Speaking of a beginner accountant…most don’t have an accounting niche. My current clients, 50% of them are low volume, another 25% are non-paying or making delayed payments. 10% of the clients monthly volume is reducing due to their business situations. Due to these, I’m not meeting my monthly expenses and I’m not taking withdrawals from the business. This is the reason I took up your training and I already know through implementing your training it will transform my situation completely. I also signed up for the sales boot camp.
I remember we spoke about completing the training and putting your ideas into practice and changing to niche specific clients, it’s all going to take some time and any encouragement or advice is good. Yeah. They need an accounting niche. So you know, I was writing about this today because somebody was asking me, I was writing this thing…what advice I would give someone who’s just getting started in accounting.
So, someone that I don’t remember, if they said a student or someone that’s at the beginning of their accounting career, and I said a number of different things in there. But one thing I said, which I think is huge and I went through university, I went through and worked a job in accounting, I got a CPA license, all that stuff. I still really did not understand, I really did not actually understand the way that money works and the way that debits and credits work, the way that the income statement works, the way the income statement flows into the balance sheet, the way the balance sheet works. I didn’t really understand that until I actually did my personal finances.
The personal income statement and the personal net worth statement is exactly the same in principle as the business income statement and the business balance sheet. So, I actually think about it like, I remember when I was in school, I always learned assets equals liabilities plus equity. And I always thought that was weird. I don’t know what it is about these markers, they’re just terrible, assets equals liabilities plus equity. Right? But I never think about it like that. I always think assets minus liabilities equals equity or really that’s kind of from a business perspective. But then also, I think about assets minus debts equals net worth. Honestly it’s the same. This is just a way to say it for business.
These are using the business terms, assets, liabilities, and then equity. People do say assets and personal life, or they might say money, but really assets still work for personal life. The average person calls it debt, money that they owe other people, which gets them to their net worth. And that’s really personal. When you look at your business, I’ve got a lot of clients but some of them are low paying, some of them are here. I’ve also got contractors, you’ve got all these levers. So if you don’t like actually to go through and do this in your personal life, this is where I actually learned how to do accounting. This is where I actually learned what it meant and how things in reality affect these numbers.
That’s the big problem, sometimes accountants want to manage the numbers. They don’t realize that the numbers are just a reflection of actions in reality. The best place where you can learn this sort of exercise is just your personal situation. If you go through, you look at your assets, you look at your debts, you look at your net worth and then you think, “What kind of behaviors increase my assets, lower my debts and increase my net worth?” Right? That’s on the balance sheet, the net worth statement side. Then you’ve also got the income statement. So, you’ve got income and we’re going to just simplify it. Expenses, and then we’ve got basically profit. This is on the business side. So, the business side and then on the personal side, this is huge for clients too, but honestly until I really understood this, I didn’t know anything about accounting.
I was a beginner accountant, I could do journal entries and stuff, but it was never really real and I never knew how it worked. What do I change to actually get these numbers to change? It just didn’t make as much sense. Then here we’ve got income, expenses and then, maybe could call it like discretionary income or you could call it savings, right? If you actually save it, savings. If you’re having problems in your business, you’re having problems getting the numbers to work, you’re having problems getting your income statement to work with your costs. I had this problem too. When I look at my business last year, we grew the business huge, but we didn’t have a good profit margin.
We just focused on growth, but we didn’t make good profit margin. Now I’ve restructured the business. I’ve totally restructured the way we are doing sales, the way we’re doing marketing. I’ve also restructured the way that we’re hiring and even though we have probably five times as many people this year as last year, our profit margins have tripled from what they were in the past. So, I figured out how to do that in my personal life when I was first getting out of debt, and then I figured out how to get sales and then I took everything I learned before about cost cutting and put it into my business. I also started to hire people the right way. I started to restructure the way we did marketing and started to restructure the way we did sales.
I take the principles that I learned in my personal life and I applied them to business as opposed to trying to help people with business. So, whenever someone’s an accountant, they’re like, “I want to help somebody with their finances. I want to be a financial coach.” I find out they’re broke. I’m like, “dude, take your own medicine.” So, in your situation, I would really sit down and go through all four of these financial statements. One, two, three, four, go through all of them and then start to make a plan on each of them. What do I need to do in my actual personal…to pay myself more and spend less money, have a higher overall discretionary income and higher savings. What do I need to do in the business?
Do I need to get rid of some contractors? Do I need to restructure some of these client accounts? Do I need to get more clients? Do I need a higher quality of revenue, higher pricing for the work that I’m doing? Am I just lumping everything in together? I’m not splitting out sub-account management with monthly accounting and outsource CFO or controller work? Am I not splitting out tax planning and tax prep, and I’m just lumping it all in with low end prep fees? Like we can dig into all this, but what the problem is…on the income side and then on the expense size, is it the contractors? I think in your case you have an office. Is the office too expensive? Is it needed at this point? What are the other things that we’re spending our money on where it’s not contributing to income growth and profit growth?
As you increase expenses, I’m always looking at increased expenses. I’m always looking to increase expenses, but they got to be on things that are growing income and growing profit. When we look at that, that’s what I’m thinking about…make a plan on each of these and then going up into here, same thing: assets, debt, net worth. How long is it going to take us to pay off any debt that we have? Student loans, house, what’s the timeline specifically? Then in the business as well, if we have debt, what kind is it, how long can we pay it off? What are we doing to grow assets other than just the net that we’re bringing in from the business? Is there anything else?
Also, can we turn some of this into cash? If we’ve got AR, something like that. Can we start billing upfront instead of billing at the end? I think we talked a little bit about that. So, I would go down and list out for each, go through each of these financial statements. Then for each of these financial statements, I would list out the key problems with each. What is the problem that we’re having here? List them out, what is the problem that we’re having here? List them out. Then if you go through in week one, that new way of thinking, training…and you start actually prioritizing them for each of these financial statements, you should have a key problem that you need to focus on fixing that is going to make the biggest impact on doubling your income, doubling your revenue. That’s how I would think about it, because to be honest, everything that you’re dealing with right now, and we’ll go into this more when you come down to the bootcamp, I’m happy to walk through some of the stuff with you as well.
Everything that you’re dealing with right now has a simple answer, right? Go beyond being a beginner accountant. I know you’re doing enough in sales to be able to make a good net, but you’ve misorganized it. You’ve hired too many contractors. You’re overpaying people. People think that contractors are so great and they are, if you’re looking to stay small. It doesn’t make as much sense as hiring people full time, on a W2 basis. Then you actually will get a much fairer deal and much more committed people if you do that. In the beginning it’s great to do it, but if it seems like we’re probably overpaying with what I know you’re doing in sales, then the quality of revenue is too low and we need to work on redoing that. But you need an accounting niche to focus on.
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