Gary Pageau of the Dead Pixels Society talks with Heather Zeitzwolfe, CPA, about the dos and don'ts of small business finance, especially for those in the creative fields.
Heather Zeitzwolfe is a CPA certified with the State of Oregon’s Board of Accountancy and a member of the AICPA. She is a Financial Coach trained through the Ramsey Solutions’ Master Financial Coaching program, a Certified Tax Coach through the American Institute of Certified Tax Coaches, and a Certified People Advisor through Gusto payroll.
She also has the "Get the Balance Right" podcast.
Erin Manning 0:02
Welcome to the Dead Pixels Society podcast, the photo imaging industry's leading news source. Here's your host, Gary Pageau.
Gary Pageau 0:10
The Dead Pixels Society podcast is brought to you by Mediaclip, Photo Finale, and Advertek printing. Hello again, and welcome to the Dead Pixels Society podcast. I'm your host, Gary Pageau. And today we're joined by Heather Zeltzwolfe, who is a CPA profitability coach and the host of the get the balance right podcast. Hi, Heather, how are you today?
Heather Zeltzwolfe 0:34
I'm great. Thank you so much for having me on the show. I'm super excited. And by the way, I love the name of your show.
Gary Pageau 0:41
Oh, thank you, it's it. It is, it does get attention. So Heather's here to share with us common ways that you can avoid business mistakes that will affect your bottom line. So whether you been a CPA for quite some time, what are some of the things you've encountered as a business coach,
Heather Zeltzwolfe 1:04
there are certain ones that come up over and over again. And no matter what the industry, although I work mainly with creative entrepreneurs, I see this these mistakes, these common mistakes over and over again. So the first one I'd like to address is not having an emergency fund. This is something that because of COVID, people have really felt the ramifications, not having an emergency fund. But business owners should have at least preferably three to six months worth of expenses, and their income set aside in case of emergency. So that is definitely the biggest one to start with is having an emergency fund. And not only just not not only having it in your business, but also have it for your personal life as well. So making sure that you have enough money set aside to pay your mortgage or whatever monthly bills that you have.
Gary Pageau 2:01
Is that feasible for you know, a typical, let's say, one store retailer who may be struggling a bit with cash flow and things like that. I mean, or is it? Or are you saying having access to just a line of credit? Is that sufficient? Are you actually talking about having cash on hand,
Heather Zeltzwolfe 2:17
cash on hand line of credit, that's always a good thing to have is the line of credit, because it's great for emergencies. You just don't want to get yourself in a lot of trouble using that debt. Debt can sometimes be okay, but that's a different conversation. But some of these other things will help you be able to put that money aside so we can go go into some of these other issues that I see happening, that holds people back from having the means to set aside this emergency funds. So
Gary Pageau 2:47
So where would they put that emergency fund? Is it just like in a checking account, or where is the best place to put that.
Heather Zeltzwolfe 2:54
So I would say it depends on the way the person is with their bank account. So if they see money in their bank account, and they think, Oh, I've got money in there, I can spend this, then probably it's a best idea to put that in a separate business account, or a separate personal account, take the money out if they're able to draw money out of the business. But I like to keep money in the business. So I would keep it in a business, business checking account or savings account, keep it separate if you have to. And that kind of brings me to the next one, which is do not co mingle your business and your personal credit cards and bank accounts. So many times I see business owners where they have a business account, the business, debit card, and then they end up using it for personal things. That stuff ends up in your books. It just makes things kind of messy having it being commingled and then it makes it so that you have to put it to draw and maybe if you're not looking at your books close enough, and which is another one we'll get to, then you think oh, wait a minute, I've got all these expenses, but they're not really your expenses. They're your personal things, and you have to get them out. It's just best to so not commingle. So if you can use your business credit card or your business, debit card for business, and your personal stuff with your personal cards, just keep them separate.
Gary Pageau 4:18
Why do you think there's that temptation just to co mingle those funds? I think a lot
Heather Zeltzwolfe 4:23
of times, it's just like they grab a credit and put it on the wrong thing. Or maybe they don't have enough money in their personal checking account. And so they think, oh, I'll just use the business credit card instead. A lot of it is just really can be avoided. Some of that comes from people not really understanding that this is can make things messy, and they just, they've just sort of done it out of habit. So it's just a habit to break if that is your habit. What is the next item? The next item builds on the last one, which is you got to treat your business like a business. So as I was mentioning about bookkeeping, There's a lot of entrepreneurs out there that don't even look at their books, they're afraid to look at their books, maybe they try to do their own books, and they don't really know what they're doing. And there are a lot of soft, great software applications out there that make it easier to do your books. But really, it's best if you let a professional who knows what they're doing, do your books. And I see so many mistakes made from business owners that are trying to do their own books. And then they have the wrong, they don't have the right information when they're trying to make decisions. So especially if there's some sort of cash flow, if you're not, if there's a cash flow issue, if you're not keeping up your books, and actually reconcile reconciling the books every month to your bank bank accounts, then you really don't know what's going on in your business. And you can't really make good decisions about things because you've got terrible numbers. So really treat your business like a business don't commingle, keep the books. And then, like I said, with the credit cards, yet, don't don't mix those up.
Gary Pageau 6:07
What are the things you look for when assessing a CPA, because, you know, many of our listeners are, you know, small businesses, they may reactor in their community, they may know someone from the Chamber of Commerce or something like that. But that may not be the best person for their type of business,
Heather Zeltzwolfe 6:23
I would say, one would be having someone that you can have a relationship with that goes is an ongoing relationship throughout the year. So a lot of times people they because business owners like I said, I work with creatives, they kind of get that icky feeling about their money and their finances and their eyes glaze over when they look at a p&l and they, they're just like, Ah, I'll just look at my bank account and just see if I've got enough bank, if I have enough money in my bank account. Well, that doesn't give you the true picture of what your cash flow is. Because you could have 50k in your bank one day, and then after you do run payroll, you have nothing left. So looking at that doesn't really give it to you. So having a CPA that's maybe more involved throughout the year. So maybe they have a bookkeeping service within their within their firm, or they are in touch with your bookkeeper. So they have an ongoing relationship throughout the year, and that they can have a flow of questions and answers throughout the year if something comes up. And then also have a CPA that you can talk to and ask questions. So many times, you know, me included, this can happen where we get caught in our jargon or CPA jargon. And the you know, a lot of business owners don't even know what a balance sheet or a profit and loss really is. And so a lot of times we'll get in this thing where like talking about receivables, and payables and all this stuff, and the person that's running the business really has no understanding of these things, and are afraid to ask questions. So really taking that shame away from them all the questions and having someone that you can really talk to and really understand, because a lot of people, they tell me when they come to me, they're like God, the last person I worked with, we'd walk out of the meeting, not understanding anything that they just said. So really having someone that can, that you can really talk to,
Gary Pageau 8:15
we can't be broke, we still have checks.
Heather Zeltzwolfe 8:20
Yeah, exactly. Exactly. Yeah, that's I mean, that's that's a serious matter, though, you know, and really understand your cash flow is, is key, if you, if you run your books on a monthly basis, and you on then you're able to actually look at your cash, but a lot of people, they don't measure things. And so that's another thing that's on my list is to really have set goals that you can measure each month. So you should really be looking at these key indicators every month. So not only is it net income, but maybe you have people on payroll, and perhaps your business can't you're not getting enough income to support all that payroll. So maybe you have to cut back on payroll, if you're not looking at these things, and you wouldn't really know or you think, Oh, I'm so super busy, I need to hire more people. But what happens is they don't have the income to support that. And then they over hire, and they can't afford it. And payroll, as people know, is like one of the highest expenses that you could possibly have in your business.
Gary Pageau 9:20
What I've heard when I talk to people who are in the creative fields who start a business is they're like, I got into this business to be a photographer, or to run a studio or to make prints not to do all that icky business stuff in addition to a CPA like should they be looking at like a business partner or some what other kind of help can they find?
Heather Zeltzwolfe 9:40
Yeah, so a lot of people work with coaches and I'm a business coach as well. I think it's great to have somebody that can hold you accountable and be a separate set of eyes on this. So looking at it from a different lens and giving you feedback that you know when you're in the weeds you you don't really see what's going on in your business. You need some sometimes you need a a different perspective. So working with a business coach, maybe being in masterminds with other business owners that are probably in a similar field to you. This, this is a great way of getting input from different people. So a mastermind for people that may not know is it can come in different shapes and flavors. But a Business Mastermind with people in your same industry could be like maybe 10 people, five people, that they can meet on a zoom call, they can meet in person, and you talk about different issues that you have in your business. And you kind of spit ball ideas, and you can brainstorm with each other on ways that you can change it. Or maybe they're like, Oh, well, I did this in my business. And it really worked or like, I never thought of that. So masterminds are a great way to kind of give you a different set of eyes. And I would also say you would need have a good financial advisor. So besides having a CPA, you should be putting money away for retirement, and a good financial advisor can help you do that. So that's definitely somebody that you want on your back pocket looking at looking out for you as well.
Gary Pageau 11:02
Now, that's one of the personal sign up for the business side, right? Well, for
Heather Zeltzwolfe 11:05
the business, you you may depending on the formation of your business, you may be able to have some sort of retirement fund through the business. But also, if you're a business owner, if you're single member LLC solopreneur your business, you still want to have some sort of retirement funds. So you could have a solo 401k. And that's something that the financial advisor can help you get set up for your business. So you definitely want to be working with them as well, some CPAs might offer both, but it depends on their licensing, if they're licensed to do that or not. So
Gary Pageau 11:38
you mentioned measuring what the metric that is most overlooked by small business people?
Heather Zeltzwolfe 11:46
Well, it really depends on your business. But I would say the one that would be overarching for everybody is net income, it seems so simple, but net income for the folks that aren't really sure about what net income is, it's all of your gross income, your sales, and then minus out all of your expenses. And what's happening is people, they don't pay attention to that they think, Oh, my money, my the money's flowing into my business. And if you are a solopreneur, that net income is where your income is going to come from, unless you're maybe filing as an S corp, where you're going to get w two wages. If you're just a solopreneur, you want to make sure that you have profit in your business so that you have money left over for yourself. So some people do use like the Profit First method so that they make sure that they get enough money out of their business to be able to pay themselves first. And that's another thing that's on my list is making sure that you're paying yourself because you might be actually paying all kinds of people with wages through payroll and not leaving enough money for yourself. And that's crazy. If you're
Gary Pageau 12:48
in business very typical. In the photo industry, yeah. So
Heather Zeltzwolfe 12:53
you want to make sure that measuring will help you be able to see if you're going to have enough money for yourself. And really, if you're not making money in your business, then something needs to change. And I understand if you are just starting out and you're you're you're investing a lot of money back into the business. But if you are not making money in your business, this is turns it into almost like a hobby, and you probably went into business to earn money, not not just to have a hobby.
Gary Pageau 13:20
Yeah, there are some people whose passions turn into businesses, but that doesn't mean they're not businesses anymore. Just because you enjoy what you're doing. And you're passionate about it doesn't that there's still the rules of business to apply. Exactly. And I think there's people who think they're the exception to that. Oh, really? Yeah, that they just, you know, their passion for the business is gonna override, you know, I'll just be super successful and the money will roll in and all will take care of itself. Yeah, I mean, you see that a lot like with folks who are like solopreneur, like wedding photographers, or, you know, they're going to do such wonderful work that everyone will want them. And like I said, they won't have maybe we won't have accounting software or insurance on their cameras, and you know, all that kind of fun stuff.
Heather Zeltzwolfe 14:00
Yeah. Well, one of the things that another thing to look out for are your different revenue streams. So if you are a photographer, maybe maybe going out to shoots, like, if you have to travel somewhere far away, you really have to look to see how profitable was that job. So many, like video, I've worked with a lot of videographers and then they'll price out a job. And then they end up spending way more time in the editing process than they anticipated. And now their margins have gotten less and less because now there may be outsourcing this editing and they didn't work it into the price. So really like after you do a job like that, go back and measure and look to see how profitable was this business really track your hours if you I know tracking hours is like something everybody hates to do. But really track your hours track your employee hours and see how how profitable was that business and maybe you need to bring in a different revenue stream that is more profitable. So maybe it's fun to go take pictures, but maybe you're making more money out of selling the photos afterwards, okay, well, then you need to take the pictures, but see where where you can spend more effort in your business that will be more profitable.
Gary Pageau 15:13
Taxes are another challenge for a lot of businesses, because there's weather, it's one of the things you have no control over. What is a good strategy to to deal with taxes,
Heather Zeltzwolfe 15:24
one thing I'll say about taxes, please set aside enough money for taxes, it shouldn't be something that could come April 15, that you're scrambling to pay your taxes. So really understand what your quarterly estimated tax amount should be, and send that money in, also have a good understanding of not only what the what the Feds want from you, but understand what your state and maybe your local, could be a county could be your city, what those taxes are, because I live in Portland, Oregon, and we have TriMet, we have a transportation tax, and we also have a local city tax on a county tax. And a lot of people get into business, they have no idea that those taxes even exist until they go to have their taxes done. And I'm like, a surprise, surprise, you have to pay this. And they're like what? And so understanding not only the federal part, the state, maybe you have to deal with sales tax as well. That's another part. But you mentioned we have no control over tax, there are ways that we can control it. And it's making good decisions throughout the year, that will have an impact on your tax. So it could be maybe the way that your your business is set up. If you're able to have be taxed as an S corp. There are benefits with that. There might be things that you can work around where you can have your kids work in your business, there's different ways that you can impact your business where you can actually pay less tax. And money is one way yep. Yeah, that's another way. But again, people it's not the ideal solution. Exactly. Exactly. And you know, people be like, Oh, I don't owe any taxes here because I didn't make any money. Well, yeah, but that's a bad thing. You want to you want to make money in your business.
Gary Pageau 17:16
Especially we're looking at in many cases, maybe selling the business or passing on, you know, I mean, it's good, I think it's very difficult to pass on a business that's not showing growth and profits.
Heather Zeltzwolfe 17:27
Exactly. And that's part of that whole planning part is, is this a business that you're doing as it's a passion, it's a lifestyle type business? Or is this something that you want to sell later on. And if you want to sell it later on, you're going to approach things, you're going to approach things differently and have a different, you should have a goal as far as witnesses that you're going to sell it and back into how you're going to get get to that goal. It could be five years from now, 10 years from now, it could be you know, maybe you want to give it to your kids or whatever it is.
Gary Pageau 17:59
So what's next on the list?
Heather Zeltzwolfe 18:01
Next on the list? Well, I think we've I think we've hit everything that was on my list in some way, shape, or form. But I want to also mention that this overarching thing with these problems is deals with your money mindset. And if you your money mindset is a certain way, then you probably are going to have problems with all of these things in a different shape or form. So money mindset could be that, for me, I'm, I'm cheap. I don't like to be I don't like to pay people for things that I can do myself. And it ends up me being more involved in my business than I should be with little things. So that affects me. So I've now changed, I've, I've changed, I'm changing my money mindset. And now I've been hiring someone to help me with certain activities. So those types of things can hold you back. Maybe it will make you so you're not a risk taker, maybe it's that you won't actually make more profit in your business. I've worked with people that felt like they weren't worthy. And then they would not get, they would not make the money from their business that they should, they were pricing way too low, and they weren't making money in their business. So it can affect all kinds of things in your business. And so I've been working with people as a money coach to help them kind of break through those those things to so that they can actually make better changes in their business.
Gary Pageau 19:27
You know, it's funny you say that because I've I've encountered a lot of folks over the years who are in photo business, they almost come in and fall into different buckets, right. Some of the buckets are like you said, I'm more frugal, I'm going to do everything and they tend to they know everything and can do everything but they're also burnout and stressed. And then there's the folks who are like, Well, you got to spend money to make money. And then those are the folks who have no cash flow. So there's a lot of different personalities and businesses.
Heather Zeltzwolfe 19:57
Oh definitely. Yeah, it takes me especially, you know, with creatives, they have a tendency to do things that are more based on like a gut feeling rather than hard data. And they, they might be really enjoying things in their business and just really not looking at the numbers. And really, unfortunately, you need to look at the numbers. And if that's something that makes your skin crawl, then work with a bookkeeper or a tax accountant that can help you look at that stuff, make sense of it. And so you can actually make better decisions in your business, because everything in your business comes down to finances, every single decision you make is going to affect that.
Gary Pageau 20:40
Even though they may not have gotten into the business with that intention, they've sought to accept that reality.
Heather Zeltzwolfe 20:46
Yeah, and you know, the thing is, it's really funny, how fun the finance side of things is sort of the the nerdy, geeky part of it. And everybody loves marketing. Like, that's the sexy thing that people want to pay attention to. And marketing can get, you can get you someplace. But again, that's another thing to track in your business, because you could be spending tons of money on marketing, and it's not really giving you the ROI that it should. So everything in your business should be measured and looked at and tested out and, and doing your keeping your books, all that stuff is going to help you do that. And it seems like such a simple thing to say. Make sure that your bookkeeping is up to date, but it's just something that I see over and over again that people just they don't they don't keep their books up to date.
Gary Pageau 21:33
Well, if they if they wanted to do that they'd be a CPA and possibly a podcast host
Heather Zeltzwolfe 21:40
Yeah, so hire a bookkeeper, you know,
Gary Pageau 21:42
make sure you have that. Where can people reach out to you for more information?
Heather Zeltzwolfe 21:45
So I have a podcast it's called get their balance right podcast. You can find me on all the socials as well. You can look up my name Heather Zeltzwolfe, I'm at Instagram. I'm at @Zeltzwolfe. And I think you probably have links in the show notes for how to spell my name. And I have an ongoing workshop that's going on. It's if you go to get the balance right podcast/workshop, you can sign up for the next one. So I hope to see everybody and thank you so much for this opportunity.
Gary Pageau 22:16
Well, thank you, Heather. Great to meet you and best wishes out there in Portland, Oregon.
Erin Manning 22:23
Thank you for listening to the Dead Pixels Society podcast. Read more great stories and sign up for the newsletter at www.thedeadpixelssociety.com
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