important. Record keeping is important for even the smallest business, but it's not something Steve & I have ever been good at. For us, record keeping has always been that pain-in-the-ass afterthought. Oh yeah, I gotta do this for taxes. Oh crap, tax info has to be to the accountant by when??? Let me cancel my life for the next month so I can pull it all together...
I've been doing these workshops with other entrepreneurs in New York, and have buddied up with a guy from Stroudsburg, PA (a little more local to me) who also flips houses and has experience with rentals. Keeping clean, accurate records is a big part of the philosophy of success with this group. Unfortunately I find it as stimulating as watching beige paint dry. Until yesterday! (Don't worry, after a little background I'll get to how I made over $500 doing this task!)
A System for Record Keeping
The last couple of weeks, I have written blog posts about Systems. Systems are how a successful business is built – you figure out a specific way to deal with each task, tweak it, perfect it, and teach it to the employees who will eventually replace you as you graduate from having to do everything yourself. I have written about my Systems for Delinquent Rent Collections (read) and for handing out Lease Violations (read) I am writing my first Systems for tasks I absolutely hate to do, but that are necessary. Systems automate the process, make it easier to deal with. Now I'm moving on to the third largest thorn in my side, which is Record Keeping.
I have committed to sit down in front of my computer at least once a week, for two uninterrupted hours. I go through all of our bank and credit accounts, entering all business income and expenses on a spreadsheet. Steve and I have committed to entering cash transactions into Podio, which is an app we can both access from our smartphones – that way we can do it on the fly. We both have the MileIQ app installed on our phones, which automatically tracks our mileage.
At some point, our accountant is going to set up Quickbooks Pro customized for our business, so all I have to do is data entry. Quickbooks will then replace the spreadsheet. I feel like I'm one of a small minority of business owners who doesn't understand Quickbooks. I tried to figure it out once, even bought the Quickbooks For Dummies book. I tried to do a Chart of Accounts, and my head exploded. That was in 2013. I'm still scraping the brains off the wall.
I'm willing to try again, though. One thing I'm learning in these workshops is how to get past shame, which stands for Should Have Already Mastered Everything. I find that once I get past shame, I can build a system that works for me. If you're already a master at Quickbooks and your record keeping was immaculate from Day 1, then good for you! I won't ask you to teach me, though, because other Quickbooks experts have tried and failed. I need to build a system that works for me. Perhaps we can get together and you can show me some tricks after I've been entering data into Quickbooks for a few months. Right now, it would be like trying to teach Mandarin Chinese to a cow. I get it, and I'm no longer ashamed.
But I still have to do accurate record keeping, the IRS insists. And the success of my business depends on it. It's kind of the Key to Everything.
Found Money
So yesterday was my day to sit down for two hours and do my Record Keeping. I had my soft music on, the sandalwood incense burning, a good cup of coffee. My screen door let in the fresh air and my cat purred curled up on the rug at my feet. Did I mention I love working from home?
These pleasant surroundings help me do an unpleasant task. I set my timer for two hours, knowing when it beeped I could get up and go to the gym, then come home for lunch – a leisurely two hour break for two hours of work. Did I mention I love being self-employed?
First I go through all the cash transactions in Podio. Then all the checks from our two business bank accounts – we have one for the rentals and another one for the flips and construction. Then I go through the Lowes and Home Depot accounts. Home Depot has this great thing called Pro Extras that will track expenses by project. Lowes has a card-scan program called My Lowes that does the same thing, but it's kind of a pain because you have to have the right card on you at point of purchase. If we purchase materials from another source, Steve will enter the property or project into Podio.
I also go through the business credit cards, which we are trying not to use as much. When we do use them, we pay off all the purchases before the statement due date to avoid interest. They come in handy for recurring subscriptions, like fax.com and Bigger Pockets. And LoopNet.
LoopNet is a commercial real estate listing service. If you subscribe to LoopNet, you get far greater access than the free site, so when I first saw a charge on one of our MasterCards for LoopNet, I didn't think much of it. It was $129.95. A little pricey, but not bad for a year. If Steve needs that for his wholesale business, that's justifiable.
But yesterday, when I logged onto that credit card statement, there it was again. I had to check back on my spreadsheet for May to make sure, yes there it was. I sent my husband a text, “Are we REALLY paying $129.95/month for LoopNet???”
His response was chilling, “No. We don't have an account.”
I went back and found LoopNet had been charging this credit card $129.95/month since March 19th. March, April, May, June. A total of $519.80. Steve called LoopNet, and they have no record of him as a paying customer. He says he does remember looking at LoopNet for a deal he was working on, but he has no memory of giving out a credit card number. So I'm calling fraud on this one and getting my money back.
I wish I could make $519.80 for two hours of work every day!
Having a disciplined Record Keeping system helps you find the holes in the boat. I'm looking at the $52/month we're paying for our Grasshopper phone tree, on top of what we're paying for Verizon's supercalifragistic phone and data plan. Do we really need both? Or would we save money going with Verizon's business plan and using their phone tree? Or would it be better to keep Grasshopper and switch to a cheaper carrier like T-Mobile?
This kind of uptight Record Keeping is uncovering patterns of spending I never noticed before. It was all unconscious, automatic. The charge went on the credit card unnoticed and I just paid it and carried on. Spending these two hours a week (twice a week is better!) is creating so much more awareness, giving me information I need to think strategically about our business.
And that is a lot more exciting to me than watching beige paint dry!