In Episode 50, hosts Elizabeth Larkin and Gene Marks answer the following question:
“As my business grows, I’m realizing that I need to delegate the things I’m not great at, like math. How do I choose between a bookkeeper and an accountant?”
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Elizabeth: Welcome to the 50th episode of the Small Biz Ahead Podcast. As you can hear, we’re having a big party here to celebrate our 50th episode. Gene, are you enjoying yourself?
Gene: Oh my God, I’m like six glasses of champagne in to this, Elizabeth. I don’t even know if I’m gonna be able concentrate. This is nuts.
Elizabeth: This is a big day for us, cause it is our 50th episode. We have some ridiculous sound effects going on here. And we do have doughnuts that we procured from a small business.
Gene: Ow. Is that some confetti in my eye? Come on, guys.
Elizabeth: Oh my gosh. So Gene, after 50 episodes, or actually after 49 episodes.
Gene: 50… just think about this. We’ve been working since… You were 12 when we first started working on this podcast. It’s been a number of fantastic years together, hasn’t it?
Elizabeth: It’s crazy.
Gene: It’s wonderful. Remember back in those days… Kennedy was president, right? America was looking up and we were just starting out on our podcast series. Ahhh, good times. Good times.
Elizabeth: Ahhh, it’s been a long time. So what has been your favorite moment or your favorite moments?
Gene: Well, I have many favorite moments over the past 50 years of doing these episodes. And I think one of my favorite ones was when you told me that The Hartford Legal team had to cut out various things that I’ve said because I was so inappropriate. And obviously if you’re listening I can’t repeat to you some of the things that I’ve said… To me, in my daily life I say these things all the time, but apparently if you work for the legal and compliance team at The Hartford, not a really good idea. So that was definitely a favorite moment for me.
And then every time you and I take a break and go down to lunch at the Hartford cafeteria, it’s just a special time.
Elizabeth: The pizza here is amazing.
Gene: Delicious. It’s a special time.
Elizabeth: Connecticut’s known for it’s pizza.
Gene: It’s delicious.
Elizabeth: So my favorites moments… Well, first of all I’ve loved all of your rants, like when we pick a topic that you just go off on. And I know the listeners enjoy that as well.
The other one was just recently when you were talking about the contractor that works for you had to put her cat down, and then she couldn’t come into work two days later…
Gene: Yeah, do you remember this? The story was that she’s a contractor and she’s doing important stuff for me, like research, and some marketing work or whatever. She has certain commitments. She was working like 20 hours a week for me, and I got this email. Remember? Because I was here. It was like on a Thursday, and she emailed me and said, “Oh Gene, I’m putting my cat down on Saturday. I won’t be able to come back to work until the following Tuesday. She was putting her cat down, and I hit the roof. Like I could not believe – She had been making excuses for different things like that… Family, and personal, whatever, but that was really the cat that broke the camel’s back. And after I left here, I went back… I let her mourn for the cat, and then the following week I got on the phone with her, and man, I really gave it to her.
Elizabeth: My other favorite moment was when someone wrote in and said, “How do I know when I have a good business idea?” And they described their business idea, and you were like, “That’s not a good business idea.”
Gene: Yeah. I kinda get those a lot as well.
Elizabeth: Killing dreams, killing dreams.
Gene: Sad. Sad. It’s just nothing but depression when you’re in small business.
Elizabeth: And I really loved our first episode, cause it was about… We didn’t have a question. We were talking about how you stay organized.
Elizabeth: Like how you stay productive. And after that, we just got so many questions always about how to stay productive and how to motivate yourself as a small business owner. Like I feel like that really set the tone for the whole podcast.
Gene: Yeah. It’s a never-ending podcast. You remember, this podcast is all about you, who are running… Sure, maybe a start-up business, but I really have a special affection for you if you’re running an established company, you know, that’s been around.
Elizabeth: Grinding it out every day.
Gene: Yeah, and maybe it’s just yourself, or maybe you’ve got a couple of employees. Maybe you’ve got a hundred employees. But that’s my client base. I mean they’re all established companies, and the world pays so much attention to hot startups and tech companies and all of that, when really the vast majority of small businesses are family-owned, mom and pop, people that have been around for a little bit…
Gene: Accountants, architects, roofers, landscapers that are just trying to make a buck. Support their families.
Alright, well we will be right back with our 50th question the Small Biz Ahead Podcast, which is about accountants.
Gene: Ooh, and my tenth glass of champagne, coming up.
QUESTION: What’s the Difference Between Hiring a Bookkeeper and an Accountant?
Elizabeth: Okay, we’re back with more questions –
Gene: Boy, that was a great performance by Kanye, wasn’t it? He just… Kanye, thank you. Dude, we’ll see you later. Thanks for stopping by. That was just dandy.
Elizabeth: That was so sweet of him to come by.
Gene: He shredded it. Well, he knew it was our 50th show, and had to be here. And I just thought that was just awesome.
Elizabeth: Oh my gosh. And it’s really nice to see Oprah as well.
Gene: Yeah. It was good that she stopped by. Look, she knows a lot about business. You know, it was a good chat that we had. But we have to get her to actually come on air with us. She comes by for the food and the champagne and all that, but listen. She’s a fan, she’s a fan.
Elizabeth: Okay, here’s our 50th question. This is about accounting, so this is all Gene. Our world’s worst CPA.
Gene: Yes. The world’s worst CPA. This is about accountants and bookkeepers, right?
Elizabeth: Yes. Okay, so this is from Vera in Ketchum, Idaho. And Vera asks,
“As my business grows, I’m realizing that I need to delegate the things I’m not great at, like math. How do I choose between a bookkeeper and an accountant?”
See, I have no idea what the difference is between those two things.
Gene: First of all, let me jump on one thing that Vera said, that she’s not great at math, okay? I do meet business owners that have a weakness for math, but I just want to… Vera, the successful people I meet that run businesses, if they don’t like math they make sure they… So if you’re not great at math, I hope you are at a certain level of proficiency with math, ’cause math is very important when you run a business, right?
Gene: I mean, you have to know how to buy something for a dollar and sell it for three, and be able to know that there’s a two dollar profit…
Gene: And you have to be able to calculate in your head certain… What’s my overhead, and what’s my, you know… Important stuff.
Elizabeth: Well, do you have to calculate that in your head?
Gene: Well, you know what? When you run a business of a certain size, when it’s small, a lot of times yeah, it is in your head. You know? You have to know if you get a price from a supplier if they’re going to charge you something… You think to yourself, “Okay, I can take this in. It’s going to take me, X dollars to then convert it, and then I can sell it for this.” I’m just saying that I tend to see the business people that I see are quite successful, they deal with numbers all the time.
So Vera, you might not be that great with math, I get that, but hopefully you’ve gotta make sure you’re at a certain level of proficiency, right?
Gene: But anyway, bookkeepers. She wants to hire a bookkeeper or an accountant, or…
Elizabeth: Yeah. Well, she wants to delegate to someone else, so I’m thinking she’s probably not going to hire them, she’s going to contract out to a bookkeeper or an accountant.
Gene: Yeah. So, there is a lot of choices if you’re running a business for bookkeeping and accounting services. And so, let me first of all give you just the difference between the two, right?
The bookkeepers are the ones that are actually rolling up their sleeves and dealing with the day-to-day data and transactions in your business. Usually their names are Ethel, their about 67 years old, they’re a chain-smoker and they wear like horn-rimmed glasses, and they sit behind a desk and don’t want to be bothered by anybody. That’s usually what the typical bookkeeper is.
Just kidding. Bookkeepers themselves, they’re the ones that are recording your invoices, recording your cash, recording your payments going out, recording your invoices that are coming in from your vendors as well. They’re proficient with your general ledger. Today’s bookkeepers are very comfortable with most of the popular accounting systems that are out there… The Sage’s and the Quickbooks and the Intex and the Xero’s, so they can handle that. There are really good bookkeeping services, and you can search for these online.
Elizabeth: And we’ll put some in the show notes.
Gene: Yeah, that’s good. We’ll give you some examples. They handle everything remotely. I mean, where’s Vera from?
Gene: Idaho. So you might be using a great bookkeeping service that’s based in Miami. They’re just telling you, “Listen, you have online banking.” So you give them access to your online banking account, without giving them access to do any transactions, and you can send over to them scanned documents of invoices and receipts, and they handle it all. And because these applications are being done in the cloud, they make sure that the books and records are correct. That’s what a bookkeeper does.
Elizabeth: Now, do they invoice people as well? Like, will they send out your invoices –
Gene: Sure. Oh, yeah. They’ll take care of all the transactions for you. And I have to say… So I have a bookkeeper in my business, my 10-person company. Her name is Susan. She is awesome. She’s been working for me for like… She works like, I don’t want to say it’s part-time, but… She works for me every day, but maybe half a day on average is what it is. She uses our cloud-based accounting system. She takes care of all of our billing, she takes care of all of our payments. We have since moved to online payments. She basically handles it all. And then every week she gives me certain financial information that I need about the business. That’s another conversation for another time.
Elizabeth: So, what kinds of questions would you be able to ask her throughout the day that she has the answer to?
Gene: Oh, just like, “This guy’s calling me for service. Does he owe me any money?” You know, that kind of thing.
Elizabeth: Okay. What’s my cash on hand…
Gene: Now a lot of this stuff, as you mature with systems, I can look that stuff up myself. Because I’m kinda lazy, while I might be driving around maybe I don’t have time to like, I don’t want to look it up on my phone. So I call her and she knows. You know what I mean?
Elizabeth: And she doesn’t say to you, “Gene, you could just look that up yourself?”
Gene: Obviously she could, she’s thinking that, of course, but she doesn’t. She takes –
Elizabeth: Rolling her eyes –
Gene: She’s rolling her eyes… No, she handles, even in this paperless world, any business has paperwork that has to be dealt with. You know clients… Oh, you need to send them over a W-9, or we’ve gotta update this payable information, or I’m bringing on a new contractor, we gotta get him some… She handles all that paperwork as well.
Gene: She does it remotely. Over the course of the year, I might see her twice face-to-face the entire year. She just handles it.
Elizabeth: Does she live near you?
Gene: She does, actually. We found her cause her kids were friends with my kids in elementary school.
Elizabeth: Oh wow.
Gene: So that was like 15 years ago. And her husband is an accountant, that’s the next topic, but she just works from home. I’m her only client, I think. And go ahead, ask me what I pay her.
Elizabeth: Okay, what do you pay her?
Gene: I pay her about 35 bucks an hour, is what she gets. Now, I think that’s a fairly good going rate for a good bookkeeper. And then at the end of the year I give her a bonus. I give everybody in my company bonuses at the end of the year. And so she gets a couple thousand bucks as a bonus as well.
Elizabeth: Now everyone’s gonna try to work for you.
Gene: Yeah right. But it’s a pretty good gig. I mean, she does it at home. She probably gives me 20 hours a week. It’s a pretty good deal for her, and she’s awesome.
So that’s what a bookkeeper does. Right? That was all.
Elizabeth: I’m probably jumping the gun, but how much does she work with your accountant?
Gene: Okay, so good question. First of all, you raised another thing that came to my mind. She not only interacts with my employees and contractors, she interacts with my customers. She does my collections as well. And that was probably my biggest… I mean, I used to have –
Elizabeth: Yeah, that used to keep up at night.
Gene:… Angina over collections. Like the worst. Yeah, you would do a job… I keep saying, if you run a business I don’t know you, you don’t know me, we come from different backgrounds, different cultures, different religions, but trust me. We have one thing in common. We’re both gonna be 85 years old one day sitting in a nursing home in our diapers… We will still remember every customer who stiffed us over the course of our life. That’s what business owners have in common.
Susan for years now has been dealing with my collections. She has kept me out of it. And thank God for that, cause she does it in a very emotionless way, and she’s very good.
Elizabeth: Yeah. She cares, but she doesn’t care the way you care.
Gene: Yes. Yes. I take it so personally. And so she’s been great with that.
So yes. Her job is to provide good data, correct data, accurate data, to my accountant. So my accountant, his name is Chris. He is a really nice guy. He does my taxes.
Now as you grow, accountants… You know, one of Chris’ weaknesses which is in common with so many other accountants, is that he doesn’t provide more of a financial advisory role to me that I think so many accountants could be doing, and I’d be paying him for it. Crazy.
Elizabeth: Yeah. I found that just even as an individual, filing taxes. I’m always saying, “What should I do?”
Gene: “What more could I be doing? Come on, like is there anything more, like any advice or whatever?” And you know, Chris is like… Again, he’s a good guy, and he’s smart. He does a very good job with our taxes, he handles all my corporate and my personal taxes, so he gets all that done. Susan provides him with all the information, as the bookkeeper should. He comes back to her with any questions, “What’s in that travel and entertainment account?” Or whatever, and she can provide him the details. She makes any adjustments to my books based on what he tells her to do, but he does my taxes.
So an accountant is that outsider that provides that role of tax preparation. But the good ones will do tax preparation as well as some advice. And you know, I think if Chris was doing a better job for me, I don’t to roast Chris cause he’s a good guy, but I guess he’s got a lot of clients he’s juggling.
Elizabeth: What if he listens to this?
Gene: Yeah, that’s fine. I told him this before. I’ve said to Chris, “Dude, you should tell me in the summer, let’s go over where I’m standing here to date, and give me some advice please.” I think his biggest excuse is, “Gene, for a small business you’re doing everything you really can.” Because people have this myth that the accountants can just wave a magic wand and come up with… Pretty much when you’re running a small business, for the most part there are very few additional things you could be doing to save taxes. You’re probably already doing it.
Elizabeth: Now I do want to bring this up again, and I know we always talk about this, but… You’re a CPA.
Elizabeth: So you technically could do your own taxes.
Gene: No. You don’t want me doing your taxes.
Elizabeth: But you choose to not do that.
Elizabeth: And you advise other small business owners to not do that.
Gene: I really advise business owners not to do your own taxes. I just think that it is a specialty –
Elizabeth: What if you’re an Uber driver?
Gene: Well again, first of all it depends on your budget, right? But if you’re an Uber driver, then you want to be the best Uber driver you can be… I’m assuming you probably have another job as well. There’s a lot of Uber drivers too. Taxes is just a profession. It’s a specialty. Elizabeth, do you know how your car works? Like if your car breaks down –
Elizabeth: Oh God no.
Gene: No. And meanwhile, you drive your car every day and you don’t have a clue how it works. Think about that. But that’s okay, cause you take it in to a mechanic to do that. And you’re like, “You know what? I don’t want to be an expert at fixing cars. That’s that person’s job to do.” It’s the same thing with your taxes.
Having said that, your taxes are your taxes. If Chris messes up my taxes, or if I’m not paying attention to what he’s doing and I get audited or if there’s a problem, that’s on me. You know, not Chris. He’s the preparer, but in the end it’s my obligation. My liability.
Elizabeth: Okay. So, bringing it back to Vera’s question, she’s a small business owner, her business is growing. She says that she’s not good at math. She probably just does not like to do the books.
Gene: She’s being humble. That’s what it is. I’m sure she’s very good at math, she doesn’t want to over-impress us, that’s all.
Elizabeth: Yeah. So, your recommendation is –
Gene: Get a bookkeeper. Yeah. Get a bookkeeper. Your accountant can do your taxes, Vera. Hire a bookkeeper, have a bookkeeping service, and start thinking about certain metrics that you’d like to be tracking with your business. And again, that’s another conversation we should be having about the kind of metrics I think a business owner should be getting every week.
Elizabeth: Alright, we’ll be right back with our 50th Word of Brilliance.
WORD OF BRILLIANCE: Cheese
Elizabeth: Okay, we’re back with our Word of Brilliance. Before we do that, though, I forgot in the beginning to give a shout-out to the caterer of this party that we’re having. It’s called Tastease Doughnuts in Hartford, Connecticut. They’re delicious mini-doughnuts. And that is a small business, so we’re happy to give them some extra business today for two dozen doughnuts.
Gene: Tastease Doughnuts.
Gene: Tastease in Hartford.
Elizabeth: Yes. If you live in the Hartford area, you have to… Just even seeing these doughnuts, they’re adorable. I will link to a picture. I put a picture on my Instagram account. I’ll link to that, because they’re just really precious and they’re delicious.
Elizabeth: Alright, so Gene. Hit us with your 50th Word of Brilliance.
Gene: Well, we were talking about doughnuts, which is food, so my word of brilliance today is cheese.
Gene: Yes, I wrote an article based on a very interesting story about a bank in Italy called the Credito Emiliano Bank.
Elizabeth: Okay. Good job with the pronunciation.
Gene: Thank you. Well, I’ve been to Italian restaurants all over… I had pizza last night.
Elizabeth: That qualifies you to speak Italian.
Gene: Yes. In the region of Italy that the Credito Emiliano Bank is in, by the way it’s a large national bank, but in this specific region there are many makers of cheese. And there was one story about a small business there called Gavasseto?. God, I’m not pronouncing that right. This business, Gavasseto, they make what’s called parmigiano reggiano cheese. You ever had parmesan cheese?
Gene: They make wheels of this stuff. They make wheels of this cheese. And the wheels themselves, each of them are worth thousands of dollars.
Elizabeth: I’ve seen like the warehouses in Italy where they make and they store the cheese.
Gene: And they store it. And I’m glad you brought that up. Because these small businesses in Italy that make this cheese, when they need financing, when they have to buy equipment, they want to expand their business, they go to banks like this Credito Emiliano Bank in Italy. The banks take cheese as collateral. We’re used to putting up equipment and real estate and whatever. And this is like a big national bank. They take wheels of cheese as collateral. And what they do is, they take the cheese, they put it into those very warehouses that you’re talking about which are all climate controlled and whatever. And they are basically under… There’s a lien on the cheese from the bank until the loan gets paid off or replaced by other collateral, other cheese. Then the bank uses that to give financing to these companies.
And the reason why I find that fascinating, if I can just say, is that there’s a bank that’s coming up with innovative ways to help finance… I mean, talk about knowing your customers, right? Typical bank here, if you went to a bank in Philadelphia, New York or Hartford and said, “I need a loan and I’d like to back it with some cheese.” They would look at you like you’re insane. Where, in that region and in that part of the world, the bankers there know their customers and they understand the value of these wheels of cheese. And they use it as collateral.
So, I guess when you’re talking to your banker and you’re looking for financing, do they know your business in the same way? Are they well aware of the assets, the value, the potential collateral that you might have sitting around? I can speak from my own experience with clients. Many of their bankers, they don’t really understand their clients very well. They probably should. They should take inspiration from this bank.
Elizabeth: So, do the banks take delivery of the cheese?
Elizabeth: Oh, so it’s stored in the cheesemaker’s warehouse.
Gene: Not the cheesemaker’s warehouse. It goes to another warehouse that the banks pay for… I guess there’s some sharing arrangement.
Elizabeth: So they have to know how to store that cheese properly.
Gene: They do. Well, that warehouse is run by another small business that specializes in storing cheese.
Gene: And the warehouse, apparently, in my article, has just hundreds of thousands of euros worth of cheese in that warehouse. It’s not the only company that’s using it as collateral. The banks are doing this for a lot of people around the area. So they have their own warehouses that they’re using where they store the cheese.
Elizabeth: That’s so cool.
Gene: Very, very cool. Very, very innovative. But a great example of really knowing your customer.
Elizabeth: Okay, Gene and I are going to get back to the party, because –
Gene: Nick! Keith! I’ll be right over. I know, just calm down, I’ll be right over there, okay?
Elizabeth: Coldplay is about to take the stage.
Gene: Yeah, that’s right. Okay.
Elizabeth: So we want to be right there for that.
Gene: They’re warming up a little bit, so we better cut this short cause I really want to hear what they got to say. They have a new album coming out.
Elizabeth: So thank you to our listeners for being with us for 50 episodes. We could not have done this without you. Please leave us a review on iTunes. Reviews help so much. And please keep sending us your great questions, and we will be back with you in a few short days.