What Your CPA Wants You to Know
A podcast for entrepreneurs! We are a husband and wife team running our CPA firm together. We know just how difficult it can be to take your business dream to a reality. Our mission for this podcast is to guide, empower, and educate entrepreneurs in an easy-to-understand way! We want business owners to have the information that they need when they need it, AND without the hefty accounting invoices from a CPA! Follow along for practical advice, tips, and tricks from a CPA who knows what it is like to run a business, and strategies to keep your business thriving from an MBA! We will also show you how to run a business while keeping your family and sanity intact along the way!
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What Your CPA Wants You to Know
84. Why Bad Bookkeeping Is Costing You Money! Common Mistakes We See
Are you using QuickBooks or another accounting software? Are you using it correctly?
In this episode we discuss the big issues we see with Quickbooks (mainly user errors) and the biggest bookkeeping mistakes we see often.
With QuickBooks subscription costs on the rise and many client complaints, we have a new tool in the works!
Get excited about our new bookkeeping tool set to launch in early 2025, to simplify tax estimation and expense tracking. The tool will offer more than just basic tracking; it aims to revolutionize how you handle mileage, assets, loans, and home office deductions. Let us know what else you'd like to see included!
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In QuickBooks you can do a setting that's going to cause the whole software to do something automatically. That's wrong, and then you're not even really the one doing it, except you sort of did. But with the spreadsheet you can't really do anything. That's that irrevocable. You type the number into the blank and it's pretty simple. Welcome to what your CPA Wants you To Know.
Speaker 2:Tax and accounting help can be expensive, so we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.
Speaker 1:I'm Carson Sands.
Speaker 2:And I'm Taryn Sands.
Speaker 1:I'm a CPA with over 10 years of experience helping people start and grow their businesses.
Speaker 2:And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck and we want to make sure you don't pay more than your fair share.
Speaker 1:We're here to share everything your CPA wants you to know in a fun and easy to understand way. Let's get started.
Speaker 2:Let's do it. And easy to understand way. Let's get started, let's do it. So we have something really exciting to share today. It's something that we've been working on. It's for business owners, and today's episode is all about that, and it has to do with being able to keep the books for your business. So we're going to talk a little bit about the problems that we're seeing in our firm, which is why we've been working on this new tool for business owners, which will just be an income and expense tracker, and why we think it's really important.
Speaker 2:So we just wrapped up fall busy season, which is where we're working with a lot of business owners on business tax returns and these problems. We've seen them for years, but we see them a lot in the fall because they're business owners that have delayed filing their tax return, usually because they're not organized and they're not ready to file. So some of the things that we've seen this year and every single year are bookkeeping issues, and we'll talk about a few of those, but the first one is just not having the right numbers. So many people are using QuickBooks, but they're not using it correctly, so then it's not even usable. So they're giving us numbers and Carson's reviewing them and going, okay, well, it shows that your profit was this and these are your expenses.
Speaker 2:Does that sound right? And they're like, oh, no, no, no, that's not right at all. And so we're like, okay, that's problem number one. So problem number two is people are giving us their numbers, saying, okay, I have everything ready to go and the tax return is prepared, and then the numbers are not even correct. So once they're reviewing everything, then they're like wait a second. That doesn't look right and it is exactly what they provided. Well, the problem is that they just didn't do their bookkeeping correctly in QuickBooks and the numbers aren't right at all.
Speaker 1:Right, Then we have to redo the tax return completely, which puts us in a weird situation. Do we charge twice for the tax return completely? Which puts us in a weird situation. Do we charge twice for the tax return? Because we did the tax return twice? And so all of that is just to say that using QuickBooks or any accounting software is kind of like using a defibrillator Used correctly, it can be very useful, but if you use it incorrectly it's very dangerous. It's worse than not using it at all.
Speaker 2:Exactly, and that's what we have told a lot of people over and over again, because this is another problem that we're seeing is that QuickBooks, subscription payments and the software, whatever type of QuickBooks you use it keeps going up, and we've heard this from a lot of our clients. We see this all the time, people complaining about it. It is a big expense, so if you're not utilizing it, there's no reason to have it.
Speaker 1:Now, the expense isn't so crazy yet that if it's saving you time and you're using it correctly and you're reconciling your bank statements and doing all the things you're supposed to do, I don't think you should cancel. But it is something you should consider. If you're trying to decide if you're going to get QuickBooks or not, well, the fact that they keep increasing the price should weigh into that decision, and if you have a pretty simple business, then it's something you should think about when you're deciding. Should I just go with a simpler approach?
Speaker 2:So Carson brought up reconciling, and that's another issue that we see is that people have QuickBooks and they are going in there and categorizing things, saying, okay, this was for my supplies, this was for this, all of that, but they're not reconciling every month. So we also get in that situation where they tell us everything's ready to file the tax return and we go in there and it's not reconciled. And in QuickBooks that's the really big deal if you haven't, because we can't rely on those numbers.
Speaker 1:That's right, because things do not always import over. Sometimes there will just be days missing for no reason at all. Maybe your bank did a software update and so for a couple of days the data didn't transfer over to QuickBooks. If you're reconciling your bank statements, you'll see that really quickly and you'll know that you need to go import a few days worth of transactions or you just need to manually add a few things. But also people make their own personal mistakes and double count things. Maybe they've linked a payroll processor outside of QuickBooks to QuickBooks and now they're double counting the checks. That happens all the time. Or they have linked Square or their other payment processor to QuickBooks and you know, in that case people oftentimes they're double counting their income. So that's something that is very fixable as long as you're reconciling your bank statements.
Speaker 2:Yeah. So we see people not reconciling all the time. So that is a very important step. And then, like you said, we've seen some very big issues created from people just really not knowing how to use the software correctly, and then the books are all a mess. And then, once you have QuickBooks and you want them to be usable, it costs a lot of money to get them straightened out, and that happens all the time here too.
Speaker 2:So on the flip side, if you are not using QuickBooks and you don't have to, I think sometimes people feel like they have to use QuickBooks if their business is getting more established and they're growing, and that is just not true. You do not have to use QuickBooks. It's much simpler to use something that you actually understand, that you would know your numbers are correct and your CPA can use anything. It does not have to be QuickBooks. So the flip side of that is that we have clients who are using maybe a spreadsheet or even just a piece of paper or something, which is completely fine, but they're not doing it all year, they're not splitting their finances. So when they're turning things in, they're kind of just last minute trying to organize everything, and the problem with that is that they're missing so many expenses and they're paying too much in taxes.
Speaker 2:All of that leading into this is something that we saw that we could create that would be helpful for not only our clients but lots of business owners.
Speaker 2:So if you are a small business owner and you're using QuickBooks and not loving it you're thinking all of these things that we just said, yes, like I'm messing it up, I don't like it, it's not very intuitive to me, or the price is just keeps increasing, increasing then maybe a simpler option would be better for you, and we think a simple option is great for lots of our clients.
Speaker 2:Now, this is not going to be a good option for, like, really big companies who have a lot going on a giant payroll, but for a lot of our companies, this would work just fine giant payroll, but for a lot of our companies, this would work just fine. And it is just a simple income and expense tracker that you can use in your business and then you can use during tax time to give to your CPA, and he or she would be happy to have it all nice and organized how we have it. It also has a lot of other built in things in it that we're going to talk about. That, I think, would make a lot of business owners' lives very simple, because not only does it remind you to keep track of these things, it also kind of teaches you along the way.
Speaker 1:Yes, and to be more specific on who exactly this is for, this would be people that have your total revenue is below $250,000 a year and your total assets that you own in your company are under $500,000 per year.
Speaker 1:So the reason for those limits and, by the way, that doesn't apply if you have a Schedule C business If you have a Schedule C business, you can use the income expense tracker no matter what. But if you have a partnership or an S-corp, if you have your revenue over $250,000 for the year or your total assets over $500,000, then you're required to do a balance sheet on your tax return and the income and expense tracker won't keep track of those items. And the balance sheet is where you report the total value of your cash assets, your inventory fixed assets like equipment, things like that, along with your liabilities, like your credit card balances, your loan balances and the money that the owners put in or take out of the business. So those items are required to be reported on the tax return when you go over those thresholds. So, for those individuals, you need something a little bit more sophisticated that will keep track of the balance sheet and all the items that go on there.
Speaker 2:So Carson's at a Schedule C business, but he's talking about a sole proprietorship that is filed on your tax return. This would be perfect for anyone with that type of business. So it will obviously track all of your income and expenses each month and will give you some instructions on the processes and workflows you should and expenses each month and we'll give you some instructions on the processes and workflows you should be doing each month. So it gives you a little bit of training with each one. So we're not just saying do this without saying why. So each month you know you'll put in your income and then put what expenses you had in each category and then it will total everything for you for the year, for each month and all of that.
Speaker 2:So that's what you're going to need for your tax return, but also super useful month to month just to see did something increase too much? How is your profit looking? All of that, so it will also have a profit and loss for you. Another thing we thought would be really important is to put estimated taxes in there. So, based on what you're putting in, it will calculate what your taxes would be looking at and what we would recommend you be paying in. So that really trips a lot of people up. Now, this isn't going to be like a firm number, but it will be good at estimating how much you should be setting aside.
Speaker 1:And this will be specific to the amount you would owe for that business income. If you have multiple businesses or if you have a spouse that has a regular W-2 job, it won't be factoring in any taxes that you would owe on other businesses sources of income.
Speaker 2:Right, so just from this business. If you had a different business you would obviously need that to calculate the income and taxes from that business. Another thing that we see come up all the time that we wanted to include was to track contractors. So there will be a part in there where you can put in your contractor. So anytime you hire a contractor, put in their name and information, check off that you've got their W-9 form filled out and you can track how much you paid them through the year. It gives you also instructions, because sometimes people don't know when you should send them a 1099 at the end of the year and when you shouldn't so anyone that you paid over $600,. It will have all of that information to kind of guide you along the way. But it will include a section where you can put in your contractors and track how much you've paid them, and we think that's super important because people forget to do that all the time.
Speaker 1:Yes, and you definitely need to send your 1099s or you will get in big trouble.
Speaker 2:And that's one thing. On the tax return that your CPA will be asking you did you send out 1099s to any contractors paid over $600 in the year? And that's information that they need. So this will be included when you send them all of your information for the year. There's also going to be a section in there for mileage to make sure that you send them over business miles put on your personal vehicle and it will go into some more detail about what you can and cannot include for auto. On that part, once again, a little bit more teaching, because I would say that's one of the top questions we get when people are sending over tax stuff to us, don't you think?
Speaker 1:Yes definitely.
Speaker 2:It's always like what can I include in my mileage? Can I do gas? So it will give you instructions on that so you know what to send over to your CPA to do your tax return. And then it will also give you guidance on those really tricky items like assets and loans. So there will be a spot to put that in there. Anything out of the ordinary if you got a loan that year or if you bought a big asset that can be depreciated a certain way, it will give you some guidance on that to make sure that you're letting your CPA know all of those big things that happen throughout the year.
Speaker 1:We'll also have a section on there for home office deduction so that you can put in your square footage of your office and it will calculate what that deduction is. And that will be important both to help your tax preparer get your tax return done and also to help you know exactly how much profit you're going to have, because that's one of the factors that will affect that.
Speaker 2:And it will also include some guidance on what is deductible and what's not deductible. It will be customizable, so, you know, not all businesses will have the exact same things. There are some that everyone will have, like marketing and supplies and things like that, but we'll give you examples and a list of what you can deduct and what you can't, and then some guidance on marking things that may or may not be deductible, that you can, you know, ask your CPA about when you're filing your tax return. I think that's pretty much it right now, what it has in it. But we wanted to do this episode because if there's anything that you guys would like or be able to use, we could add to that. Now's the time to let us know, because we're still finishing up and getting it ready for launching, probably the 1st of 2025.
Speaker 1:So if there's anything else you'd like to see in there, make sure you let us know.
Speaker 2:So, just to recap, the pros of this would be that it is very simple and easy to do. We're going to give you instructions on how to use it and what your workflow should be every single month, so that you're doing bookkeeping for your business, and this should take less than 15 minutes. This is going to be very quick, but it's something that you really should be keeping track of. It's also going to be very inexpensive. We haven't set the price yet, but it's going to be a one-time fee. So, unlike paying a software expense every single month, even if it's low like $10 or $15, this is going to be a one-time purchase and you can use it over and over every year, and the beauty is that you're going to keep customizing it for your business and it'll just get better over time. And then it's really easy to do. It's realistic.
Speaker 2:A lot of people just don't click with QuickBooks or accounting software, and that's okay. I think that there's a stigma that it's not you have to use something that is on the computer or online that you have to use some sort of accounting software and you don't, because we've seen it time and time again that if people aren't teaching themselves how to use it and putting the work in, then it actually creates more work because they're not using it correctly and it can really create a big problem. So using something simple like this works for a lot more people and that's okay too. So we just want to provide an option that is simple and expensive and that your CPA would love to see if they're preparing your tax return.
Speaker 1:Yeah, that's true. It's very difficult to make big mistakes when you're just entering numbers into a spreadsheet, you know. I mean, it's possible to type in the wrong number, but it's easy to go back and check that too. Whereas in QuickBooks, you know, you can do a setting that's going to cause the whole software to do something automatically. That's wrong, and then you're not even really the one doing it, except you sort of did. But with the spreadsheet you can't really do anything. That's that irrevocable. You type the number into the blank and it's pretty simple.
Speaker 2:Yes, and that happens a lot. No one is intentionally going in there and screwing up their QuickBooks. It's just they know enough, but not enough, right? So that's what we have so far. We're really excited to get this out, but we are still working on it and we did want to get input from you guys. If you listen to this and you are really excited about it, you think it's something you could use in your business or maybe you're starting a business soon. We are doing a wait list and it will notify you when it's available, so you don't have to keep checking back in. If you'll just check the show notes, you can put your email in there and you'll get an email as soon as it's available.
Speaker 1:So that's all we have for today. So until next time. Thank you so much for listening to.
Speaker 2:What your CPA Wants you to Know.
Speaker 1:Podcast. This podcast is intended to provide accounting and tax information for educational purposes only. All tax situations are unique and should be handled with the assistance of a tax professional.