Welcome back to stuff. Interior designers need to know. I'm your host, Rebecca West, a residential interior designer who spent decades helping thousands of clients get happy at home. These days, I'm a marketing and client communication coach for other interior designers who want to raise the bar in their own businesses and across our industry. Whether you're flying solo or you're leading a team, this podcast is here to make sure you know what you need to know. To steer your residential interior design firm towards sweet sweet success. Today, we're diving into a topic that might not seem glamorous, but is unavoidable. If you want to run a successful interior design business. And that's bookkeeping. To talk us through what we need to know. We have Natalie Spears with us CEO of vintage gray, LLC. A bookkeeping firm that works exclusively with interior designers. In fact, she's so dedicated to her niche that when she gets asked to take on clients outside of our industry, she refers them to her colleagues. Can we just take a second to appreciate and learn from the genius of embracing a narrow bookkeeping niche? While most bookkeeping firms stick to the safe route of serving any small business. Much like a lot of interior design firms out there. Natalie picked a lane for vintage gray. By focusing only on interior designers, she's become an expert in exactly what we designers need to know. Making her not only memorable, but also super referrable from one designer to another. It's a perfect example of the power of a niche. As you listened today, think about how much more confident you feel in Natalie's expertise simply because, you know, she specializes in what we do. Then imagine your clients feeling that same sense of trust when they know you specialize in exactly what they need. That's how this niche stuff works. Everything gets easier when you embrace your niche, it makes marketing a breeze. It helps you attract the right clients and it sets you apart as the go to expert in your field. So a big round of applause for Natalie Spears for doubling down on her niche and dedicating her from two interior designers like us without further ado, let's dive in and hear what Natalie wishes. Every designer knew about bookkeeping.
rebecca_1_08-28-2024_170843Hi, Natalie.
natalie-spears_1_08-28-2024_100843Hi, Rebecca, how are you?
rebecca_1_08-28-2024_170843I'm doing so well and I am so excited to have this conversation about bookkeeping with you I will be the first to admit Bookkeeping is not my favorite thing When I hired my first bookkeeper it kind of became a running joke that she would have to pour me a shot of whiskey every time we would sit down to have a bookkeeping meeting. So that's how I feel about bookkeeping. I hope you enjoy your job more than I would enjoy your job.
natalie-spears_1_08-28-2024_100843I would say there are some days that shot of whiskey would probably be good at the end of the day too. But you're not any different than most designers, and most business owners in general, unless you're a bookkeeper, no one really wants to look at the financial side of things.
rebecca_1_08-28-2024_170843Yeah, I think it's because of several different reasons. A lot of designers think they're bad at math. So as soon as a number is part of the conversation, they get a little nervous. We're also very visual and charts of numbers... Just don't translate in our head the way colors and shapes and 3d planning do. It's like it's a totally different language.
natalie-spears_1_08-28-2024_100843Absolutely. Unfortunately designers have to face the numbers because you do need to know if projects are profitable. Just seeing that balance in a business checking account doesn't really tell you how much money your company is making. It can be very deceptive, especially the larger that your projects get, the more deceptive that balance can be.
rebecca_1_08-28-2024_170843Before we start diving into what designers should know about bookkeeping, what is it you enjoy about this work? And how did you come to focus on helping interior designers with bookkeeping.
natalie-spears_1_08-28-2024_100843I actually do love diving into the numbers. To make sure that an account is reconciled, everything is neat and buttoned up and organized and then to look at those monthly financials and have a really good understanding of where the business is. It brings me sheer joy translating that to designers who do tend to be more visual, so that they can decipher those numbers and make strategic decisions. So how I got into this field and why I serve designers. I grew up in a very small town, very small town, in Tennessee, if you can't tell by the accent. So, I was born, raised, and actually still live in this same small town. Over the course of time in working for different companies, doing various bookkeeping tasks for those businesses, the one thing that I did not have while those businesses were wonderful, what I did not have was flexibility. Um, I have twin boys and as they started growing, I realized I wanted the ability to attend all of their activities and because of a long commute to get to good jobs in this area, I would be on the road sometimes, uh, two hours or more a day. That did not leave a lot of family time to be able to participate in the activities that our boys were participating in. My husband at the time was working an out of town job that would take him away for 30 days at a time. And I didn't have that spouse available at home that could kind of, make up the difference when I wasn't around. My parents have always been entrepreneurs. So it's sort of in my genes. Once I saw that I didn't have that flexibility that my parents always had, I made the decision to open my own business. doesn't mean I don't work hard. Doesn't mean I don't put in over 40 hours a week. My parents were up long before most people. It was, way before daylight when they got up. It's way before daylight when I get up. It was very late when they would close their business. And it's usually very late when, when I get finished working. But it allowed for a different lifestyle. And that's what I wanted. So we opened this business. I already knew the bookkeeping side, and I already had a really good understanding of how to run a business. Maybe not necessarily how to run a bookkeeping business but how to run a business because I had grown up in that so I was very fortunate in a lot of those areas. We started out in the business as a general bookkeeper. So we were working with various industries. When I took on my very 1st interior designer, it was an immediate fit. Just, just the best fit, she is still our client to this day, uh, and I'm so proud of that because she was so happy with our services that then she said, are you taking on new clients? And I told her yes, and she immediately referred us to other designers who then, those two then referred us to other designers who then referred us to others and it just built on that. And by that second designer, I had already revamped our website so that it became very clear that all we wanted to work with going forward was interior designers and and for the last several years, that's all we have worked with, and that's the only industry that we have to this day, is interior designers, because it was such a great fit. And while your audience can't see my wall behind me, it's literally just a plain wall, it's very obvious that I do not have the skills to do interior design work myself. It is strictly on the side of bookkeeping, so I didn't go into this industry because I was a designer in the past, or because I'm wanting to learn from other designers to go into that field later. It has nothing to do with that. It is strictly because it was a great fit between what I can offer and what that industry desperately needs. And it, it is a desperate need for designers.
rebecca_1_08-28-2024_170843I have so many questions I could ask you right now, but why did you just say it's a desperate need for designers? You said that very fervently.
natalie-spears_1_08-28-2024_100843So interior designers often have a reputation for people outside the industry of they just go in and they throw a few, uh, pillows on a sofa and they hang a photo on the wall. It is so much more than that. It is a complicated industry when it comes to your financials. Oftentimes you are taking large amounts of money up front sometimes a hundred percent of your products. Some take 50 percent of their services up front. Some bill their services out by the hour on a weekly or bi weekly or monthly basis. These are plates all spinning in the air and your balance in your checking account doesn't really show you the true picture and needing to keep up with all of that can be very challenging. There's also the aspect of sales tax. Every state is different in the U. S. on sales tax, and you may be selling to various states. You may be like I am, where I'm literally right where Tennessee, Alabama, and Mississippi meet. So I'm only 30 minutes from Mississippi, 30 minutes from Alabama, but my business is located in Tennessee. So some of the common questions that I might get is, do I charge sales tax? You know, I'm registered in Tennessee. Do I charge sales tax when I go down to Alabama and sell to a customer down there? I can't tell you the number of designers that come to me who have just ignored their register. They're supposed to be filing sales tax, but they don't have a clue how to file it. So they just have put their head in the sand and have ignored it, and all they're doing there is they're building up fines and penalties, late fees for not filing that. So that can also be detrimental to their business.
rebecca_1_08-28-2024_170843I never really thought about it, but for a lot of interior designers, the barriers to entry are really low. Unless you're opening a showroom there's not a lot of upfront costs to becoming an interior designer. But on the flip side of that, the actual structure of our job financially is very complicated as you point out and is not standardized. So in addition to everything you're talking about in terms of "Who charges what taxes, where?" and like where I'm from in Seattle, it's literally different from city to city, and you're expected to report all of those taxes on a city to city basis, even if it's five miles away from you. So in addition to all that, as you say, you have people billing hourly, you have people billing flat fee. You've got people hiring subs and paying subs and dealing with their income and W nines and fours and twos and whatever all these numbers are.
natalie-spears_1_08-28-2024_100843Right.
rebecca_1_08-28-2024_170843You've got the deposits of money that doesn't belong to you because it's actually for product. You've got deposits of money that does belong to you, but it's a retainer form and we could go on and on and on. So I can see why you said interior designers in particular can really use a bookkeeper. Okay. So my next question for you then is what is the difference between a bookkeeper and a CPA?
natalie-spears_1_08-28-2024_100843That's a great question. I always recommend that our designers have both. If they have us providing monthly financials and they've got good clear insight into what their business is doing from month to month and the overall for the entire year, that's extremely helpful. But I'm only seeing one portion of their entire financial structure for their household. So maybe they're only doing their design part time right now. Maybe they have another full time job and they're doing the design work on the side. Maybe they have a spouse who also has a business or their spouse has a job.. There are things that only a CPA is going to be able to help them with. While we provide a package for you to take to your CPA at the end of the year, we don't file your yearly tax return. That is going to be something that your CPA is going to help you with and guide you on, you know, your home, your vehicles, if you own rental property, on the various aspects of everything that you have. We usually recommend that designers sometime in the fall, by September, October take your current year's financials, and since we're doing it on a monthly basis, it's really easy to take those financials, sit down with your CPA and let them look at everything. Let them look at the entire picture, and make projections about what your tax liability will be for the current year. Because while you are still in the current year, you have a lot more options of what you can do to offset that tax liability before you get to the end of the year. Once the year is over and you're sitting down with your CPA at the beginning of '25 to discuss what your tax liability is in '24, you are so limited on what you can do at that point. You only have, you know, just a handful of things that you could possibly do to reduce that, that tax liability. But CPAs really don't want to get into the daily details of your business, the bookkeeping side of it. Many of our clients don't even have their CPA accessing their QuickBooks Software because their CPA really just prefers to see their financial statements for the whole year. Now, some do some, some CPAs do want that access. Others do not.
rebecca_1_08-28-2024_170843So if I'm hearing you right, the CPA is helping with the annual financials of your whole life. And if you have a good one and you use them at the right time of the year, they're also helping you with some strategy. Whereas bookkeepers are really helping you understand how much money you have right now to work with.
natalie-spears_1_08-28-2024_100843Yes, that's correct. I may say this is hard to give you an answer on because I don't have the entire picture. I would recommend that you reach out to your CPA who knows the whole picture, and they can best advise you on that." But we can provide general rules of thumb because we only support the design industry. We can say, okay, here's what we've been told in the past by various CPAs. Um, here's what, here's how my industry in general handles that. Here is how the design industry in general handles that. But we do default to the CPA. But I can give you a great example. Just recently, I had a client who, when they turned over their, their paperwork, their documentation to us, I saw that they were filing as an S-Corp. So, to keep from getting too in the weeds on it, she really should have been paying herself throughout the year, through payroll where payroll taxes are literally deducted from the paycheck, similar to, if you were working a job, they would pull payroll taxes out. That was not in the books at all. And when I asked her about it, she said, Oh, I didn't know I was supposed to be doing that. And I said, Okay, this is what I typically see. This is what I know. Before we move forward contact your CPA and confirm that they are on board with that. A week later she comes back to me, "you're absolutely correct, I was supposed to be doing this. Can you help me with that?" Yes!
rebecca_1_08-28-2024_170843Let's talk about the designers in two groups. You've got your more experienced designers. We'll talk about them in a second, but our brand new designers. I remember one of the best pieces of advice, and I wish I remember who told me this, because I owe them at least a coffee, but somebody told me to set aside 10 percent of every single dollar that I was paid into a tax account. So there was this tiny little pool of money that was growing so that at the end of the year, I wasn't surprised if I had a big tax bill. Over time, we changed that to about 30 percent and it ended up becoming our savings account within the business too. On the opposite side of that I know when my husband started his first business, nobody gave him that advice and he was very surprised by a very, very big tax bill at the end of his first year in business. And I know that that has taken people out of business and caused them to go bankrupt because the cashflow just wasn't working. In that vein with brand new designers, what is one or two very best pieces of advice you would give to them maybe even before they're ready to hire a bookkeeper?
natalie-spears_1_08-28-2024_100843That is a very good one that you've mentioned, factoring in the self employment tax, because you are not taking taxes out of a paycheck like you would in a traditional job. Your first year or two of business, you may not be paying quarterly estimated taxes And if you're only seeing your CPA once a year that is something that will sneak up on you and by the time you hit the new year, there's not really a whole lot you can do about it, and all the CPA can do is say, okay, you owe this much, and you have that pain of having to pay a large tax bill to the irs unexpectedly. I mean some people have to go borrow money to do that and even that can be challenging If you're not set up good with a bank, or set up a payment terms or something like that so you definitely don't want to have an unexpected tax bill if you can keep from it. Usually what we recommend is 20 to 30%, like you were saying, to estimate. I will tell you some of the things that I see for newer Uh for newer design businesses So you have a challenge because you only have a certain amount of profit coming in if any...
rebecca_1_08-28-2024_170843Oh, wait, let's pause right there for a sec. Profit versus revenue. Do you feel that new designers know the difference between those two things when you first meet with them? Okay. So let's just give people a real quick what's profit, what's revenue. How are they different?
natalie-spears_1_08-28-2024_100843So revenue is whatever you invoice your clients. So revenue is whenever you are invoicing out products or services, which is the usually the typical two categories, that you're invoicing to clients. So that is your revenue. Now your profit, your net profit is a very different number. So you could be bringing in two hundred, three hundred thousand dollars in top line revenue numbers, so you could be invoicing, uh, $200,000 to $300,000 or more and think you've got it made. The sad part is you may have a loss instead of a profit, you may not even have a profit. You may have a negative number at the end and where that is, is maybe you said, okay, I'm bringing in hundreds of thousands of dollars in revenue so I can afford to hire all of these contractors and I can go sit on a, on a beach somewhere and not work at all. Maybe the end result of that is you end up with a loss because all of those expenses may eat into that top line revenue to the point that you don't have any profit at all. So you really have to monitor those things. One of the things that I see most often for new designers when they come to us, and maybe we clean up a mess. Maybe they have a mess in their financials, and we clean that up, and we, we produce their reports for them, and I sit down with them, and I go through a screen share session, and I'm showing them their financial reports, and they realize that that bottom line number is not where they expected it to be. If you are a sole proprietor or a single member LLC, that bottom line number, whether it be a small profit or even a loss, that's what you have to pay yourself out of. You're not paying yourself a paycheck, This bottom line number is your pay. And then I start questioning them. So did you factor that in when you invoiced, when you created that contract, that proposal for that project? Did you factor in your pay? Because you've got to remember that bottom line number has to be large enough that you're, you're covering your time that you're investing in the business. Otherwise, why have the business? And that's one of the common things I see.
rebecca_1_08-28-2024_170843Yeah. So then, okay. So that's our newbies. They, you know, it's, it's really fundamental. You're going to literally have to help them understand what is profit versus revenue and how much to set aside and how to pay their taxes. I mean, truly the fundamentals of any business. Now, fast forwarding 5, 10, 15 years, what are the big mistakes you see more advanced designers making?
natalie-spears_1_08-28-2024_100843One of the things that I see as they grow larger is that payroll aspect, whether that means that they're needing to bring on team members and pay them and determining whether they fall into the realm of a 1099 contractor, or whether they need to fall into the realm of a W 2 employee. Sometimes that's based on whether you're providing their work materials for them, a computer, software, supplies, you know, their working tools and equipment that they need. If you're determining their schedule, if you're directing them on how to perform the work. And different states are different, And how to factor in as they're growing, how to determine, okay, what, what can I afford? As they're growing, can I afford this new team member? and then the, the S Corp aspect. When they get large enough that they can transition to that S Corp, you know, I'll start warning them, okay, your CPA may be starting to have that talk with you. Once you get to that point, make sure that you reach out to us because Maybe they've never had anyone on payroll. Maybe all of their employees are 1099 contractors. So, they're just paying them either a paycheck or Zelle or something like that. And when I say paycheck, they're just writing a check for a certain amount. They're not taking out payroll taxes. They're not set up for payroll. So, I have actually built that into our system now where I warn them, before you set up payroll, don't go do that on your own, let us know, we will help you with that, because there's, there's some steps really that you need to take to make sure that you get that set up correctly. And, and they'll, they'll come, they'll come to us and ask us those questions because we have monthly meetings with our designers and we're going over the numbers. And you know, Rebecca, the numbers don't lie. And I'm all up in a designer's business because I'm seeing those numbers. And so we almost become a confidant because we do know that we know the true numbers. So they're not having to, fake it till they make it. They're not having to be something that they're not. We see their struggles. We see their successes. You know, we've, we've been able to celebrate with clients when they've hit that million dollar number. And it's so exciting and they were so busy working they didn't even know they had hit it and, you know, and we're like, look what you did this month, you know, and we're able to share that with them. If there's a level that they reach that needs strategic CFO services that get beyond my area of expertise. If you will, there's, there are CFOs that we can connect them to.
rebecca_1_08-28-2024_170843For anybody who's never heard the term CFO, that is a chief financial officer. So I'm curious, CPA, CFO, bookkeeper, what are like, how would you distinguish those three jobs? How is a designer supposed to know which one they need for what?
natalie-spears_2_08-28-2024_104830When I recommend CFOs, I find ones that, are they are providing that service specifically to interior designers. And. are in line with what we are also teaching on our side. I found some that are a great fit that simply don't want to be down in the weeds in the day to day bookkeeping side of things, looking at those individual transactions. They are wanting to look at your overall strategy for your business. So you might go to them for something like, I would really like to double that bottom line within 12 months." or "can I set up a, a budget and see how close I'm getting to that budget?" Now, we have clients who are in the millions who are able to get what they need strictly by having just a bookkeeper and just a CPA. So it's not like you're having to add these expenses. These are just particular clients who are really taking control of their finances and they want to be very strategic in where they go next because sometimes those growth steps start to feel a little bit out of control. Sometimes CFOs will only meet once a quarter. They'll look at your entire quarterly financial situation and they'll provide some of that top level guidance.
rebecca_2_08-28-2024_174830Yeah, I mean, that makes sense. I mean, cause we're covering a really large span of possible situations here. You've got your, your new versus your, your more seasoned companies, but you've also got simple versus very complicated companies. And so they're all going to have different needs. And then the growth trajectory, it's funny as I'm listening to you, I'm sort of taking my own nostalgic walk down memory lane here of like when my CPA had, as you said, "the talk" with me about S Corps... It is all very familiar. That very first decision about what structure are you going to pick for your business day one, when you have no idea, you have no understanding of what the ramifications of all these decisions are, and some of them aren't decisions you can make until you hit a certain level. level of income, or they aren't decisions you have to make. Like with those quarterly estimated taxes, it's not so much that we get to decide when we do that. It's the IRS that says you're making this much money. Now you have to follow this new rule. And it sounds like these are the rules and situations that a good bookkeeping and good CPA team can help you navigate at the right milestones as you reach them.
natalie-spears_2_08-28-2024_104830Correct. Yeah. You don't know what you don't know. And that's the scary part sometimes, you know, we all learn when we do sit down and have that meeting with that CPA one year and they say, okay, this is how much your big tax bill is. We all learn sometimes that the hard way and sometimes that's the most expensive, educational lesson we can possibly have. And then we learn from that point on, okay, now I know I need to pay estimated taxes and it needs to be, you know, 20 to 30 percent sometimes of that of that bottom line net profit number. So, learning it sometimes is difficult, but if you can If you can work with a service provider, like a bookkeeper, or like a CPA, who can, who can direct you as they see those things coming along, then, They can help guide you and be a little more proactive. That's what I really like about the fixed rate package that we offer versus an hourly rate.
natalie-spears_1_08-28-2024_100843One of the number one complaints that I got from our very first interior design client was, I don't know how much my bill is going to be each month, so I don't know what to expect. And I'm trying to figure out how to best budget for this type of service. Thankfully, we were already doing a fixed rate service, so that worked out great, and we just kept that same structure for all of our designers going forward.
natalie-spears_2_08-28-2024_104830I find that once our designers know that they're not going to be charged extra for sending me an email to ask me a question, they will tend to be more proactive with their financials, with their business in general, than reactive. Rather than not asking, not knowing how they were supposed to set up that invoice, not knowing what they were supposed to do, and then us having to fix it on the back end. If they know they can contact me and just say, you know what, I'm thinking about doing this. Do you have any guidance or recommendations? Do you ever see this industry doing this? And I can say, you know what, that doesn't work. I've never seen that work for any of our clients. That fixed rate package tends to. Just automatically, naturally encourage designers to be more proactive and ask us up front so that we can help them and guide them on how to do it the correct way the first time, rather than having us having to spend time fixing it on the back end or them having to spend, unwanted time either with their state or the IRS or their CPA, uh, and possibly costing them more money because it was done incorrectly or was not done in the best fashion. I'll give you an example. I had a designer who had, and this was after 2020, which we know all the challenges for designers that happened then. There were long lead times on products. They got a set of dining room chairs that were fabric covered. The vendor sent the wrong color. And they were very wrong. And so, they were going to have to return these. Even though they were going to be refunded, it was going to be a major pain to have to return them. It was still a lot of extra time that this designer was not going to be covered for. They found another designer who actually could use it in a current project they had going on. So that designer wanted to purchase those dining room chairs from my client. So they just emailed me and said, I think I know the answer on this, but would you confirm? Can I sell to this designer, sales tax exempt, and if so, what do I need to do? How do I need to make that happen?
rebecca_2_08-28-2024_174830That reminds me of a, of a challenging kind of income. I don't want to call it income. So we've got our basic, you know, money flows in, that's all of our revenue. And the money that's left over is our profit and what we pay ourselves. But there is a certain kind of money that doesn't feel like revenue. And I see this trip up designers when they're like, Oh, I'll just pass through my discounts. And so they're thinking, I'm going to buy this chair for 400 and I'm going to sell it to my client for 400 because that's all it costs me. And I'm trying to pass through these discounts. And they don't realize that it costs you money to do that transaction. The government considers the 400 that they gave you revenue. They're going to tax you on that money as income, they're going to expect sales tax on that item, and there's all the literal time that went into you sourcing that. So If you're not billing for your time on sourcing you're literally losing quite a significant amount of money by trying to do this, quote, nice thing for your clients. Is this something that you see come up frequently?
natalie-spears_2_08-28-2024_104830All the time. Yes, all the time. I cannot stress enough. Do not pass your in your, your discount, your trade discounts for those wholesale trade accounts that you worked so hard to get set up. Do not pass that on to your clients. That is set up for you. There is no way they can get that trade discount themselves. The reason that is provided to you is because you are a business, you are an interior designer, you are set up as a business that does that and you are basically telling that wholesale vendor that you are going to bring enough business their way to offset that discount that they're offering you. So This is their way of allowing you to then do a markup to make money for your business. So It works well for them because you're going to bring continual business their way. And it also works really well for you. that is a huge determination of your bottom line number. Some of the greatest profits that I see for designers. Is about setting up those wholesale trade discounts. not passing that discount on, charging a substantial markup, and making a profit. So don't pass those on. Those are set up for you and when you pass that on, you can really end up showing a loss at the end of the day. So all the things you said are true. And I'll add one more to that: cash flow. literally have designers who come to me who purchase a product, they'll pay sales tax on it at retail, and then they will sell that product. And not charge sales tax on it. And they won't charge a markup. All because they think they can avoid having to file sales tax. Which may or may not be true in their state. But my question is always, Why? Why would you sell a product that you are not going to markup? Well, so I could get the business for the design services side. Well, just let them go out and buy their own products then. Don't be out the cash so if you charge it all on credit card, you don't pay that credit card off, you may have interest charges on that credit card. You're just, you're reducing your cash flow down, which if you don't have enough cash flow. Can hamper your business from growing so purchase wholesale get those trades set up, do not pass on your discount, mark up your products, purchase sales tax exempt, charge sales tax on the full price of the products if they're taxable in your state, and then, charge a substantial markup because the thing about it is there is a lot of time that you are not counting that goes into procuring of these products. Just like the designer example that I gave you where the color was wrong. I promise you she did not get reimbursed for any of that time that she had to spend on that I have seen designers who cut out the product aspect and just do the services side. And while that is a good line of income, sometimes it takes away a huge portion of their profits if they disregard products entirely. Because the argument is, well, I don't want to deal with the hassle of it. Well, guess what? Neither does your end customer.
rebecca_2_08-28-2024_174830I am actually one of those design on the designers and I have been told over and over again, you know, you're leaving all this money on the table and all these things are just decisions. Yeah. You know, I'd made that decision very thoughtfully. But the key is don't then over serve your customers and literally lose money. We get so cheap with our own time as if it's valueless. And if we do that to ourselves. our clients are going to treat our time cheaply as well. And when we pass through our discounts, and this is, you know, for me doing design only, I would in the early days pass through even the retail discounts, Williams and Sonoma and wherever. Okay. Well now they're going to send me an email to make sure that it's okay, that this client uses this trade number. And now I'm literally paying my time to help them save. Not that much money in the end. And so it is just about getting really clear about what your job is and isn't and not putting the focus on the wrong thing. People hiring an interior designer shouldn't be because of the trade discounts. There should be so much value there. That whether or not you pass through a trade discount, it has nothing to do with whether or not they're going to hire you, but it has everything to do with whether or not you're profitable at the end of the day. So it's not a huge impact on your client. It is a huge impact on your business, the decisions you make about each of these things and on your professionalism. You know, are you in business or aren't you? And that's really what this whole thing is about, this finance stuff.
natalie-spears_2_08-28-2024_104830Right. I probably say at least once a week. You're not a nonprofit.
rebecca_2_08-28-2024_174830Yeah,
natalie-spears_2_08-28-2024_104830I mean, do they really think that, you know, a large store, like even something as simple as Walmart, do you really think that they're not making a profit? Do you really think that they're not getting wholesale? Discount rates on purchasing, you know, large quantities of product and then marking those up to you. You're not going into Walmart and asking them to sell that to you at cost.
rebecca_2_08-28-2024_174830it would be ridiculous.
natalie-spears_2_08-28-2024_104830No one would even, would even consider doing something like that. First of all, if that's the first question that your customer is asking when they come to you, that might not be the best fit customer. You know, because sometimes I'll get pushback. When I suggest that and, and they'll say, but they can go out and see that product. They can Google that product and see what the price is. And I've explained to them, look, if I was hiring a designer, I do not have time to go out and Google products. You may not be dealing with the right customer if that's what the customer is doing.
rebecca_2_08-28-2024_174830How we present our invoices to our clients has a profound effect on if they feel like they're being nickel and dimed, or they need to question every single line item. Do you coach your clients on the formatting and communication of their invoices, or is that something more for somebody like myself,
natalie-spears_2_08-28-2024_104830So we usually refer them to you for that. One of the areas where I recommend they not nickel and dime, and I get this question, Rebecca, multiple times a week. I literally have this conversation multiple times. Credit card processing
rebecca_2_08-28-2024_174830Yup.
natalie-spears_2_08-28-2024_104830The most successful designers we see are the ones who do not get caught up on having to pay the credit card processing fees. I would really love it if every one of your listeners would let that sink in. Do not get caught up on having, the expense of the credit card processing fees. I find so many designers who do not want to allow customers to pay with credit card. Because they, they see that that large number that they're collecting and it's a large amount and it's usually a percentage of that total amount. And I've even had some CPAs who will guide customers into reducing those processing
rebecca_2_08-28-2024_174830What? So
natalie-spears_2_08-28-2024_104830Yeah, yeah, I've had that conversation before, and, I remind them when you suddenly list that as a separate line item on your invoices or in your proposal, you are shining a bright spotlight on that one line item, and you are taking away from the overall project that you have built out for them, and suddenly all the focus goes down on that one number. Yeah. And there are various reasons why your clients may want to pay with credit card. You know, a spouse may want to hide the true expense of a design project. I hate to say that, but I've had this conversation with designers before who want to hide the true expense of a, of a design project from their spouse. Maybe they want to justify it by saying, I get rewards. points on my credit card or I get those, those airline miles, uh, and they will justify a family trip. Look, look, honey, we got to take this trip, you know, with these miles. Or maybe they just don't want to admit that they don't have, they may have plenty of, of income coming in to cover your design project, but maybe they just don't have that in readily available cash. Maybe they want the option to pay that off in two installments on their next two credit cards. Statements, you know, maybe they want to break it in half. So maybe they want to take 100, 000 project and they want to say, okay, I'm going to pay 50, 000 this month and 50, 000 the next month to the credit card company. They may not want to have that conversation with you. Do not make it difficult for your customers to pay you. You're at the one yard line. Why stop them right there?
rebecca_2_08-28-2024_174830Yes. Yes. Oh, you are, you are preaching to the choir right now. And I'll tell you, I mean, I remember going through that and you're looking at those PayPal fees or Zelle fees or whatever the fees, you know, if you're up with a big processor, they're all around 3%. Okay. The way I look at it is through two lenses that really helped me psychologically. Number one is I just treat it like utility. You know, I can't get away with. Oh, here on my invoice, you're going to pay 5 percent of my rent this month. Like that would be weird to put on your invoice. You know, you're going to pay my phone bill for this month. That'd be weird to put on the invoice. So this is just a utility. It's a cost of doing business. Why in the world would I ever put that in front of my clients and put that in their head? And then the second thing was that I'm like, well, the bigger that number is the better I'm doing in business. So that felt really good. So it is a mentality shift, and it goes back to are you in business or not? Are you a business person or are you not a business person? And if you're gonna be a business person, you have to start thinking like one.
natalie-spears_2_08-28-2024_104830yes, I literally said almost the exact same words you said about utilities just yesterday. Like, literally, you think about it, your liability insurance. As a designer, you need to have business liability insurance. You are not going to prorate that monthly charge out by the number of projects you have this month and say, okay, one line item on your invoice is for, you know, 2. 50 for this monthly liability insurance that I have. Literally that's what you're doing with a credit card processing fee. Just build it into your. your cost of the project just like you build everything else in. You build the cost of your business phone in, your liability insurance, the softwares that you use. If you have 1099 contractors, you build all of that in to the cost of that project. Just build the credit card fee in. Regardless of how they pay. Plus, in some states, it is illegal to pass on those credit card processing fees to your end customer. In some merchant service agreement contracts that, that you basically check and say I accept, but nobody ever reads. In some of that fine print, you cannot make a difference between whether someone pays with cash or check versus credit card. So that's always my argument. You are the business owner. You get to make the decisions, whether they are good or bad decisions for your company. This, in my opinion, is a bad decision, but you're the business owner. You get to make the decision.
rebecca_2_08-28-2024_174830yeah. Although I will add one more argument in our argument's favor, which is that if anybody is not after everything, Natalie and I just said, convinced that we're right. Just think about how you feel when you pay your cell phone bill, and it's so confusing because your bill is 70, but somehow your real bill is 110 because of this fee and that fee. It's the same thing that airlines are doing. It's the same thing that Airbnb is doing. And nobody likes it. So if we don't like it on those platforms in our day to day lives, why would we want to inflict that upon our clients?
natalie-spears_2_08-28-2024_104830Yes, and going back to someone like Walmart, you don't see that. If you pay with credit card at Walmart, you're not given the option before you swap that card. They don't say, you know, your bill is a hundred dollars if you pay with cash or check, but we're going to tack on 3 percent if you use credit card. They don't do that. But I promise you They are covered for credit card processing fee. They end up at the end of the year with a substantial profit for their company. No, no designer ever gets caught up on the expense of their website design or their software they're using, their, their liability insurance. It's their, their monthly business cell phone bill. They don't get caught up on those expenses, but they get caught up because they feel like somehow, they would just be that much more profitable if no one ever used the credit card. But keep in mind, you may be deterring customers. Everything else is the same. And one designer is offering that customer to pay with credit card versus you are not allowing them to pay with credit card. You may have lost a customer. What if you lose that hundred, two hundred thousand dollar project Simply because you wouldn't take credit card.
rebecca_2_08-28-2024_174830So silly. Well I feel like you may have already answered my final and most important question, but I'll give you the chance to have another answer too. So big picture, what makes you grind your teeth at night when you see designers do it? What do you really, really, really wish interior designers knew about bookkeeping that would make their life and your life as their bookkeeper easier?
natalie-spears_2_08-28-2024_104830I will touch on one that we haven't talked about. It's not as frequent as, as getting hung up on processing fees. but one of the things that can potentially be detrimental to your business is co-mingling of funds. Now, I'm using, bookkeeping terms, so let me explain that for those who might not know. Basically, if you are trying to run your business out of your personal checking account, so everything is running through one account, versus having a dedicated, Business checking account and a dedicated business credit card account. Dedicated accounts that are completely separate from your personal. That is business 101. It doesn't matter if you're an interior designer, what I'm a designer, Industry of business you're in that is one of the first lessons that you need to learn as a business owner keep those separate It can Open you up to additional liability if you're not careful with that. So that's the legal reasoning for doing that. so keep that in mind. The challenge as a bookkeeper is I'm going to assume that everything that is running through your business is related to your business. So if you start going and buying groceries for your family, if you're purchase that with your business, credit card, it is going to potentially cost you more in services because if I'm having to fish out all the individual personal expenses, you've got co mingled with your business expenses. It's taking me and my team more time to do that, which means your fixed monthly rate is going to cost more. And there's just no way around that.
rebecca_2_08-28-2024_174830Yeah. And again, this is just a decision you can make. You can show up to your bookkeeper with the proverbial shoebox full of receipts and say here, good luck. And that's totally normal actually. But it will cost you more. But I'm really glad you brought that up because that was a real important takeaway from me early on when I. Set up my company as a limited liability company, an LLC. And my advisor was very clear with me. He's like, we need to separate church and state here. You need to have your personal accounts and your business accounts. And he, he didn't talk to me from the bookkeeping lens. It was very much that liability lens of the whole point of having a limited liability company is that your company is seen as a separate responsible entity from you as a human. And every time you blur those lines between the company entity and you at the entity that is taking away and eroding that legal protection that in theory, you took on by choosing to have an LLC company in the first place. So. And, and it just makes the bookkeeping harder, so don't do it anyway.
natalie-spears_2_08-28-2024_104830Yes. if you're, if you're more, apt to not commingle funds because I've said it's going to hurt your pocketbook, sometimes that immediate it's going to hit my pocketbook is more of a deterrence than The possibility of, of, of, you know, all of your assets being stripped away from you because you, you did not protect yourself You set up that limited liability company to begin with, there was a reason that was set up that way and all you're doing is exposing your company. You know, to potential liability and, and, and potentially exposing your personal as well setting up that LLC was to protect you from that, but you have to do your part in order to, maintain that protection.
rebecca_2_08-28-2024_174830Well, obviously, we could talk for days about the intricacies of bookkeeping, but this has been absolutely wonderful. Is there anything in particular, after all of those gems and nuggets, that you would want to leave with our listeners today?
natalie-spears_2_08-28-2024_104830So one of the fears I get from designers, and it surprises me that that this is the big concern when they first start talking to me, is that designers are often very concerned about the mess that their financials are. You're coming to me for bookkeeping services. I'm naturally going to assume that you have a hot mess. I am going to assume that you do not have it all together. Otherwise, why do you need me? So just like I'm not going to go through and And try to do a bang up job of interior design in my house before I hire a designer, it's okay to come to me with your mess. Trust me, it is not the worst I've seen. So that is, that is one of the biggest concerns that designers have. They are not concerned with the fact that they didn't file sales tax all of last year, but they are very concerned that I'm going to see the mess of their financials. So that's one of the things. Another thing that I would like to leave you is the fact that designers often tell me after we have that meeting I actually feel so much better just having this meeting with you. I finished a cleanup not long ago and it was one of the greatest compliments I ever got. Your team has brought a sense of calm to me that I have not felt throughout the entire, Lifetime of my business, and they've been in business for quite some time. their husband was in another industry entirely their husband was so stressed and they wanted their husband to have that same sense of calm. I said, no, but I can actually refer you to a great colleague who's in that industry. So I put them in touch and I talked to them recently and they said that your colleague is wonderful. We're moving forward with them that we're already feeling so much better about that too. So while it may be a hot mess right now If you will take the time and, and feel that you are able that your company, how do you know if you can afford it? So you don't even know what your profits are. Most of the time. That's what's amazing to me is I, I may not, I don't know if I can afford you what that's because you don't even know what you're making. How can you also know if you can afford to go to high point? How do you know if you can afford to invest? How did you make your first investment? in that conference that you've really been wanting to go to, or that new software that you would like to purchase for your company? Or, virtual assistant, or help with a junior designer? How do you know any of that? You don't have a clue how much money you are bringing in? You don't know how much money is going out? You don't know what your bottom line number is? So, You You know, we are not the cheapest. We are also not the most expensive. We are a fair price for what we offer. And, hopefully we can bring that sense of calm to everyone that we, that we meet with and that we deal with, because it's a very deserving industry.
rebecca_2_08-28-2024_174830We work hard for the money we bring in, that is for sure. Oh
natalie-spears_2_08-28-2024_104830working business owners I have ever seen. And sometimes they are working in heels. They are dressed to the nines, they are working in heels. I literally have a client who, they just put a brand new floor down for, a client. They were, they had cleaned that floor for a beautiful reveal, slipped and fell on that floor and ended up with a mild concussion. Guarantee you, guarantee you they had heels on.
rebecca_2_08-28-2024_174830All right, well in our next podcast we'll be talking about fashion tips for safety. Brought to you by Natalie, the bookkeeper, but
natalie-spears_2_08-28-2024_104830Trust me, you do not want that.
rebecca_2_08-28-2024_174830obviously getting ahold of you. We'll all be in the show notes, but what's your website? Where can people find you?
natalie-spears_2_08-28-2024_104830Yeah, so our website is vintagegrayllc. com. So gray gray is spelled with an e, so it's g r e y. Didn't think about the business name and having to give that website out numerous times. So think about that. If you're thinking about starting an interior design business, make it simple. But it's vintagegrayllc. com and from there you can easily schedule a complimentary consultation and just sit down and talk to me about your bookkeeping needs. That's usually the first step if you're interested in working with us is have that initial, consultation. It usually lasts about an hour. We will get on a virtual meeting face to face. And that way you see who you would be working with. I see who I would be working with. And, let's take a look at your financials and let me get a feel of what's going on in there sometimes it's helpful to see what you've got going on right now. so that I can give you a more accurate, proposal, uh, of what our services would be and hopefully I can at least bring some, some insight and maybe some calm for at least an hour of your busy day. We are on social media, on Facebook, LinkedIn, and Instagram, and we do try to post daily. And some of those posts can even help you. Again, you don't know what you don't know. So simple things like for designers, so I'll give this little nugget of information here at the end. So say at the end of the project, you want to, you want to purchase a really impressive gift for that customer. As a thank you for doing business with them, as a thank you for referring them to future projects or doing follow up work with them. the challenge is you're limited, on what is deductible from a tax standpoint. You could spend any amount of money you want to on that gift, but keep in mind you may be limited 25 per client per year. That is so painful for designers because 25 So, you know, the cost is usually very minimal compared to what you would typically spend sometimes for these larger projects. And that's okay. You can spend you know, 100 plus, uh, for a client to give them a really nice, impressive gift at the end. Just know only 25 of that is going to count as tax deductible for your business at the end of the year. The rest can still be shown as a business expense, but it's not going to be a deduction. Those are some of the types of posts that we might have out there on LinkedIn, Instagram and Facebook that you might not have thought of and might not know to ask or might not know to research further, So if you don't feel like you can afford bookkeeping services or CPA services or CFO services, Initially, when you're first getting started, maybe some of those posts might help you and guide you to know what to research further.
rebecca_2_08-28-2024_174830Thank you so much. Everybody. Vintage gray, Natalie, the bookkeeper, For our actual industry. I love that you have chosen a niche so that you are an expert in what we do. Thank you so much for your time today, Natalie.
natalie-spears_2_08-28-2024_104830Thank you so much. It was a pleasure to be here.
Well folks, that's it for today's round of stuff. Interior designers need to know. Did you have an aha moment or a favorite takeaway from today's episode? Come find me on Instagram at be seriously happy. And tell me what you learned. Were you inspired by the fact that Natalie, so bravely leaned into a narrow niche and feel ready to target a tribe of your own. Ask me about my nail, your niche course, it's now available as a self study course for just 350 bucks. As of this recording. That's 500 less than the cost of the life course. And you can complete it at your own pace. Last, but not least. Please let your interior design colleagues know about this podcast so we can all learn and succeed together. Until next time, may your design biz make you seriously happy?