In Amy’s words… “I know a few things about taxes: how to spell them and that we pay them.”
Can we get an amen? We’ve never met a photographer who started their business because they were passionate about accounting! The administrative side of things comes with the territory, but can easily make us all feel overwhelmed and in over our heads. With Tax Day (April 15th!) right around the corner, we thought we’d share the way we stay sane during the pinnacle of both wedding season and tax season.
When we first started our business, we took one of our family friends who owned a non-photography-related business out to coffee and asked her for the best piece of advice she could give us as brand new business owners. She didn’t hesitate for a moment before she told us to hire a bookkeeper right away. “It will be the best thing you ever do for your business,” she said. This of course seemed a little odd to us at first because we didn’t feel like we really had any “books” to keep yet! We only shot two weddings in all of 2011 and there really wasn’t a whole lot to keep track of. But we trusted her advice, and decided to seek out and invest in a monthly bookkeeper, who we still use to this day. And now? We can’t imagine our business without her! Our friend’s advice was some of the best we’ve ever gotten and we are so thankful for her wisdom.
Early on, we didn’t understand the difference between a bookkeeper and an accountant. Here’s the best way we can explain it: We talk to our bookkeeper once a month, and our accountant once a year. Our bookkeeper helps us stay on top of our month-to-month financial picture and how we’re doing year-to-date, and our accountant just makes sure that we file our annual state and federal taxes properly. The great news about this is our bookkeeper is much more affordable than our accountant per hour (which is industry-standard) so we can ask our bookkeeper questions and get her opinion on things along the way when we need professional advice (How should we account for our mileage? What things can and can’t we write off? ) and we can actually afford to ask her! In fact, we can’t afford not to!
If it wasn’t for her, we would’ve spent hours and hours and HOURS researching REALLY complicated things that we’ll never be experts at and don’t want to be (like IRS rules and regulations), creating spreadsheets from scratch or from Googled templates that didn’t make any sense and don’t work, or jumping in forums and asking what everyone else does even though they’re just as confused as us! Instead, whenever we’ve had questions, we don’t have to guess or Google it. We just email our bookkeeper and she answers it. If she can’t, she asks our accountant. It’s simple, really. As business owners, our time is our most valuable asset, so we should be spending it doing what we do best, what only we can do, and outsourcing the rest to professionals who will do it faster and better than us.
A friend said something around the time we went full-time that we’ve never forgotten. He asked, “Do you know the difference between small businesses and big ones? The big ones acted like big ones even when they were small.” His point: even though it’s hard to release control, we have to as small business owners in order to grow. At big companies, the CEO doesn’t do the books. The accounting department does! We realized that if we tried to wear every hat in our business, we’d spend all of our time doing that and less time doing the things that actually grow our business, like shooting weddings!
It was important to us that we found someone with the heart of a teacher, someone who believed in our business, and someone who’d help us do things right, because if there’s one thing we know to be true, it’s this: God’s always right and the IRS always wins, so it’s best to be honest with our business books and do everything squeaky clean to the letter of the law (as best we possibly can). We’re big Dave Ramsey people, too, so since we already had a solid financial advisor for our personal finances from the moment we first got married through Dave’s ELP (Endorsed Local Provider) program, it made it easy for him to recommend a bookkeeper with the same values and ideas about money and business. Our bookkeeper has been a great support and one of our biggest coaches and cheerleaders.
The great thing about bookkeepers charging hourly is that we were able to afford her from the very beginning. It’s all proportional. Our first year working with her, she only needed one hour a month to go through our books. Not much was going in and not much was coming out! It was simple. For the most part, we made money and bought gear. That was it. The awesome part is that as our business grows — and the number of moving parts gets more complicated — so does hers! Our business has grown substantially since 2011, and now it takes her three or four hours to go through the books every month, which is a great thing and we’re happy to pay her because she’s helped us (and continue to helps us grow) by guiding us through things like processing payroll (paychecks for ourselves), making sure we’re withholding enough money for taxes, etc.
So, here’s how it works:
We download our bank statement as an Excel document (a free feature through our bank) and then explain each transaction, along with a record of our mileage, each month and send it to our bookkeeper, and then she sends us three things back:
1. A profit and loss statement
(or P&L) which shows us all the dollars that came in, everything that went out, and whether we have a profit or a loss for that month. It also shows us the same things for the entire year to date. For example, this is where it shows (for that month an the whole year so far) how much we spent on our Dropbox, meals and entertainment, health insurance, and more.
2. A balance sheet
which is a big-picture document that outlines our assets and liabilities, which is simply what our business owns and what our business owes. For example, it would note if we acquired a new piece of gear (an asset) and it would also show us how much money is in our account that we shouldn’t touch because we “owe” it, like the money a client gave us for their wedding album which we can’t order until after their wedding, for example (a liability). This one is key because we’ve heard horror stories from SO many photographers who received a bunch of money during inquiry season, spent it all, and literally didn’t have enough to make it through the slow season!
3. Sales tax numbers
which lets us know how much sales tax we owe to the city and state, so we know exactly how much to pay each month.
And here comes the best part!
TAX SEASON SANITY!!
When it comes time for our accountant to start filing our annual taxes, our bookkeeper simply sends over all the perfect records she’s been keeping for us all year, and he uses that to do our taxes. Meaning, we essentially have to do nothing! Cue confetti! THAT is how we survive tax season! The peace of mind that comes from it is such a gift! We’re huge proponents of outsourcing, and we hope that we were able to encourage you today to leave your finances to the professionals so you can get back to doing what you love! Happy Wednesday, friends, and may the tax season odds be ever in your favor!
Have a Question You Want Answered?
Send an email to info[at]amyandjordan.com with your question and we’ll do our best to answer it in an upcoming blog post!