3 Accounting Tips with Erin Armstrong
Branding with Friends | Episode 15
Featuring Expert Guest: Erin Armstrong, Business Coach and Virtual CFO
Watch or listen to the video interview below or scroll down to read the transcription.
Meet Erin Armstrong, Business Coach and Virtual Chief Financial Officer
Annie: Today I am so excited to introduce you to one of my new friends in the business world. If you have been wondering about accounting, taxes, getting your business finances in order, you are really going to dig today's episode.
My guest today is the incredible Erin Armstrong. Erin is a business coach and virtual CFO, that's chief financial officer, who helps small business owners make empowered financial decisions, grow their income, and create a healthy business that will truly sustain the work and life they want to lead. Erin's unique approach incorporates the nuts and bolts of business finances like accounting practices, tax strategy, profitability, budgeting, and cash flow with emotional and mental work such as identifying confronting fears around money and control. Super excited to talk about that today. With this holistic approach Erin's clients are able to confidently move forward in a proactive, free, and empowered way. Erin's worked with hundreds of business owners across the country in dozens of industries since 2011. She's also led workshops in Los Angeles, New York, Chicago, Austin, and other major U.S cities. Erin I am so glad you're here, thank you so much for joining me at Branding with Friends.
Erin is really here to talk to you guys about accounting and so much more so we're really glad to have her today on Branding with Friends. We're going to share three tips on what you can do to follow some accounting best practices and really some money best practices for your business. As you know, maybe this is the first time you're watching Branding with Friends or listening to it, wait till the end because we are going to save that third tip for the very end of the episode to make sure that you get all of the great value from today. Erin, without further ado we are talking about your wheelhouse or maybe one of your wheelhouses which is accounting. Tell us a little bit about how you fell into this field, got into this world of taxes and profitability.
Erin: I'm going to condense it down because it's a long story but the gist of it is, I was not in this industry. I didn't go to school to be an accountant originally. I was actually like you, I worked in the Hollywood world. I just ran into a lot of issues for myself. I was oftentimes working as an independent contractor which is really a small business owner. I got frustrated over several different situations where I had questions about taxes I felt like would be really straightforward. For some reason they weren't even asking professionals. I think what happened is I also grew up in an abusive financial household. But you only know what you know. As I was grappling with all this I started still just intending to do what I was doing at the time. Which I had my hand in a few different businesses in that world. I started reading the tax code and I thought, okay I'll just figure it out. Which is ridiculous. I couldn't have imagined that but what was really interesting is it was something obvious that I didn't find completely boring. But what I found was that taxes specifically were different than what I thought and different the conversational wisdom. Which is if you work for yourself, all your money is going to be taken in taxes. I think we have a lot of negative things that just float around in space. What I found is that, at least in the U.S., if you're a business owner or an independent contractor, the code is set up to support you. That led me down this windy journey of earning certifications and starting to shift. I started to shift my business way back way before 2011 and then I realized that I felt like this was a calling. It was a gradual shift.
Annie: Well we're glad that you're here and this is such a big topic. I would say the connections to branding are less obvious. But I think in the sense that branding succeeds when you have a successful business and you can't have a successful business if you were not paying attention to the financial element of yourself. One of the things that my dad has imparted to me, I think he learned it in a marketing book, is great branding and marketing if you don't have a great business it puts you out of business faster. You could hire that branding person, maybe me, maybe somebody else in your world. But that's not going to fix problems with profitability, accounting, and taxes. They go hand in hand. You have to have a great brand and great marketing but you also have to have a foundation on which to build upon. Go ahead and tell us what do you think is the first thing we need to be focused on if we really want to make sure our business is financially fit?
#1 Action TIP
Take yourself seriously from the get-go.
Erin: I think the overriding theme you're going to see today is going to be setting yourself up for success. But the first one would be to take yourself seriously from the get-go. You're right Annie, it's exactly hand-in-hand with branding although maybe not so obviously to everyone. One of the first things when I start working with someone, whether they're a brand-new business owner or someone who's really established.
Right now, I have a lot of clients that make a few million a year. They always want to spend money on the shiny, beautiful branding. I get it because that's what we get to look at, interact with, and engage with. It’s very needed because that's how we let people know what we have to offer and who we are. I always have to pull them back from that. We’ll get there but we need to look at how profitable this is or we need to look at your systems because if this marketing's successful like we want it to be, you have to have the foundation in place that you can scale up.
On the back side when it has to do with money, that's as simple as establishing some sort of bookkeeping system. For a lot of people that's intimidating but you have options, commit with one and go with it. If you think you can do it, go in and do QuickBooks. If you know it would be like pulling teeth maybe that's your first thing that you outsource. I actually had a client years ago, she went on to sell her company for several million, but she started with nothing like most of us do. She hired me even before she was making money because she knew she wouldn't deal with the money. She knew she needed some accountability. That's an extreme example. Most people aren't, going to do that right at the beginning.
Annie: You have to hire for where you get stuck. So, whether that's branding, marketing, or accounting or whatever it is. You have to pay attention to where you're stuck because you're not going to move forward until you get unstuck.
Erin: One of the things to build on the bookkeeping is a lot of people say well I'll just figure out if I'm profitable or I can skip that piece. But you have to know your numbers to know if you're being profitable or not. In the beginning we have to admit everyone doesn't know what they're doing. You have to jump in and figure it out allowing for a little bit of figuring out space. As soon as you think “oh maybe this is a thing” or “yes this is a thing,” that's when you need to really start shifting things. So, whether it's a bookkeeping system or looking at what is your actual profit, that's the kind of thing that people don't really want to look at. I think because you have to look at the numbers which is sometimes intimidating. It's being willing to put the systems in place and I would say even establishing goals. It's surprising how many people either set a goal or don't set a goal. But then it doesn't change as their business starts to grow. They hit that for $50,000 so they can quit their day job. But then you need to come back and reevaluate. How could this business really sustain me on a long-term level? What kind of money or income would I need to be making for me to take home what I need to take home? So, it's just being willing to have those conversations and to look at that stuff and get the support you need. But taking yourself seriously because otherwise it turns into a train wreck very quickly.
Annie: At the beginning of my business, I've been in business for about seven years, I remember feeling very intimidated in the beginning by all of this stuff. I was afraid to start my business. I was afraid about the taxes thing. That was a big reason why I didn't want to start a business. I thought, “I'm so terrified, how do you do this?” I remember one day tracking in my head thinking, “this person owes me, this person...” I was adding it up. I didn't have it anywhere. A couple years ago, I set up a really simple excel sheet to track incoming revenue and where I was profitable. People really underestimate tracking that. Once I started tracking it, it really built my momentum and I could tie my marketing activities to my revenue. I could see how many proposals are booking. This is the money that's coming in. This is what it was per last year. Taking yourself seriously doesn't have to be such doom and gloom. It can actually be a good opportunity for you.
Erin: I think it can be very light-filled because one of the most common things is when people start tracking and they're surprised that they're doing a little bit to a lot better than they thought they were. That's really reaffirming too.
Annie: It's momentum, you can't do anything unless you have a clear picture of what is going on. You can't make strategic decisions without that visibility. So, I love that as a tip. What is the next thing we need to do? I know we need to take our businesses seriously but what else do we need to do?
#2 ACTION TIP
Learn to embrace taxes
Erin: I would say learn to embrace taxes. That's a hard one right? I don't know what it is. When you're an employee you get those taxes taken out and you trust that it’s all going to work out in your favor at the end of the year. It just feels easier. But when you're the business owner and there are all different ways you could shape it. So, it's going to look a little different if you're a sole proprietor versus, an LLC, versus S-Corp versus a partnership. The thing they all have in common is that there are formulas you can use to calculate what you'll be owing. So, you're not going to be just surprised. I think the other thing is the tax code at least here in the U.S. is really set up in a way that supports businesses. That's not something that you hear often. You hear things like, “oh man like the IRS is taking everything I made.” I've never yet seen that to be true. I do understand if you haven't planned for it that would not be fun to have a huge tax bill. But I also know from working with hundreds of people and leading lots of workshops, a very high percentage of business owners don't take advantage of all the deductions and all the benefits they can get from their business.
There's not one tip within that because there's so many things. But I would say, being willing to engage with that. Now you don't have to go read the tax code. I wouldn't necessarily recommend that. You could work with someone. You could hire someone to do it for you. But have them walk you through your tax return. There’re different ways. There are some books out now, which wasn't the case ten years ago, that are written for non-accountants. I think it’s a lot easier to look at how the tax piece can actually help you. Then it starts shifting it. Once you realize “well... even if I owe these taxes I've gotten all this benefit over here.” Which I never could have gotten as an employee. So, it's a Yin and a Yang. I think it’s important to know it's going to be uncomfortable at first but it's something that can be figured out.
I'll also say when it comes to the tax piece, it's not a one and you're done you know. You learn it but then you get to apply it every single year. So, it's not like you do it and then next year it's going to be just as time-consuming or excruciatingly painful or however you might feel about it. It's like okay, I implemented this piece of my business and now I will continue to do that until I stop doing business. Which, exponentially that does save people tens of thousands of dollars one year. Ten thousand dollars adds up.
Annie: I think the underlying message here is knowledge equals power. The more knowledge you have about how you're doing financially, how you can take tax deductions. This is one of those things that I told you almost stopped me from starting a business in the first place, my fear. I love that your business really helps address that because there is fear around money and taxes. I don't want to go to jail for tax evasion. I just want to do the right thing and it's really hard to sit there and read the tax code. I invested in someone. That was the biggest thing I needed to find in the first year of business. I found a partner and I think a big eye opener for me was it wasn't super expensive. It's a couple hundred dollars a year for me to have a strategic tax partner who I meet with quarterly. I do all my own bookkeeping still. Which I could outsource but I don't want to make him do that. I just have him as a partner to go and say “here's how I'm doing. What should we change? What could I do strategically.”
Sometimes it is really helpful to have another perspective. While we're talking about being a business owner, you don't even think about things like health care. Our healthcare has been astronomical for years. Partially because my husband's in grad school and we just had a baby. We were looking at that but because of how my business is structured I'm able to have a health spending account. That's money that's pre-tax dollars that lowers our adjusted gross income. Opportunities like that can be available to you if you work for others as well if you have a high deductible plan. We're not talking about insurance today. But it's an example of yes, we're getting hit hard with big health bills however we're getting some help because I have a business and because I'm able to take a deduction. I wouldn't know that without asking questions of professionals.
Erin: I think a key piece that stands out from what you said to me is you were proactive about it. Which I think helps too because there's a little bit that might be able to be done if you wait until April filing time, but not a lot. What would happen is they look at what has happened and then they'd be talking about the year ahead of you. Reframing your mindset that tax time is not a season as it is when you're an employee or you know. But as a business owner, it probably should be a quarterly, at least a quarterly thing where you're engaging with it on a small level ongoing basis.
Annie: Yeah it forces me to keep up with my bookkeeping. So, I do my bookkeeping on a quarterly basis. I never have to face an entire year's worth of receipts. Everything comes back to systems. Make yourself a system and you'll do it consistently. I know you have one more tip for us. But I know you also wanted to have a way for everybody to connect with you. So what is the best way that Branding with Friends listeners and watchers can learn more from Erin Armstrong?
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Erin: I'd love to connect with you and if you want to visit my website which is www.erinarmstrong.com/email, that's a great way to connect. I'm not a weekly emailer by any means because not everyone wants to think about money all the time. But sometimes like when the pandemic hit I sent out a lot in that period. I wanted to give people a lot of tips on how to get help with the government assistance. But for most of the time I'm sending out an email on a monthly basis or so and just trying to give some insight, maybe some thoughtful things to think about or let you know what's up. I'm also somewhat active on Instagram. But those would be the two places to connect. I've pulled back a little bit since the pandemic.
Annie: Sure haven't we all in different ways? Make sure that you do connect with Erin. Because you know if you are stuck because of finances or you were afraid like I used to be at the beginning early on in my business, she's going to be a great person to connect with. Get on her list and get some value from that. If part of where you're stuck is your branding, you can always speak with me. Hop on my calendar at greateststorycreative.com. Just look for the big red button that says free consultation. I'm sure Erin will back me up on this that branding is tax-deductible. So, it is a tax deduction if you do it. I am so glad you're here. Thank you for these great tips so far. So, taking our businesses seriously from the get-go, learning to embrace taxes. What is the third and final thing that you really want us to take away when we start to think––rethink how we consider accounting for a business?
#3 Action Tip
Align your financial goals with your life
Erin: The third tip is beginning to align your financial goals with your life. I think for many people numbers are an abstract thing. I want to hit a hundred thousand because then it means I've made it or I want to hit $50,000. I'm all for hitting those goals or making those goals but it's really hard to boil down success. What success means for you and what you need to sustain the life you want to live. So, that, goes back to everything we've already said. Which is getting really clear on what your systems are and what your profit is. The clearer you can get about what you would do with the money even if you don't have it right now. I find that it's a lot easier for people to reach those goals. So, if you know that you have to take home $120,000 because you're going to rock it with your business and you're going to put down a first house payment. If that's your goal this year, you're going to be a lot more motivated to make the decisions, not just to get clients but to be looking at the profit all the time.
A lot of times too that comes into play on the converse side. What is it that you really want? I also think what happens for a lot of people is that the amount they need to really flourish and to live the life they want is lower than the surface level. I think they think it's far out, unreachable. I'll have to work years for it. Which could be true but if you really boil it down where you have some numbers. What would I need to live in that kind of house? What would I need to hire this kind of person in my business? What would I need to do xyz. It's a lot easier to match everything together. I think how many clients do I need to get? How many clients would help me pay for this goal or whatever it is that need.
Annie: I love the specificity of that and I think it's so easy to lose sight of it. I hear a lot from people, “I want to hit six figures.” I want to net six figures.” But why? I get that it's a success driver. It’s a goal that I had for many years. I am a six-figure business now. I wasn't always. I could have done it in you know about three years. But I take a month off every year and it was taking only working you know 10 and a half months a year. I would come really close to six figures but I didn't want to give up that month and so it took me extra years to actually get to a legitimate six figure number. That’s a great thing and I'm extremely proud of it. I like to align my goals with my life. Because yes, I could have reached that vanity number but at what cost? I wasn't having the time with my family that I wanted or the time to work on my book or whatever it was that I wanted. I finally did it on my terms. You have to be willing to think what does success look like on your terms. Six figures is a wonderful thing but what are you going to do with it? For me this is a big financial year because we had a baby. I'm the sole bread winner of the family because my husband is in school. So, we have to make finances a huge focus. Next year that won't be my biggest motivator or driver right. It's okay for it to fluctuate. But time is your money and where are you spending it right.
Erin: I think there's always a temptation and it is a Yin and a Yang. Because there is a temptation to the hundred thousands or beyond that. If you increase this and make more of those sales then you would make that. But a lot of times it's not worth it if it's not in alignment with you because it's not sustainable. I would say a lot of business owners that have been in a long time that becomes an issue at some point. If they're doing something that they don't love or they hate the management piece of it or whatever then you're really stuck. Because you feel like, I have to make this amount of money to sustain this lifestyle, this business, or these employees that I've hired and I hate it. I'd say never, never do anything that really that you know in your heart of hearts that is not like life-giving to you for the numbers. It'll bite you. It might take a year but it will bite you hard and it's so much harder to get out of than slowly increasing if it needs to be a slow increase.
Annie: It’s unsustainable to your point. This is something I keep coming back to whether it's branding, marketing, or business. If you don't love what you're doing, it's work. Sometimes you don't want to get up and work. But if you truly hate it you're not going to do it or you're not going to do it well. We know that about our own human psychology. So, you have to be willing to re-evaluate and if you don't know how to do that then somebody like Erin is a person to talk to.
I invested in a coach this summer because I got into a financial place with my business and where I had maximized everything. I couldn’t see any more opportunity and that's why it's great to hire a pro. I do that at least once a year. I hire one professional every year to take another look at something where I've plateaued or gotten stuck because they can see things you can't. I sat down with that coach for half a day. I'm still implementing all the stuff she told me. I think it's going to help me double my revenue. She looked at it like it was an easy cakewalk and I just couldn't see it. I think that that's sort of the fourth and hidden lesson. When and if you get stuck in this play around finances or your money mindset ask for help. Talk to people like Erin. I do some business mentoring as well but if this stuff gets you stuck you still need to do it. How do we get you unstuck and get you the help you need in a way that feels good to you? I love that, that's your message Erin because money matters when it matters to you when it really makes a difference.
Well, Erin thank you so much again for joining us on Branding with Friends today. So many thanks to the amazing Erin Armstrong. You can reach her of course at erinarmstrong.com.
I hope you guys are going to tune in next time when we're going to tackle yet another topic, so many topics for Branding meets Business. Until then I am Annie Franceschi with Greatest Story Creative. You can find all of our past episodes, branding resources, and a lot more including time with me at our website at greateststorycreative.com. Stay awesome!
“Branding with Friends” Episode 15
Show Notes + Resources
Here are 3 key tips for Accounting to grow your service business:
From a financial perspective, take your business seriously from the get-go.
Learn to embrace taxes.
Align your financial goals with your life.
Dive deeper into branding and growing your greatest business with Annie Franceschi:
• Subscribe to the Greatest Story Creative newsletter to have new episodes of “Branding with Friends” sent right to your inbox the day they premiere!
• Find past episodes at BrandingwithFriends.com
• Connect with Annie for consultations, resources, and more here on greateststorycreative.com
• Follow Annie & Greatest Story Creative online:
--- Facebook - facebook.com/greateststorycreative
--- LinkedIn - linkedin.com/in/anniefranceschi
--- Instagram - @annie.franceschi
To learn more about television publicity or to seek Erin’s help:
• Visit Erin at erinarmstrong.com
• For financial tips & insights, join her email list here
• Follow Erin on Instagram @erin.armstrong.cfo
