#50 : Easy ways to get a handle on your bookkeeping

 

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If you want to grow your wealth, you have to have systems and processes in place to help you keep track of it in the first place. We talked about this in episode 48, and today we’re hearing from another accounting expert who has some tips to make your bookkeeping simple, easy and consistent.

Meryl is a Chartered Accountant who specializes in cloud accounting software Xero. She founded Bean Ninjas in July 2015 with $1,000 following Dan Norris's 7 Day Startup methodology. Now 4 years later the company operates in the US, UK and Hong Kong and has a distributed team of 15 people.

Meryl and I talk about why it’s so important to keep good records from the beginning of your business - even if you only have one rental property. We also chat about what Bean Ninjas does for clients, how to effectively keep track of your receipts, and what you need to know about how to use your accounting software.

In this episode, we’re discussing…

  • The importance of keeping solid records the whole time you own and operate your business.

  • Why Meryl recommends a cloud-based accounting software for entrepreneurs.

  • How to manage receipts so you’re not scrambling at tax time.

  • Why you should either educate yourself on your accounting software or pay someone to set it up for you.

  • How a separate bank account can make it easier to run your business efficiently.

Meryl’s Top Tips:

  • It’s important to have good records – if you want to build wealth and make good business decisions, you need to know how your assets are performing. Don’t miss out on all that data - capture it from the beginning for a fuller picture of your business and its evolution.

  • Automate some of your accounting tasks, but schedule time to review your books – utilize apps that make bookeeping easier and more accurate, but be sure to set aside time consistently to review your chart of accounts and profit & loss statements.

  • Don’t hesitate to get help – if you don’t want to learn all the ins and outs of bookkeeping yourself, don’t be shy of hiring help. Good books are vital to a healthy, scalable business, so if you’re not doing them, get a professional to!

Resources:

Episode 50 Website (1).jpg
 

+ Read the transcript

What if you could be doing something smarter with your money that creates income right now? If you're an IT professional who's wanting to get ahead financially and enjoy greater freedom of choice, and if you wonder who else in tech is creating ways to make their money work for them? You want actionable ideas on his pros and cons and no fluff. Welcome to The Richer Geek Podcast. We're helping IT professionals find creative ways to build wealth and financial freedom. I'm your host, Nicole Stohler and in this podcast, you'll hear from others who are already doing these things and learn how you can too.

Welcome back to The Richer Geek Podcas. I'm excited to have today's guests share with us a little bit about accounting, bookkeeping. Now, we may think that's boring. What does that have to do with some kind of side business? Well it actually has a lot even if you have just one rental property, good bookkeeping is pretty key. We talk about all the tax benefits of real estate, so if you don't have bookkeeping in place, it's going to be more challenging for your accountant or you, I guess if you do your own taxes. So we will dive into the importance of that in today's episode, and I'm really excited to have Meryl Johnston on with us today. Now, I'm just gonna read a little bit to give you some background, then we'll go into more detail. So Meryl is a chartered accountant. She specializes in a cloud accounting software called Xero and we'll get into that a little bit. She founded Bean Ninjas, which is her company in July 2015. With just $1,000. As a side note, I absolutely love that name Bean Ninjas. Now, four years later, her company operates in the US, UK and Hong Kong, and has a distributed team worldwide of 15 people, Meryl appears in the media regularly. And she speaks a lot about entrepreneurship scaling businesses, which she has a lot of experience doing, as well as it will be talking about today, bookkeeping and business finance topics. And she also hosts the Bean Ninjas podcast. So you can check that out. Meryl, welcome to the show.

Thanks so much. It's great to be here.

Well, let's go ahead and have you share a little bit more with the audience about your background, because I just didn't probably do that justice.

Sure. So I started out my career as an accountant. As you mentioned, I'm a chartered accountant, which is similar to a CPA in the US. And often if I'm in a barbecue and I say I'm an accountant, someone will say, Oh, great, you can help me with my taxes. And I have to explain No, actually, I do a different kind of accounting. And I started my career in audit at a firm called video which is around the world. And part of what we did there was looking at financial systems and looking for what they call control resources or places where people might go to commit fraud. And so it was more looking at the accounts from are they right? Do they do they look reasonable? And what are the systems around that rather than coming at things from a tax perspective. So I've always been interested in the technology side of accounting, as well as things like standard operating procedures and the way that you build a finance team. So it's a little bit of a different perspective to typical tax accounting. So after video, I worked in corporate accounting for many years. And part of that role was working with multiple managers in large businesses and talking with them about their budget and the actual numbers compared to budget and helping them to understand what that meant and make decisions for their business unit. And I really enjoyed that educational piece and talking about accounting, not in accounting language, I was trying to talk the language of the business Business Unit managers that I was working with. And that led me to then teaching accounting at university. I've always been interested in both. I think accounting is really important. It's a really important skill for everyone to learn and financial literacy skills. And I was also always interested in the teaching side of things and and sharing that education with with others. And so that led me to then eventually starting my own consulting business. That was my transition out of corporate accounting. And then from consulting, then I moved on to starting Bean Ninjas.

I love a few things you said you said you liked talking about accounting. Now I know you were saying more with the business people. But you learned how to speak about accounting in a way that wasn't quite so technical and it's interesting being intact most of my audience should be able to relate to that we have to be careful and not use too many technology terms when explaining so if I was teaching a class, similar kind of thing. So that is a great experience where you had the corporate background, and then you were also teaching. So you were able to see all sides, I guess, of the counting spectrum, people who knew very little, and people who knew a lot, I guess. So then you founded being ninjas. And we were chatting a little bit before and you were sharing that beamed in his house, a couple of components. And I'd really like to help the audience understand, again, if they only have just one rental property, where does accounting to come in? And again, not taxes, not the CPA? Where does that come in? And why does that matter?

Yeah, I think you touched on that in the intro, where it's really important to have good records. So if you have a rental property, then you probably want to know how that how it's performing. You've got that for a reason. And that would that is part of your project to build wealth for your family. And so I'm sure that you want to know How that's performing. And you probably want to know how that's performing reasonably regularly or have red flags if expenses have spiked up. Or if it's costing you more than you're expecting or your tenants, maybe you're having some issues with payment. And if you have good record keeping good bookkeeping, then you'll have that information in an easy, easily accessible format when you need it. So I think there's two components. One is having a system that makes it easy to keep those records you don't want to have a shoebox full of receipts and spreadsheets and have that process difficult. So that's the first step is having a good system around that and then the other is making time to actually look at those numbers. So then you can make decisions. And as you mentioned, there's a benefit. If you have good records, it makes it a lot easier for your CPA or if you're preparing your own taxes when it comes time for tax time to actually prepare that tax return and maybe save on accounting fees as well. So whether you are you've got the one rental property, or you've got a bigger portfolio I think it's important to get that system in place. So you're not spending a lot of time, you know, wasting time doing bookkeeping. So we have two different arms to be ninjas. There's a done for you bookkeeping and reporting. And that's where we take the pain away from things like collecting receipts and keeping track of the records in accounting software and prepare regular reports. And then the other arm of the business is the education arm. And that is teaching business owners or investors how to keep their own records and do that in an efficient way. And then also how you interpret the data that's coming out of your accounting system to make the decisions.

I think I would opt for done for me. I'm not I'm not a huge fan of that anchor, but it's so important. And I do want to share you know, for people who use property management, let's say you have one property, you use a property manager. Sometimes they'll provide bookkeeping services. And it's interesting because I'll have People tell me how frustrated they are with property management. And they're seeing all of these expenses. And they're not necessarily talking about the property manager. They're just talking about general expenses. And I think that if you aren't somehow looking at what's happening on an ongoing basis, like you said, measuring performance and using the data to really make decisions, and you're just getting this report on a quarterly basis, you're probably missing some opportunities, even have a conversation around certain kinds of expenses and ways you can scale that back. So the ability to make good decisions so that you do continue to have that asset be a wealth generator for you is pretty key as well. And when you're doing it, when you're providing kind of a done for you service, the bookkeeping services for someone who doesn't want to do it on their own. How does that work? Is there some kind of portal that they Going into and they can see real time what's happening. How does that actually work for someone.

So we specialize in a platform called Xero, which is similar to QuickBooks. That's the online - So QuickBooks has an online version QBO. And so Xero is similar to that where it's cloud based. So we log in and we set up the account we connect. The advantage of using cloud based systems is they can connect to a range of different things. zerah has over 400 add ons that can connect in like property management, property management systems with linking to it if they're cloud based, as well. bank accounts can feed in stripe, PayPal, receipt management apps can they can all feed in so we, we've set up all of those connections. And then we look at the information or the reporting that you're trying to get out of the system. And then we start to allocate transactions to appropriate accounts. For example, if you had multiple rental properties, then you might be wanting to track the performance of those separately. And so a particular expense items might need to be apportioned across those rental properties, or it might relate to one. So we would do all of that categorization. And if you have receipts, which hopefully you're keeping track of those, then we would be attaching those into the system as well. We would then send out reports on a regular basis, monthly or quarterly, depending on the package. And you would also have the ability to log into the software. So say you were looking at a report and you wanted to see our maintenance costs have increased this month, you could click on on that line item and then see a breakdown of what's in it this particular month compared to three months ago. So there's a whole lot of visibility there to really dig into the detail if you wanted to investigate something. So that that's what the done for you service looks like but then we work with some people who never want to log into the software and that's fine to their email their reports and they can look at the the PDF and the Excel attachments.

I love too when you described that there's all these connections so I'm Just envisioning, you know, a lot of our residents, we basically pull rent through either a CH, or we'll use a service like Zell. So you would be able to capture that integration if you did use property management like you mentioned, if you use some kind of team communication, that's very cool and and for anyone you know, as you scale as you add more rental properties, if you're buying multi families, certainly now you've got multiple properties. I bet there's a tie in with some of the property management systems we've used before like building them and yardie and some of those which are also software for tracking more of the resident side of things like if a resident is you know, calling in a let's call it a trouble ticket, or they're calling in some kind of maintenance issue. We've used those types of systems and I bet that then connects into what your Xero software as well it sounds like.

Yeah. Absolutely. So there's a platform called Re-leased. It's been many years since I've used it. But I have worked with a client on that where they had, I think, managing about 30 properties. And they had all of that info in release. They were tracking correspondence, communication, repairs, and maintenance or about the properties. But then the key accounting information was feeding into Xero. So was eliminating data entry around how much money was coming in from each tenant and then some of those costs as well.

Nice. Now tell us a little bit about someone who says, Okay, I just have one house, eventually I want to have 10, right, or whatever it is. And then of course, at that point, there's there's a more moving pieces and a lot of things to track. But if I just want to have one house, what kind of recommendation would you make for someone like that?

If you want to have one house, but you're expecting that you might want to have more in the future. You don't want to get to 10 houses and not have a system in place for bookkeeping, it's much better to get it sorted out early on, get the system in place and save yourself time over the years that you're going to be a property investor. So there's a couple of elements that I think really help with simplifying bookkeeping. The first is using a cloud based accounting platform like Xero or QuickBooks Online, that really helps eliminate data entry. The second is having a receipt management process. And there are apps like hub dock and receipt bank, which actually can read data from receipts and send it over to the accounting software so they can extract information like the date, the description, the amount and turn that into a bill within the accounting software. And again, that eliminates a manual step. So if you have a lot of receipts, then that would be something to consider. If you don't have a lot of receipts I think we still need a system to manage receipts but something like Dropbox or Google Drive is fine and being disciplined with Making sure that you're saving everything in that folder, and maybe having folders set up for each month. So it's easy to find. It's very simple, it sounds very simple. I'll save it in Dropbox, and I'm going to have these folders labeled, but it's amazing how common it is not to be disciplined with filing them and then having that sense of overwhelm across the year because you haven't managed your receipts and then you're trying to find things at tax time. So it's a simple matter of deciding what method you're going to use, and then sticking with it. And I think having time scheduled in your calendar regularly, just to make sure that you're on top of that is helpful too. And that might be doing it on a Friday, once a fortnight half an hour just to make sure you're on top of your receipt management and bookkeeping. Number two is looking at how you've structured your bank accounts. And it can be helpful to have a separate bank account to track transactions. So rather than having everything mixed in with your personal bank accounts in his holidays and food purchases, and from that big list of transactions Do you have to pull out what what related to this property and what related to something else, it's helpful if you can isolate that into a separate bank account. And whether you can or can't do that will depend on your personal financial situation. But from a bookkeeping point of view, if you can do that, it's a lot easier, because then every transaction, you know what it relates to the property, and you would connect that that bank feed into Xero. And then it's just a matter of allocating those transactions to the right account, like repairs and maintenance. Number three is just spending a bit of time looking at your chart of accounts. And a chart of accounts is the summary of all of the accounts in your accounting software. So you might have rental property income, maybe you have interest income as well. And each of those accounts make up the chart of accounts. And every accounting platform comes with a template or standard Chart of Accounts, but that might not be relevant to rental properties or might not be relevant to what you're doing. So I recommend talking with your accountant about that just to get some advice in the beginning because If set up correctly, then you can get really helpful reports. Whereas if you're using the default Chart of Accounts, there might be accounts that aren't relevant or you don't really have the specifics of what you need. So I'd spend a little bit of time on that at the beginning when you're getting set up. The fourth thing I mentioned, is having a bookkeeping timetable, and I touched on having time scheduled in your calendar for receipts. But I recommend having time scheduled in your calendar for each step. So if you're doing your own bookkeeping, you might want to do that on a weekly basis. have time in your calendar, know when you're doing that and commit to doing that, if you're looking at reports that you might be doing that once a month schedule that know when you're going to do it and what date each month. I find having that mapped out in a timetable is really helpful. We have a template that is available. I'm happy to share the link with you anyone's Welcome to take a copy of that and modify it for themselves, to give you an idea of the kinds of regular bookkeeping tasks that you would do and then number four Five is identify what reports you'd like to look at. And at a minimum, I recommend looking at a balance sheet and the profit and loss with a balance sheet. It may not be as relevant if you only have one rental property because that's probably not an issue or renovating the house. There's probably not a lot happening there. But it's a good habit to get into to look at the balance sheet and then also the profit and loss which is sometimes called the income statement in America.

That's a ton. That's a great steps that you took us through and a ton of information. So I and I was making notes as we went. And first of all, I love the receipt recommendation, the automated receipt, I was just thinking about this, that I just take a picture with my phone and then have the receipt go into Dropbox and then you do put it in folders within the tax year. So I've tax year and then the folders. But it's just an image and it does not labeled so then To go find them. It's just like an image and the date. So I don't know if that was that receipt was for Home Depot for some kind of repair item, or that was a receipt for you know, something else like a regular ongoing. So it's just it's I like the idea of that automated those software's that you mentioned, because I imagine they're much better than my image scan picture.

They do they make it a lot easier to go and find categories or groups of transactions or receipts without you actually having to go in and rename every receipt, you can log in there and, and it's easier to find that information or refer back to it.

I need that in my life. Okay. He also mentioned that you have a template on his on your website, and then that has kind of a guideline for people of the regular accounting or bookkeeping types of things they should look for.

Yeah, so that's available at beanninjas.com/toolkit. And I'll give you the link for that. And that's just a free resource where you can download and copy that we have a couple of other resources that are available there as well. They might be more relevant for people who are running businesses, there's a cash flow forecast template, but that could probably still be adapted for someone with a rental property, especially if you've got some major expenses coming up. It can help you plan the timing of when you will be paid by your tenant compared to regular outgoings. And then if you're making any major investment to make sure that there's going to be enough the timing of that cash flow is going to work. So that's helpful. And then the last item available, there is a list of common mistakes that people make if they're setting up their accounting system. And so that's just a checklist that you can work through

As a checklist of do not do these things. Got it.

Do not do this or check that you have done this because it's commonly missed.

All right, I might have to look at that because I had our CPA setup quick. Well, we have we have multiple different Different bookkeeping, depending on which side of our real estate business but yeah, I need that checklist to so make sure that everything was done correctly. Well, thank you so much, you've provided a ton of information for people to think about, again, if you have just one rental property or you bought a franchise, or there's some other business that you're looking at, you will want to think about bookkeeping and setting things up whether you learn how to do it on your own, or you have someone do it for you. So Merrill, where can I know you mentioned the link, but any other information you want to share as to how people can get in touch with you.

So our website is a great place which has beanninjas.com, and I'm also really active on LinkedIn. So if anyone enjoyed the episode and wanted to connect with me, it's my full name Merrill Johnston, and feel free to send me a connection request there too.

Perfect. Thank you so much. It has been such a learning experience having you on really appreciate you joining us today.

Thanks for tuning in to The Richer Geek Podcast. For today's show notes including links and resources. Visit us at therichergeek.com. Don't forget to head over to iTunes, Google Play stitcher or wherever you get your podcasts and hit the subscribe button. Help us spread the word by sharing with others who could benefit from listening and leave a rating and review; that'll help us get the podcast in front of more people. I appreciate you. Thanks so much for listening.

The information, statements, comments, views, and opinions (collectively, “Information”) provided in this podcast are not intended to be and should not be construed as financial, economic, legal, accounting, tax or other advice.  For our full disclosure, click here.

 

ABOUT MERYL JOHNSTON

Meryl is a Chartered Accountant who specializes in cloud accounting software Xero.

She founded Bean Ninjas in July 2015 with $1,000 following Dan Norris's 7 Day Startup methodology. Now 4 years later the company operates in the US, UK and Hong Kong and has a distributed team of 15 people.

Bean Ninjas were finalists in the Bookkeeping Firm of the Year category at the 2018 & 2019 Australian Accounting Awards and Xero Partner of the Year (QLD) in the 2017 Xero awards. Meryl was also a finalist in the "Entrepreneur of the Year" category in the 2019 Women in Finance Awards.

Prior to Bean Ninjas Meryl ran a consulting firm, worked at international accounting firm BDO and taught accounting at Central Queensland University.

 
 
 
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