Know and Grow YOUR Cashflow

Episode 7

Putting the power of knowing your numbers in your hands, to be able to make decisions, is the difference between making money and losing money.

DAVID RICHTER

Do you find bookkeeping difficult or almost IMPOSSIBLE?

Are you struggling to keep up with your books and in need of GUIDANCE?

If you can RELATE, you’ve come to the right place!

In today’s episode me and my co-host Tim Jon go over the essentials of bookkeeping and we touch topics like:

• the secret of Bookkeeping
• the power of knowing your numbers
• the importance of working in a tandem
• knowing and growing your cashflow
• and more!

We want to encourage you to take a different approach on managing your finances and set a new standard.

Take a seat and enjoy!

Do you find bookkeeping difficult or almost IMPOSSIBLE?

Are you struggling to keep up with your books and in need of GUIDANCE?

If you can RELATE, you’ve come to the right place!

In today’s episode me and my co-host Tim Jon go over the essentials of bookkeeping and we touch topics like:

• the secret of Bookkeeping
• the power of knowing your numbers
• the importance of working in a tandem
• knowing and growing your cashflow
• and more!

We want to encourage you to take a different approach on managing your finances and set a new standard.

Take a seat and enjoy!

Transcription

David: Hey, this is David Richter with the Profit First REI Podcast. Hosted by SimpleCFO Solutions – our company, and I’m excited again today to be on another episode. I think we have another great one for you. We want to talk about how to put the power of the numbers in your hands – how do we put that in your hands – the power to know your numbers and make decisions. So that is our main theme for today, and I’ve got Tim Jon – my co-host with me today. He works in SimpleCFO; also, Tim, you want to just say hey to everyone?

Tim: Hi, everyone! Thanks again for joining in for another wonderful episode of our podcast. Hopefully, you guys have been getting a lot out of it. Feel free to drop a comment below if you would like to hear a different topic or have any comments or questions. Really excited about today’s episode here.

David: Awesome. Yeah and I am too because this is such a – this is an area where I think not only real estate investors struggle, but most businesses struggle. And I really want to help you as a real estate investor. How to put the power of the numbers – your numbers, your business finances in your hands. And honestly, the biggest thing I am going to talk about today – that’s the main theme. But it all starts with bookkeeping, and I don’t have a bookkeeping practice right now or anything. I am not trying to sell you on Bookkeeping. I’m going to talk to you about how important it is to have a system and try to give you some practical ways to make sure you can put the power of the numbers in your hands. So I know Bookkeeping is not sexy. I really do get it, but if every real estate investor had a good bookkeeper and the investor worked with the bookkeeper to get them what they needed, that investor is going to have the power to make faster better decisions. That’s just the bottom line. So that’s why we were here today to talk about because we want you to be able to – at the end of the day know and sleep well at night knowing you know your numbers, and you have the power to change them to know that I can do something. Once you have that power but not- without that, you’re going to be kind of just flying blind because it’s all about not just that what you make – what you keep, and that’s why at SimpleCFO and on this podcast, we are all about helping you – know and grow your cash flow. And so I kind of wanna just dive into it where I wanna tell you just some very practical things, and we just gonna get right into that like I said. We have one main theme for the podcast episodes that we like to stay on, and then I like getting right to the point. So we are going to dive right in.

The first thing – the relationship between the bookkeeper and the investor. I want to- I want to just talk about that first. Because a lot of people and investors go out and they try to find a bookkeeper, and they go through a bunch of own. And they think they know what they are doing. They might even – I’ve had people who even taught themselves as bookkeepers for real estate investors, and then the real estate investor ends up ditching them because they didn’t really know what they were doing. But I want a – kind of put some of that power in your hand as a real estate investor.

So number one, I would say with that relationship with the bookkeeper, I would say to set a clear expectation. So you are going to know- need to know what your expectations is and when I say clear expectation, when do you want them to have the books closed by? Like, when do you want them to have the data in the books? Do you want them be updating that daily, weekly, monthly, quarterly like how often do you want your numbers? And my personal preference for a real estate investor that you should have them daily and at least weekly, so that would be my personal opinion if you went to a bookkeeper and you set that expectation and see what they say are they going to be able to meet what your goals because you need to know how often do you need your numbers to make decisions because your numbers help you make decisions. They help you to make those decisions in your business. So set a clear expectation; you’re the leader of the business and of the team, so you need to be specific; you need to say I wanted this way, but you can also be flexible like I want it this way like what do you think as the expert in Bookkeeping. So you can also make sure that you’re working with them and not just telling them every you know- you are not just lording over them. You are working in tandem with them because you want to make sure that you set yourself up both for success and not failure and then empower them to make decisions. Empower them to make the decision. So if they- what I see in the bookkeeping world is where a bookkeeper in a day may not ever seen an expense before but obviously is a food joint and sometimes they’re putting that in a non categorize expense but you know that they might not know or they- there’s something that they could research or something like that you’re going to need to tell them what to give the benefit of the doubt on or maybe a certain dollar amount and if it’s under a hundred dollars and you know you’re not sure where the expenses supposed to go as far as that goes put it into this one- into this bucket and then I’ll review it or get some sort of system like that but empower them to make decision to save you time and then they can take ownership of that work. So that’s just a couple of those things up front set the clear expectations to make sure you have expectations with them how often you want the books done, how often you want to meet with them ,if you want to meet with them weekly or bi-weekly I would suggest having a meeting with them to make sure you know what’s going on and that you can stay informed too and it can be a very quick meeting but then another thing ask them questions give them an opportunity to give you feedback. What – you know, a lot of – a lot of bookkeepers are frustrated by the people that they work with because if they had- but sometimes it’s a bookkeeper’s fault sometimes it’s the investors fault but setting those expectations upfront and then having- getting feedback from them too saying is the system that we have in place is working and I keep saying system – I’ll touch on that in a little bit but- is this working what we have, because I’m telling you right now. You might think a bookkeeping as the worst function in the world but number one you probably don’t want to be doing it cuz if you’re doing it right now you’re probably not keeping it up-to-date and number two even though it’s a low dollar-an-hour task you enter the data – the data and knowing it is a super high dollar per hour task so we’ll get into that in a second but Tim how about setting expectations, asking them questions, holding them accountable what- what other tips can you give between the relationship- between a bookkeeper an investor?

Tim: You know, to use a metaphor here- you know when you are the leader – you are the leader of the business, you’re the leader of the team and the people who are on the trenches the bookkeepers they know everything that’s going on in the front lines with every single expense every transaction they see things that you may not see, or you may not notice, and that’s why I like you said David feedback is so important like honestly ask them what is something that I don’t know that I should know? Maybe you don’t know that every month you’re being charged a hundred dollars for the software that you’re not aware of or this expenses going out to somebody’s personal account rather than the business account and also ask them to what’s something that I can do better as a business leader too, like as much as we want to automate things and systematized things the people on our team are people. You might not know how to help them work the best for you, so that might be that you set a clear expectation by having things in bullet points or you meet with them in the morning for a few minutes; maybe they need to jump on a quick phone call with you before the big meeting, little things like this can really help a person feel like they’re heard and that they’re an important part of the team. And in terms – I believe that they will be working even harder for you too.

David: I love it. And that reminded me too. That- I want to go into a secret of bookkeeping if it’s really a secret and this is really dealing with the type of and the size of business that you have in real estate investing because if you – if it’s just you and you have to do the bookkeeping you might want to hire a virtual assistant or something that help you, but then you have to be very clear on the expectations you probably want to get some advice to make sure they know how they’re entering the data so you might want to talk to your CPA to look over it, you know once a month and make sure that they’re entering it accurately and you need to be able to leverage other people so that’s probably- unless you just- I know some people too that are close friends at a Real Estate Investors who love that side of their business and they don’t- they love seeing the numbers but some of them- they had to give up that side because they were growing so I would say if you got a smaller business you might be able to use a virtual assistant or a third-party but if you’ve got any size team or doing any size amount of deals you probably want someone who is actually on your team who is actually a part of your team entering that data who has access to your other Data Systems like if you’re using a CRM like podio or Zoho or a lot of these other ones that are out there for Real Estate Investors so that way they know the properties that you have or if you’re using Google Sheets they are able to see ok so these are the projects they’re working on so obviously I need to assign these to a certain project their or they’re just-they know the flow of your business so I will say if you have any size team that is the absolute best having someone in there because they could be updating it on a daily basis giving you the numbers you need at the drop of a hat. So that’s just kind of a secret there – not really a secret but a lot of people think why would I spend that money because honestly it’s not just the data entry that you’re getting from that it’s the power to make decisions and put that in your hand to make your business run better and it should take headache off your plate.Having someone in that seat doing it for you so that way you as the owner get the high level- the high-level numbers being able to actually get that from them so, make sure you’re setting those expectations you’re giving that to them you’re asking them questions and feedback you’re holding them accountable to what you actually want either that’s daily or weekly so you- you know that you’re getting what you’re actually asking for in those expectations so those are just a couple things and then honestly like I said the big thing is the data entry might be low-dollar-an-hour but what you get from it is a lot higher dollar per hour so that’s why it’s so important and why I want to stress it and make sure that I get that into your head that even though you might think a bookkeeping is just a necessary evil it’s more than that it’s more like- it’s very necessary in order to help you really know and navigate your whole business.It’s like the compass on a ship you know it’s like being able to- if you’re lost in the woods and you need a place to go and you need somewhere direction then you- you need that compass in your bookkeeping and your- your numbers are that compass, to be able to put the power in your hand to say we need to know we’re lost right now or we’re not making profit this is not what’s working we need to switch our tactics or we need to pump it into this marketing which is returning for us or what not.So, it really puts that power back into your hands. So knowing that data is super important and then you need an accurate data- so starting, running and building a business is a journey, and it really- it’s all about you going to that, and you have no idea how it’s going to be until you actually start that, but there’s always something- there’s always a treasure to be found and having that map and having that compass there that tells you where you’re supposed to go is going to help you make those better decisions and where not to go too. Like Tim was saying if you were having a meeting with a bookkeeper or you actually have the numbers in front of you, and you are like Holy crud there’s a- there’s a big charge on here you have no idea what it’s for, or you get keep charged for the same thing over and over once you canceled it.Then you know you have issues, so it’s also telling you where not to go so accurate data is really a record of the decisions you’ve made, and it tells you whether it’s been a good decision or a bad decision your numbers tell your story.They tell your story of your business, and the more control you have over those numbers and the more control you have over knowing them and being very familiar with them gives you more data on your business how well you’re doing, and a lot of investors don’t want to look themselves in the mirror and say this is where we are right now and I need to either step it up or we need to figure out something else and that’s why we also work with Profit First because that’s another system for cash flow management that works in tandem with bookkeeping and works in tandem with the counting and a Profit First really is a neon blinking sign too from the cash system- from the cash level to be able to say do we have enough cash? Do we not have enough cash? Are we spending too much? I’m taking profit, but then there’s not much- enough money for my expenses well then I need to lower my expenses, so that’s- they all work in tandem, and knowing that data of where you stand is going to make or break you it really is.
Tim, why don’t you take it from here? I want to – I want to pull up a – a quote here from Dan Kennedy, but why won’t take a little bit just on the importance of the accuracy of data.

Tim: Yeah. David, I love what you said about starting,running and building a business is like a journey you know that there is treasure out there to be found. You know that there is the deals out there. You know there are ways that you can improve your business, and actually, there is profits to be found too. And the data that you have, like David, was saying, is a record of the decisions you make. For example, you bought a house, and you know you shouldn’t have bought it. But now you’re paying for the mortgage, and you see the expense every single month, or you bought a house to rehab it flipped it – sold it. And you thought you made a lot of money on it, but when you go back to look at it, your expenses were way higher than you thought it was you went way over a budget of what you originally did. You didn’t make as much money as you should now that could be viewed as a failure, that could be viewed as something that will get you down, but we look at it as a way of learning not that you win or lose, but we win, and we learn here, from these business decisions that we have made. Another example is that by looking at the data, you realize that the occupancy of your rentals is kind of low in this area, or perhaps there’s a tenant that is delayed on payments, and you didn’t notice that at first. Well, now you can make a decision to talk to that tenant about it- about getting current with payments, or you can decide to swap them out with somebody else or increase the occupancy of your different rentals. You know a lot of times in business we sometimes fly by the seat of our pants making decisions and honestly, we aren’t the most intentional about things, and we have a record in our mind of what were good decisions and what were bad decisions, and I heard it said to the people we don’t make decisions based on reality we make decisions based on the perception however of our reality. And that’s important to look at too is we may remember things differently than the data actually shows.

David: I love it, and I love what you said too. About when they finally get the numbers for the sale of a property and it’s worse than you thought if you have good data and you’re working with a good bookkeeper who’s keeping your books up to date you should be able to predict that before your sale so that way you can say oh, you know what I’m into this property for a hundred thousand I need the sale price to be at least a hundred and forty to net a hundred and thirty or under the net – oh I’m sorry thirty – twenty five or thirty because of the cost that are going to go into that, because you might have 10% of you know designated for your closing cost for what not so being able to have that in your hand how – how powerful would that be that you could go to your books open them up and say for 123 Main Street as if right now after the rehab is done we’re into this property $100,462.36 that’s the power that we’re working with- our investors that work with simple CFO we make sure that they know what they’re into those properties week by week so they know are they going over budget how- how much did they spend in the last week? What did- are they spending that money on? And do they think they’re already over budget and they’re going to have to take a loss on this property, or they need to be able to maybe have a different exit strategy than they originally thought. Putting that kind of power in your hands to be able to make that decision is the difference between making money and losing money for a lot of businesses any what the- what is sad is that if you just had the power to be able to set that expectation with the bookkeeper like I want to make sure I know how much I’m into these properties and at – at on a weekly notice and on a weekly basis and have that basically at a moment’s notice to be able to pull that and get that data then they should be able to get that for you and how powerful would that be for your real estate business especially if you’re fixing and flipping or houghtaling a property or even if you double close and you maybe you have to hold on to it for a week and then it goes to two weeks or whatever because your buyer backs out but knowing what your cost is into that property because then you can factor in things like the interest and the rehab and everything like that to make sure that you know you’re getting the best price for that property the most profit and then if you went way over budget is there another exit strategy like turning it into a rental maybe selling it on terms instead of just now write sale having something else where you might not have to eat your shirt so that’s just a couple things that the power of the data that really gives you impractical- impractical real estate language where that- that data can really be between having a great month or having a horrible month having great property profit or property profits that really hurt your business so hopefully that helped you too with just a couple of those things I did wanna- I was able to find that quote from Dan Kennedy about knowing your numbers and I think this is a great quote so, bear with me here. Dan Kennedy says here’s a fact from my 30-plus years of doing marketing consulting with business owners those making the most money, especially those growing businesses from small to big and getting rich by doing so, know their numbers inside and out thoroughly completely and just can’t be stumped by a numbers question, those who can be easily stunts are usually poor or headed there.The fact is in 30 years, with well over two thousand clients, those who have made the most money and gotten wealthiest are the ones who know their numbers Inside-out, upside-down backward, and forward minute-by-minute day by day so that’s from Dan Kennedy, who is literally the consultant to millionaires and not just millionaires but has consulted businesses from making millions of dollars to billions of dollars so this is someone who’s been in it for a long time and has seen the power of knowing your numbers and if that quote doesn’t just a light a fire under you to get to know your numbers I don’t know what would.

Tim: I think that’s great, David. And for a lot of these entrepreneurs and business owners and investors like you guys that are listening here. An important question to ask yourself is why do you want to know these numbers because it can be very overwhelming to have all these numbers and feel like you have to have them all in your head at all times, but if you know why you want to have your numbers that you want to increase your sales, that you wanna decrease your expenses. You can be able to work with the bookkeeper in targeting those goals and getting those outcomes that you want. And we might not be able to go through our entire books every single day for 10 hours a day to figure out everything that we want to know about the business. But you can communicate with your bookkeeper like hey, I set up a Google sheet for me to where I can see this number here, this is expense here, this income over here. These are the important numbers to me, and with this, I know I can make the decisions I need to do for that next clip for that next rental for that next project that you have.

David: No, I love it. So, another thing that I wanted to just bring out is the actual system of bookkeeping. Like how are you going to work with a bookkeeper to get them what they really need so as far as that goes, use as much technology as you can. I highly recommend QuickBooks online because of the banking features in this- the automation that can be built into that and that can the- receipt systems like that that have it right inbuilt on to QuickBooks or if you need it outside of QuickBooks like a Receipt Bank where people can literally email receipts and tell what that was for certain property or Bill.com I highly recommend if you have contractors and if you’ve got- I highly recommend you either using QuickBooks bill pay or Bill.com because a contractor can literally email the bill to a Bill.com and it shows what the property is for and all that and then you can link that to your accounting software, and it can link that up, and you can make sure that it’s put in the right place so that way you as the owner you get the best end result. you get that – the bill is paid for it’s appropriate to the right property and then you get the numbers then that goes into your system where the hard facts are now you see okay this is more for the rehab for this property so getting systems like- like I said Bill.com, Receipt Bank, QuickBooks online there’s a lot of other software is out there for your finances and that you can use but you want to use as much automation and technology as you can because the other- the other fact of life is here that the bookkeepers going to have to ask you for some charges and you want to have as little- as little questions from them as possible so how can you automate a lot of that and it’s by using these systems – these systems that can make sure that you snap a picture of the receipt and gets uploaded somewhere one of the people that I work with they actually take a picture and this is someone who’s in a mastermind group and they are actually the head of the Mastermind group where they take a picture of the receipt and upload it into Evernote and like this is what it was for or the property or whatever and then someone literally weekly their bookkeepers scrapes that data puts it in QuickBooks and they’re not really- they’re not having to have those nitty-gritty meetings of oh, okay this is what this charges for this is what this charges is for no their meetings are more like we have all the numbers and now we can actually go through and either cut expenses or add to our marketing on what’s working or see what’s working the best inside of our business so those are just – hopefully some practical ways that you can put a system inside of your business for that bookkeeping because if you have a system for bookkeeping then you kind of sit back and say okay now or meetings are more about the high-level then the nitty-gritty of getting those transactions out of the way so that’s what you want to get to of course it’s going to take time setting that up and making sure you have what works for you and what you can do consistently cuz that’s the other key to bookkeeping is being consistent so not taking a picture one day and then forgetting the fifty other receipts that you have no it’s doing it right away making sure you get it out of your- your system as soon as possible out of you out of your immediate sight that way you don’t have to think about it again so that’s what you want.Your end goal is to have a system and that’s where we were talking about at the beginning the relationship with the bookkeeper what would be easy for them or what suggestions do they have for you to make it easy on you and that’s one of the services that we provide at SimpleCFO is making sure okay what system are you using now, is it something that sustainable, is it something that is going to take headache off- is it actually taking headache off of your plate or what you’re doing right now is a brain damage and that’s why you’re never ever updating anything so that’s one of the things that we hope and really dive into to too. But I know from working with a lot of Real Estate Investors on their finances that they just don’t like doing it because they don’t have a simple system to use and that’s all we really try and help people with so that way they’re not bending over backwards trying to get their numbers in their system because the easier it is to get that data in the more you’ll respect the numbers that come out and the more that you’ll be out there to look at the numbers and say hey this is what they’re really telling me and I can make decision from here so I just want to give you that quick tip there. Tim, do you have anything on that point?

Tim: Yeah, making decisions is so important like think about- in the course of your business, back to when you made a decision, and if you’ve made a different decision, you would have had a totally different outcome if you hire the wrong bookkeeper- the books would’ve been really messed up we have clients where there were people that were hired, and the books were not done in the correct way, and now they have to spend so much time with the bookkeeper – the boss has to be there, and they’re even working with us to try to clean up the mess that was made before, and I encourage everyone too, to make a decision today of something that you’re going to do with your bookkeeper- a new system that you can think about set aside some time to talk with your team about how you can do things better and from their make- make that decision see what happens and grow and adapt from there too. We’re not going to have the perfect system set up each time every time, and there’s going to be some struggle sometimes between communication and personalities or whatever it may be, but you know for the growth and the health of your business, this is a very important step that you need to take to know and grow your profit.

David: I love it.Yeah, and it’s so important to back up with Tim just said I want you to take an action step right now. On this podcast while you’re listening to us, go out and make that decision what are you going to do and email us- at what your decision was- email us at systems – at SimpleCFOSolutions.com and tell us what your decision is so you- so we know that you actually took a step- this podcast is not just all about fluff and rara rara. It’s about actually going out there and helping you we want to help you in your business so we want you to actually do action stuff from this podcast so email us at systems at SimpleCFOSolutions.com and tell us what your decision was so that way we can see that you took something away from this episode and that way we know that you actually did something and you- you went out there and made a decision to make your- your business better you are- you need to be that business owner and not just a real estate investor but a real estate investor who owns that business and goes out there and makes these decisions to make your- your business better and ultimately give you the time, the money, the freedom to be able to enjoy your business and actually have it be a business and not just as cash eating cow which I’m really excited for the next few episodes of the podcast cuz we’re going to dissect profit first and go over the notes that I’ve taken and go over just profit first chapter by chapter to really dive into the profit first series cuz I wanted to lay some groundwork here on these first few podcast but we are going to be going through a profit first actual series and go through the book and I want to really help you with that and really help you not have this cash eating cow that is just that this monster, that you thought was going to be a great business for you and now you have no idea what’s going on why there’s no money in your bank account and first of all I would say get a great bookkeeping system in place before you even Implement profit first because you need to know your accurate numbers and then run with it from there and that’s what we’re going to be talking about next. Tim, do you have anything else to add before we close out this podcast episode?

Tim: Thanks so much for everyone listening. We do have a Profit First for Real Estate Investors Facebook group. If you go to facebook.com/groupsforward/profitfirstrei, that would be a great place to connect with us. Feel free to message us there about the decision you made today to get to know your numbers.

David: Awesome yeah, I love it, and we really look forward to seeing you on the next podcast, and we really do appreciate you listening.

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