S6E14: What Every Business Owner Should Know About Talking to Bookkeepers

Disclaimer: The information in this video should not be viewed and is not intended as tax/financial advice. Consult with an expert before making any decisions regarding your finances. 

Feeling lost or “dumb” when talking to your bookkeeper? You’re NOT alone—and it’s not your fault. This week, Pam's breaking down bookkeeping in plain English so you can feel confident, ask smart questions, and actually understand your business numbers.

✔️ Stop nodding along confused
✔️ Learn what really matters in your books
✔️ The #1 question to ask your bookkeeper today

No jargon. No judgment. Just practical tips to take control of your finances—without needing an accounting degree.

Transcript

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Foreign. Hey, everybody. Welcome back to Passable Podcast. Really glad to have you here. One of the things I hear most often is I don't know how to talk to my bookkeeper. They don't understand me, and I don't understand them. And a lot of times what I'll hear people say is, I don't want to sound dumb talking to my bookkeeper. So I'm here to dispel that myth. There is no dumb when talking to your bookkeeper. You know your business the way you know your business, and your bookkeeper knows the bookkeeping terms. So we're going to go through a few things here because I think that language difference sometimes separates you. It makes you kind of go, I don't even want to call them. I don't even want to talk to them. I just want to see the numbers. And unfortunately, what that does, it takes all of the real meaning out of the numbers you're looking at. And you need numbers to run your business. You've got to know what's going to be in your bank account from one week to the next. So I want to give you a couple tips here on how to talk to your bookkeeper and what kind of questions as a business owner, you should be asking. And if you don't happen to have a bookkeeper, don't worry. This is the kind of information you want to extract from your bank statements or the bookkeeping system that you're kind of hooked into. And you're going to see it's not. It's not. The point here is not to act as smart as a bookkeeper, quote, unquote. First of all, the bookkeeper is no smarter than you and I. They just know something a little bit different than you know. You might be a marketer, you might be a coach, you might be a strategic analyst, you might be a cfo. Like, I don't know the mechanics of how this camera in front of me is working. I have no idea when Francis calls out what he's doing and changing and when Wen's working on lighting and colors, how it works or what it all means. But guess what? I didn't need to know that. Right? So it's the same thing with your bookkeeper. One of the biggest things keeping entrepreneurs from doing their books or understanding their numbers is this kind of feeling of overwhelm. It's a completely different language. I don't really know what to ask. We're going to beat that back today. Okay? So let's dive in. The main thing I want to point out Here is that you don't have to be a gap accountant to be a business owner. That's truly not your job. You don't have to memorize what deferred tax assets are and what depreciation is and how it works and why something's on the balance sheet instead of the income statement. You need to know how much cash is in your bank, how much cash is going to be in your bank, and what's happening to that cash in between. That's the story you need those numbers to tell you, and I'm here to tell you, you can make them do that. They can be that friendly to you where you're literally feeling like, oh, I'm reading a book. I see my bank balance. I know what I did. I see my ending bank balance. That makes a ton of sense. Because then you can dive in and use some of that information, right? Are my prices right? Can I hire somebody else? All of these really cool things that you can start to address to really understand what's happening in your business and be able to have that quote, unquote intelligent conversation with your bookkeeper. But you don't need to know how to speak bookkeeping. You don't need to know how to speak accounting to your tax accountant. So what are the smart questions? Right? The smart questions, very simply, are the ones that you have about your numbers in your language. A smart question could be, hey, I'm pretty sure I'm profitable. Why is my bank balance lower? Pretty smart question. You didn't have to go get any expertise for that. That's the question you're asking about your business anyway, hey, how come I've got four subscriptions for the same thing here? That's a pretty logical smart question to ask your bookkeeper. And when you're seeing those sorts of things, what you want to see from your bookkeeper is that they're absorbing it and going, oh, that's the kind of questions they need to understand for their business. So next month, when you get your information, they've already answered them for you. And then you'll ask a whole new set of questions. But the key is you're not asking accounting questions. You're asking any question that comes up for you where the numbers you're looking at don't match that gut feeling you have about what your business is doing. That's where you want to kind of dig in. So the way I would phrase that is your very smart question is, hey, I don't understand these numbers. Explain them to me. That's the smartest question we can ask. Right? So the other thing. The other two things I would ask my bookkeeper. Actually, three. One is ask them if they see any red flags. Right? They're inside your books. They're watching every expense come in, every income come in. Ask them if they see any red flags. They might be looking at it and going, wow, you know, we seem to be really narrowing the gap between income and expense. Maybe I ought to talk to you about raising your prices or you need more clients or we need to cut some expenses. Ask them if there's anything, any duplicate entries in there. Does it look like there are any subscriptions that you could cancel? We talked about those in a prior episode. And then here's the key one. And this is where you'll know if you have the right bookkeeper or not, because they'll send you an income statement. They'll send you a balance sheet. They may even send you a list of transactions to have you give them codes. And it feels like that's, like, all you're doing. You're always just kind of getting information that makes no sense and throwing information back at them. But here's what you ask them. And if you get the answer to this question, you will be the smartest business owner out there, because these are the ones. These are the 5% who make it very simply say, hey, how much did my cash balance change last month from the beginning to the end of the month, and what made it change? Now, the thing you don't know about that question is there is a ton of understanding to be able to answer that question correctly, number one. But then also in a way that you understand it. And I would argue that until you understand the answer you're getting, it's not a good answer, right? So that doesn't mean you're dumb and not getting it. That means that it's not a good answer. Somebody either doesn't know the answer, and I want to talk about that in a minute, or they do know the answer and they just can't translate it into plain English, which would imply they don't have a really deep understanding of whatever it is. If you're like me, the more complicated something is and the more in depth you understand it and know it, the real skill is being able to draw a picture of what's happening, either with words or by drawing it by hand. That means you really understand what's going on. And here's the scoop with bookkeepers. There are bookkeepers who literally learn QuickBooks. Take the QuickBooks certification and let me tell you what the QuickBooks certification is. It's basically an Intuit advertisement, right? It's teaching you not only how to do a couple of entries in QuickBooks, but it spends most of its time telling you why you need all the other products. So a bookkeeper can hang up a shingle and say, I'm a QuickBooks bookkeeper. And all they've done is taken one company's bookkeeping class. And it's not even really a bookkeeping class, it's a paid advertisement. So there's that level of bookkeeper. They're not going to probably be able to answer the question, the big question, which is what happened to my cash last month? So be aware, if you're paying rock bottom rates for a bookkeeper, you may be getting a very basic bookkeeper. And all they're going to do is keep the books, which basically means they're going to pull the transactions in and they're going to classify them and they're going to hit, here's a report at the end of the month. They're not going to understand how and why it's so important for a balance sheet to balance, why cash flow is not moving like your profit. Once you get one step up in bookkeeper level, those are the ones that are going to be able to answer these questions. Okay, so here's another way to think about this. The dumber you feel your question is, the less skilled your bookkeeper probably is. Because any skilled bookkeeper is going to recognize what any question under the question is that you're asking. So the bottom line here, don't try and sound smart. You don't have to, don't try and sound like an accountant. You don't have to make sure that your bookkeeper knows what's causing the change in your bank account balance. At any point in time, you should be able to ask that question and have it answered so that you understand it. And then the next thing is actually look at those numbers every month and if it doesn't feel like they're telling you a story, then we've got a problem. Now, I do want to turn this back on us entrepreneurs a little bit as well, because as much as I've just explained to you the difference between a, you know, a very basic commodity type bookkeeper and a bookkeeper who can actually really provide you with all the benefit you can get from your numbers, the reality is that no bookkeeper can give you good information. No accountant, no cfo, no anybody can give you good information if they're getting Garbage into the system. So here's what happens a lot. Business owner will say, hey, I want to see how much each product is making, and I want to know how much I'm spending on it and how much people are working on each one. And I want you to do that. Bookkeeper. Okay? Are we keeping track of people's hours when they put receipts in? Are they saying which project they're working on? Are we even getting the receipts so that I can look at them and see how to categorize them? You as the business owner, if you want. Just like anything else, if you want the information to be meaningful, you have to put good information in. I think the routine way to say that is garbage in, garbage out. A lot of people will say, hey, take this junk right, and make it make sense to me. But I'm not going to change anything I'm doing. I'm not going to have my team do the jobs they have to do to get you, the bookkeeper, the information you need in order to tell me the story of my business. That's broken. That'll never work. Get over it. No matter how much you yell at your bookkeeper, no matter how much you change from bookkeeper to bookkeeper to bookkeeper, once you've changed through two or three bookkeepers, look in the mirror, the problem is probably you. And that's a tough lesson, because as business owners, and I am guilty of this, as any one of you I'm talking to, we kind of like to go, hey, we don't need structure. We don't want structure. We don't want to deal with the rules. That's why we're entrepreneurs. The bottom line is, if you want to be a successful entrepreneur, you need to know how much money your business is making, what you're spending it on, how much you can afford to spend on things, what you should price your products, how long you'll be in business when you need to borrow money. Those answers all come out of the bookkeeping. Those are the smart questions, and you're asking them anyway. So there it is. Have a great week. There is no dumb question for your bookkeeper, your accountant, or your cfo. But do try and give them the information they need to give you what you need in return. You guys have a great week. We'll see you. See you. Next time on Cash Flow.