Latest / The Confident Entrepreneur With Jennifer Ann Johnson / Practical Budgeting Tips for Small Business with Jennifer Cail
Transcript
- 0:37Jennifer Johnson: Today we welcome back into the studio Jen C, who owns Medrano and C Bookkeeping in Naples.
- 0:42Jennifer Johnson: They assist small business owners with their finances so they can focus on what they love and what they do best.
- 0:49Jennifer Johnson: Welcome back into the studio.
- 0:51Jennifer Johnson: Thank you for having me again.
- 0:52Jennifer Johnson: Absolutely so.
- 0:53Jennifer Johnson: Last time we were talking about business mistake or accounting mistakes that small businesses make, right.
- 1:00Jennifer Johnson: Okay, now we're going to delve into the budgeting world.
- 1:03Jennifer Johnson: I know Budgeting is fun.
- 1:06Jennifer Johnson: Trying to get that all to work and aye, aye, aye right.
- 1:12Jennifer Cail: It takes a lot to budget.
- 1:13Jennifer Johnson: So, first of all, before we start talking about mistakes that people make with it and maybe this is going to be one of the mistakes but is this something that should be done once, twice, every quarter?
- 1:24Jennifer Johnson: Oh no, it should do monthly.
- 1:26Jennifer Cail: Monthly budgeting Unless you've perfected it.
- 1:29Jennifer Cail: Where you can do like a cashflow budget, it's once a month.
- 1:33Jennifer Johnson: Okay, that's what you need.
- 1:35Jennifer Johnson: So what are you supposed to do when you sit down and do a budget?
- 1:39Jennifer Cail: Okay.
- 1:40Jennifer Cail: So think of the basics.
- 1:40Jennifer Cail: What is your income, what are your expenses, what are the variables, what can come in, what are surprises that can do it?
- 1:46Jennifer Cail: So, income expenses you know that You're running your accounting software or whatever you're using.
- 1:52Jennifer Cail: Okay, what is another key factor?
- 1:54Jennifer Cail: You have employees payroll, so payroll is huge.
- 1:57Jennifer Cail: What is the minimum and maximum?
- 1:59Jennifer Cail: You would be paying in payroll in two weeks and you know that by season, correct.
- 2:03Jennifer Johnson: You know the payroll Exactly.
- 2:05Jennifer Cail: And then insurance says once a year, come up.
- 2:06Jennifer Cail: So do you want to save on it monthly?
- 2:08Jennifer Cail: How do you want to save for that?
- 2:09Jennifer Cail: Taxes, you know?
- 2:11Jennifer Cail: So it's all just taking everything that would come out of your bank account every year and saying, okay, this is what I'm going to save for it monthly and do a budget, because some businesses are seasonal, others are not.
- 2:22Jennifer Cail: So if you have a lot of income coming in during the season and not the summer.
- 2:26Jennifer Cail: What are you anticipating that summer to look like that?
- 2:29Jennifer Johnson: makes complete sense.
- 2:30Jennifer Johnson: It does, and I honestly didn't think about yeah, you should be doing this monthly, monthly.
- 2:35Jennifer Cail: You should just be at least reviewing it and then updating it, because there's always going to be money left over.
- 2:40Jennifer Cail: So what I tell my clients when we budget that money left over, what would you like to do with it?
- 2:44Jennifer Cail: Would you like to save it?
- 2:45Jennifer Cail: Would you like to spend it?
- 2:47Jennifer Cail: You didn't account for it and most of them are like well, as an in case, I'm like, but your budget's already taken in case, so now you have all this money.
- 2:55Jennifer Johnson: So you put in savings.
- 2:56Jennifer Johnson: What a nice problem.
- 2:57Jennifer Cail: It is a nice problem.
- 2:58Jennifer Cail: Or you put into what investment are you going to make with the business?
- 3:01Jennifer Cail: Can you hire someone else?
- 3:02Jennifer Cail: What does that look like?
- 3:03Jennifer Cail: Can you buy more inventory?
- 3:04Jennifer Cail: Can you buy more equipment?
- 3:05Jennifer Cail: Can you pay off a loan?
- 3:07Jennifer Johnson: Is it smart to budget to like your worst month?
- 3:12Jennifer Cail: I do.
- 3:12Jennifer Johnson: Kind of thing.
- 3:13Jennifer Johnson: Yes, because then it's like anything else is awesome.
- 3:16Jennifer Cail: So you don't want to do your best month, because what is your best month?
- 3:19Jennifer Cail: You don't know.
- 3:20Jennifer Cail: You can have one best month in 2022 that was not there in 2020.
- 3:24Jennifer Cail: So you don't know, every year is different.
- 3:26Jennifer Cail: So I always say, go with your worst month or the middle, and then you can tell what trends that are happening.
- 3:34Jennifer Cail: You look at industries.
- 3:35Jennifer Cail: You look at other industry that are specific to yours.
- 3:36Jennifer Cail: Do you have a resale store?
- 3:38Jennifer Cail: What are the other industries?
- 3:39Jennifer Cail: Do you know?
- 3:40Jennifer Cail: What does their budget look like?
- 3:41Jennifer Cail: And all these budgets are online, for free also, so you can kind of look, they are.
- 3:45Jennifer Cail: Yeah, you can look online.
- 3:46Jennifer Cail: You can go Google and say what is a good budget for?
- 3:48Jennifer Cail: This and it starts.
- 3:49Jennifer Cail: Uber had a business plan and they started with a budget Wow, and that gave them $100 million, isn't that?
- 3:55Jennifer Johnson: fine.
- 3:55Jennifer Cail: So you can line.
- 3:56Jennifer Cail: But just start with something simple, with what you know, and if you don't know, project Okay.
- 4:03Jennifer Johnson: So what are some common budgeting mistakes?
- 4:08Jennifer Cail: Overestimating your income, assuming that you're going to sell five times more on the income side than what you really do, or taking into account something that someone owes you your account receivable, that you're going to get paid that month.
- 4:19Jennifer Cail: So you're expecting money, so you're making a budget on fake money.
- 4:22Jennifer Cail: That's what I tell people.
- 4:23Jennifer Johnson: I'm like you're making-, not play money.
- 4:25Jennifer Cail: Exactly Wishful money.
- 4:26Jennifer Cail: You hope they pay on time.
- 4:28Jennifer Cail: You can't count on your receivables, so what is it that you can count on?
- 4:31Jennifer Cail: So that's a huge mistake counting on money that's not there.
- 4:49Jennifer Johnson: And I think we're in Southwest Florida, and in Southwest Florida for those of you who are not listening or are not familiar with our area we're very, very seasonal.
- 4:53Jennifer Johnson: However, since COVID, our area has not been seasonal.
- 4:54Jennifer Johnson: We've had crazy amounts of growth all the time, and anybody that started their business during COVID or maybe a newer business that started right before, or perhaps a business that kind of just forgot the last three years here have been unicorn years, that's what I call them they have.
- 5:13Jennifer Cail: Yes, that's why people are trying to sell their businesses on the last three years, because it shows a projected income growth of a maximum.
- 5:19Jennifer Cail: But that's why they're looking at the last five years, because the three years are.
- 5:23Jennifer Johnson: It wasn't real.
- 5:24Jennifer Cail: It wasn't real.
- 5:25Jennifer Johnson: But now this last summer we hit a reset button here in Southwest Florida and it's still going, yes, and people realized, oh my gosh, this is what it really looks like.
- 5:37Jennifer Johnson: This is what it really is.
- 5:38Jennifer Johnson: Yes, now what?
- 5:40Jennifer Cail: Exactly, and that's where your budget comes in.
- 5:42Jennifer Cail: I have a huge one that was affected.
- 5:45Jennifer Cail: It was realtors.
- 5:45Jennifer Cail: Realtors were doing great and good for them, they're doing amazing.
- 5:49Jennifer Johnson: They're going with but not now.
- 5:50Jennifer Cail: And now there's a little bit of a stall.
- 5:52Jennifer Cail: So what I do with my realtors is we work on a budget before the pandemic and we work on a budget during the pandemic.
- 5:59Jennifer Cail: So we say, okay, what did those numbers look like?
- 6:01Jennifer Cail: What?
- 6:01Jennifer Cail: Are they going to look like, and then we work on what money they're going to have and then not get too much into that.
- 6:05Jennifer Cail: So it's working on those non-unicorn years.
- 6:08Jennifer Cail: Yes, I agree, even though there's a lot more people in Naples now, so Right.
- 6:13Jennifer Johnson: Well, last year I think everybody was traveling.
- 6:16Jennifer Johnson: Now they're here.
- 6:17Jennifer Johnson: Yeah, traffic, but hopefully they don't travel over the summer.
- 6:21Jennifer Cail: I think they're going to stay unless we get you know, probably one month, because it's really hot.
- 6:25Jennifer Johnson: Right.
- 6:25Jennifer Johnson: It's just interesting that last year, everybody traveled Europe, Like everybody.
- 6:30Jennifer Johnson: You were on Facebook and everybody's like I'm in Italy, I'm here, but that's our reality here.
- 6:36Jennifer Johnson: So what other budgeting mistakes that are pretty common?
- 6:40Jennifer Cail: Lack of detail and being specific in terms of your budget.
- 6:44Jennifer Cail: So a lot of people will group items together.
- 6:46Jennifer Cail: Let's just say dues and subscriptions with office supplies.
- 6:49Jennifer Cail: But if one month you're spending $50 on office supplies and another month you're spending $200, how is that going to help you with your dues and subscriptions Dues?
- 6:57Jennifer Cail: and subscriptions is every month.
- 6:59Jennifer Cail: So it's not being specific enough.
- 7:01Jennifer Cail: I tell people get specific, get granular.
- 7:03Jennifer Cail: It's going to be a pain, I know it.
- 7:05Jennifer Cail: Who wants to sit down and do a budget?
- 7:06Jennifer Cail: But once you have it you can fill in the numbers and if it's something zero something zero, but that's a huge one.
- 7:12Jennifer Cail: It's just saying oh, my payroll is the same as my contract.
- 7:15Jennifer Cail: Well, no, again, you don't pay taxes on your contract.
- 7:19Jennifer Cail: Oh my boys, they pay themselves.
- 7:20Jennifer Cail: Yeah, they're.
- 7:21Jennifer Cail: Just fine.
- 7:22Jennifer Cail: So those are huge mistakes that affect the budget as well.
- 7:25Jennifer Johnson: Okay, and why?
- 7:27Jennifer Johnson: I mean, why do we budget that way?
- 7:32Jennifer Johnson: Just from lack of knowledge?
- 7:36Jennifer Cail: Lack of knowledge, and just that's what you think you're supposed to budget.
- 7:38Jennifer Cail: No one teaches you this.
- 7:39Jennifer Cail: I was just talking to you, you're right.
- 7:40Jennifer Cail: I was talking to a professor at Lorenzo Walker and I said you know, do you teach budget?
- 7:43Jennifer Cail: He said, yes, we have to.
- 7:45Jennifer Cail: But you go to a high school.
- 7:46Jennifer Cail: They don't teach you budget.
- 7:46Jennifer Cail: So how do you know what to budget if they don't teach us in the education system?
- 7:50Jennifer Cail: That's a different story.
- 7:51Jennifer Cail: But when you're older, you don't get taught it.
- 7:54Jennifer Cail: You go to a bank, you open a bank account.
- 7:55Jennifer Cail: They don't say hey, remember, you got to put money away for bank fees if you get a bank statement.
- 7:59Jennifer Cail: No, they don't ask you any of that.
- 8:00Jennifer Johnson: They say okay good luck, because they're in the business to make money.
- 8:04Jennifer Johnson: Because they're in the business to make money.
- 8:06Jennifer Cail: But if you don't know what to budget for, then how are you going to?
- 8:09Jennifer Johnson: budget there.
- 8:09Jennifer Johnson: There should be.
- 8:10Jennifer Johnson: I feel like something was passed in the state of Florida about doing financial literacy in high schools, but I don't remember what it was.
- 8:21Jennifer Cail: I don't know either.
- 8:21Jennifer Cail: I know that it's been up in the air.
- 8:22Jennifer Cail: There's so much that hasn't been passed and passed, so who knows?
- 8:23Jennifer Cail: It's just one of those.
- 8:26Jennifer Johnson: And consequences.
- 8:27Jennifer Johnson: We're going to get into that right after the commercial break here.
- 8:31Jennifer Johnson: But consequences of making budgeting mistakes we'll get to that right after the commercial break here.
- 8:34Jennifer Johnson: But consequences of not not you know making of making budgeting mistakes We'll get to that right after the commercial.
- 8:39Jennifer Johnson: Is your closet overflowing, or maybe your kids' closets are as well?
- 8:44Jennifer Johnson: Or maybe you just want to redecorate your home?
- 8:47Jennifer Johnson: If you're wondering what to do with all that stuff that you've accumulated, bring it all to True Fashionistas or even ship it to them for free.
- 8:53Jennifer Johnson: They'll sell your unwanted items for you.
- 8:55Jennifer Johnson: Take away all the hassle by doing all the work, and all you have to do is sit back and collect your money.
- 9:00Jennifer Johnson: You can reach out to them online at truefashionistascom.
- 9:04Jennifer Johnson: Check them out online or in-store, facebook or Instagram.
- 9:08Jennifer Johnson: That's truefashionistascom.
- 9:10Jennifer Johnson: All right, welcome back, friends.
- 9:13Jennifer Johnson: We are back in the studio with Jen Cail of Medrano and Cail Bookkeeping and we're chatting about business budgeting.
- 9:22Jennifer Johnson: I know I'd rather watch the paint dry on the wall because I'm not a math person, but I know it's important.
- 9:29Jennifer Johnson: It is very important for the health of your business and for you personally as well, correct?
- 9:34Jennifer Cail: It is.
- 9:35Jennifer Johnson: So how can we we've talked about the mistakes how can we avoid making the mistakes and what are consequences?
- 9:43Jennifer Johnson: I know that's a very loaded question.
- 9:45Jennifer Johnson: First of all, what are the consequences of not budgeting correctly and making these mistakes?
- 9:50Jennifer Johnson: And then, on the flip side is how can we avoid making them all together?
- 9:54Jennifer Cail: So a big one is overspending.
- 9:55Jennifer Cail: If you don't have a budget, you're going to overspend because you're not going to know what you've allocated the money for.
- 10:00Jennifer Cail: So if you overspend at the end of the month or the end of the quarter, end of the year, where did your money go?
- 10:06Jennifer Johnson: You don't know.
- 10:06Jennifer Cail: You don't know where to put it in your financials.
- 10:09Jennifer Cail: So that's a huge thing.
- 10:10Jennifer Cail: The overspending and that, as we know, we need cash to run a business and if you overspend you're going to be running it on debt.
- 10:17Jennifer Cail: So this is reducing your profitability.
- 10:19Jennifer Cail: If you don't have the right information, you're not going to have the right profits.
- 10:24Jennifer Cail: You can tell anyone that you've made $800,000 a year, but if you don't budget, where did that money go?
- 10:30Jennifer Cail: Did you keep it?
- 10:31Jennifer Cail: Did you leave it?
- 10:32Jennifer Cail: What happens to that money?
- 10:34Jennifer Cail: So those are huge, huge mistakes and everything that.
- 10:36Jennifer Cail: What happens?
- 10:38Jennifer Cail: The consequences.
- 10:39Jennifer Johnson: Right yeah.
- 10:40Jennifer Johnson: So how can we avoid?
- 10:42Jennifer Johnson: How can we avoid this?
- 10:45Jennifer Cail: Well, we have the internet for a reason.
- 10:47Jennifer Cail: So first thing I tell people is, if you're unable to get a consultation with someone who can assist you with a budget, go on the internet, get a budget sheet.
- 10:54Jennifer Cail: It's very plain and simple.
- 10:56Jennifer Cail: There's free ones online, so that's a huge one.
- 11:00Jennifer Cail: It's knowing what actually comes in.
- 11:01Jennifer Cail: Just look at your numbers.
- 11:02Jennifer Cail: If you can't invest in an accounting software, whatever your dilemma may be, let's just start with your bank account.
- 11:06Jennifer Cail: What did that first month do?
- 11:07Jennifer Cail: What are you projecting?
- 11:09Jennifer Cail: What are you anticipating?
- 11:10Jennifer Cail: What does it look like?
- 11:11Jennifer Cail: Because then you can plan for the future and then mold yourself to do it better.
- 11:15Jennifer Johnson: You just hit the nail on the head, I think.
- 11:16Jennifer Johnson: What's that saying?
- 11:18Jennifer Johnson: If you fail to plan, you plan to fail.
- 11:21Jennifer Cail: Exactly, exactly, and that's why.
- 11:23Jennifer Cail: So how do you fix it?
- 11:24Jennifer Cail: How do you get it?
- 11:25Jennifer Cail: Well, first you have to start.
- 11:26Jennifer Cail: So that's how you can learn, you learn.
- 11:28Jennifer Cail: Go on YouTube.
- 11:29Jennifer Cail: Youtube teaches you how to sew.
- 11:31Jennifer Cail: It's going to teach you a budget.
- 11:32Jennifer Cail: Oh my gosh.
- 11:32Jennifer Cail: It teaches everything on there.
- 11:34Jennifer Cail: Exactly, it teaches everything.
- 11:35Jennifer Cail: Go to your local community, go to a library, get a book, not TikTok or Facebook or Instagram probably, though I would not count those with an IRS audit if you get that.
- 11:47Jennifer Cail: But I saw it on.
- 11:48Jennifer Johnson: TikTok.
- 11:49Jennifer Cail: Oh yeah, I can't wait for those.
- 11:50Jennifer Cail: I can't wait for that explanation.
- 11:51Jennifer Cail: One Can't, I can't get it now, but those are just ways you can learn.
- 11:55Jennifer Cail: You know, I always tell my clients when they start, cause there's a lot of startups where Southwest Florida, everyone's an entrepreneur, I think, since the pandemic and we kind of hit on that everyone decided they want to work remote and for their, their selves.
- 12:08Jennifer Cail: That's great, great that they made that decision.
- 12:10Jennifer Cail: But learn where your financials are going, and that's always just taking a step in the direction of, okay, what is coming in, what is going out?
- 12:16Jennifer Cail: Keep it to the basics.
- 12:17Jennifer Johnson: At that point that makes complete sense, and do you have some tips for our audience on how to actually create an effective budget?
- 12:26Jennifer Cail: Yep.
- 12:27Jennifer Cail: So I just say, go to Excel and start with just a table sheet and start with okay, this is what the income is.
- 12:34Jennifer Cail: What is every expense you believe your business is going to incur?
- 12:37Jennifer Cail: It could be something simple as an Apple subscription $2.99,.
- 12:41Jennifer Cail: All the way to your cell phone for $59.99.
- 12:44Jennifer Cail: Whatever it is, write it down.
- 12:45Jennifer Cail: Just write all your expenses and then bring in your income.
- 12:49Jennifer Cail: Okay, what are you anticipating?
- 12:50Jennifer Cail: And then see what do you think is a reasonable amount you should put away If you don't know, look at your industry.
- 12:56Jennifer Cail: What are the industry data telling you?
- 12:58Jennifer Cail: You can look that up online.
- 12:59Jennifer Cail: Would a retail business?
- 13:02Jennifer Cail: Would it be 30% on their cost of goods sold?
- 13:04Jennifer Cail: Would it be 20%?
- 13:06Jennifer Cail: What does that look like?
- 13:07Jennifer Cail: And then, what do you feel comfortable with?
- 13:08Jennifer Cail: So that's just starting with.
- 13:11Jennifer Cail: What do you think your business is going to need?
- 13:13Jennifer Cail: And it all starts with legal fees.
- 13:15Jennifer Cail: What do you think your business is going to need?
- 13:17Jennifer Cail: And it all starts with legal fees insurance, accounting, bank fees.
- 13:18Jennifer Cail: There's all these fees.
- 13:20Jennifer Cail: So you have to offset it with your income.
- 13:21Jennifer Cail: Yeah, and insurance has gone up so much.
- 13:25Jennifer Cail: It's a projected 30% growth, 30%, and it's going to keep going up.
- 13:30Jennifer Johnson: I just don't even.
- 13:31Jennifer Johnson: It's hard to wrap your head around it because that means for the average person out there who owns a company.
- 13:37Jennifer Johnson: Can you imagine the pushback they'd get from their customers if they increase their prices by 30%?
- 13:42Jennifer Cail: And they have to, you know it has to get passed on at some point.
- 13:46Jennifer Cail: It does, and if you think about it, there's always a new insurance.
- 13:49Jennifer Cail: For my firm, we have three types of insurance.
- 13:51Jennifer Cail: Sure, yes, you can't just go with the basic.
- 14:00Jennifer Cail: You have to be protected and that's just.
- 14:01Jennifer Cail: That's what's expected.
- 14:01Jennifer Cail: I go above and beyond, but if you think about how many, do you?
- 14:03Jennifer Johnson: need workers' compensation.
- 14:03Jennifer Johnson: Well, that's a must.
- 14:03Jennifer Johnson: It's a must if you have it.
- 14:04Jennifer Cail: General liability A must, exactly.
- 14:07Jennifer Cail: And then you have other insurances.
- 14:09Jennifer Cail: If you provide health insurance, or at least you provide a deductible for your employees, there's so much that happens.
- 14:17Jennifer Johnson: And health insurance, or at least you provide a deductible for your employees there's so much that happens and yes, you do have to raise your prices.
- 14:20Jennifer Johnson: You know there's other like errors and emissions and employee protect, like the EPLI.
- 14:22Jennifer Cail: Yeah, there's also for salon industries.
- 14:24Jennifer Cail: They have an insurance that helps them with if they get into legal trouble and their contractors can pay $10 a month.
- 14:29Jennifer Johnson: What yeah?
- 14:30Jennifer Johnson: Oh, like you fried my hair.
- 14:32Jennifer Johnson: Yes, basically, basically.
- 14:34Jennifer Johnson: Yes, oh my gosh, $10 a month.
- 14:36Jennifer Johnson: But if you, I mean it's a job hazard, it is Right Because you.
- 14:40Jennifer Johnson: It's like general liability insurance if you own a physical location.
- 14:46Jennifer Cail: And everyone has to be insured.
- 14:47Jennifer Cail: What if something happens with my staff and I'm not insured?
- 14:50Jennifer Cail: Can you imagine Exactly, and it could be something simple you Not insured.
- 14:54Jennifer Cail: Can you imagine Exactly, and it could be something simple you stub your toe and it ends up cutting in a rust.
- 14:57Jennifer Cail: I don't know.
- 14:57Jennifer Johnson: You know the things that happen.
- 14:58Jennifer Johnson: You lost your toe.
- 15:00Jennifer Cail: You can't make this stuff up.
- 15:01Jennifer Cail: You can't, but it's happened somewhere.
- 15:02Jennifer Cail: That's where these insurances are in place, and especially if you own your own business now with the flood insurance that's needed Right.
- 15:08Jennifer Cail: Everything's going At that point.
- 15:10Jennifer Cail: Budget for the increase Every year I tell my clients budget with a 30% increase If it doesn't happen hey, better for you.
- 15:17Jennifer Johnson: I mean, that is just astounding.
- 15:19Jennifer Cail: Exactly, and that's a little bit more on the conservative side.
- 15:25Jennifer Cail: But I say I'd rather be conservative and have a bonus at the end of the year for myself than not and have to be in debt Right Because somewhere or another someone's going to get their money.
- 15:30Jennifer Cail: That's true.
- 15:32Jennifer Cail: They're not going to stop.
- 15:36Jennifer Johnson: Exactly, you got to pay this for your insurance.
- 15:37Jennifer Johnson: You're right.
- 15:37Jennifer Johnson: You're right, any other?
- 15:38Jennifer Cail: tips.
- 15:38Jennifer Cail: Call me that's what a tip is Awesome.
- 15:42Jennifer Cail: Call myself or call another professional and get them to help you.
- 15:45Jennifer Cail: People, we do budgets all the time and how do they get ahold of you?
- 15:49Jennifer Cail: They can definitely check me out online.
- 15:50Jennifer Cail: I do have Instagram, but I don't give any accounting advice.
- 15:53Jennifer Cail: You're not the Instagram lady.
- 15:56Jennifer Cail: I will not do that.
- 15:57Jennifer Cail: There are certain people's I will not take that claim, but Instagram, facebook, madrona and Cail, and then my cell phone, 239-677-5888.
- 16:05Jennifer Cail: I will answer your budgeting questions.
- 16:06Jennifer Cail: It might take a minute because we're budgeting, but definitely sit down and get something going Fabulous.
- 16:11Jennifer Johnson: Thank you so much, thank you.