Subscribe
Share
Share
Embed
Short episodes about money management for coaches running simple service businesses. I'm Mark Butler. My goal with this show is to convince you of one thing: for most coaching practices, bookkeeping isn't strategic, it's hygiene. You don't need to become your own CFO. You need your numbers to be current and accurate so you're not scrambling at tax time, and you need to be able to answer one or two simple questions about your money. That's it. I've been running a bookkeeping firm for coaches for over a decade, and this is the conversation I have with my clients all the time.
Mark Butler: Hello, this is Mark Butler.
I'm a coach, and I am the founder of
Plucky Accounting at getplucky.io.
I have been helping coaches manage
their finances since 2014, and today
I wanna talk to you about one of the
single biggest levers that a coach
can pull in the healthy management
of coaching practice finances.
This is a sneaky lever, It surprises
people as one of the most important
decisions that a coach will make,
if not the most important decision
that a newer coach will make in
establishing their practice, and
that is to have a dedicated checking
account for their practice finances.
throughout this episode, you'll
hear me refer to it as a dedicated
business checking account.
I'll talk more about the technicalities
of that at the end of the episode, but
for now, all I mean is a checking account
whose sole purpose is the inflows and
the outflows of the coaching practice.
So money coming in from a PayPal
account, from a Stripe account, from
a Venmo account, money coming in from
a personal account when we're funding
the practice because the practice
isn't yet in a position to fund itself.
That's what I'm talking about when
I say a dedicated checking account.
There are practical benefits to this,
and there are also philosophical, mental,
emotional benefits to this, which I
suppose are also practical, but here's
what I mean by practical benefits.
In previous episodes, we've talked about
how beneficial it is to you to know how
much money your practice is earning and
how much money your practice is spending
Just that level of awareness will set you
apart from many, maybe most of your peers.
What we're talking about today,
though, is coaching practices that
are so simple and actually have so few
transactions that bank balance accounting
is actually probably sufficient,
What it requires is that you run your
practice finances through a single
account or through very few accounts.
Why?
Because then at a glance, you can know
what money's coming into the practice and
what money's going out from the practice.
It's very, very common for newer coaches
and even for some of my more established
clients to pick, a seemingly random
assortment of checking accounts and
credit cards to run their practices.
I'm not being critical of the
person who does this because it's
totally understandable to me.
Coaches are functioning with a desire
to build a successful practice,
often a very strong desire to keep
up with their peers and to make sure
that they're not falling behind.
I relate to that.
What can happen then is that if you
feel like there's a new training or
a certification or an advertising
campaign that you really need to do in
order to feel like you're maintaining
momentum in your practice, you may say,
"I've got this personal credit card.
It's got some availability on it.
It also has some points on it, maybe
has a promotional interest rate.
I can just grab that card and make
that purchase for my practice."
The problem with that is you end up
with Your practice's transactions
spread across a bunch of accounts.
When tax time rolls around, now you've got
the stress of, "I'm not even sure which
of these qualify as business expenses.
I'm not confident about the tax
deductibility or not of these
transactions, and I can't even
remember where they all are."
Well, your tax professional's gonna help
you with the deductibility question.
That's not my gig and never has been.
But that question becomes much easier to
answer if the vast majority, like greater
than 90 or 95% of those transactions,
reside within a single dedicated checking
account and/or a dedicated credit card.
It is such a relief to you, believe
me, when tax time rolls around and
you say, "Okay, I've got to get these
taxes done," to know I really only
have to look in two places, this
checking account and this credit card.
And when I look in either of those, I
know that the transactions I'm looking
at, whether they're officially deductible
or not, at least I know that when I made
the purchase, I had a presumption of
business intent and tax deductibility,
so that when I pass that data over to my
tax professional, I can say, "Here's why
I made this purchase, and here's what--
here's why I believed it, quote-unquote,
'counted' as a business expense."
You will thank yourself 1,000 times
over at tax time if you do nothing
else besides take that simple step.
So that's one huge benefit of
dedicated accounts for your practice.
The other huge benefit is that when you
make the commitment to using a dedicated
checking account and/or a dedicated
credit card account for your practice,
it will actually act as a stress reliever
and as an anxiety reducer in your
practice because it will create pause.
It will cause you to pause
before you make purchases.
Because if you're running all your
money through a dedicated account,
checking and credit card, you will
say to yourself, "Do I have the money
in that account for that purchase?
If not, where will the money come from?"
Now, there's a very reasonable
workflow where you say, "Okay, I want
to purchase a $2,000 training I do
not have two thousand dollars in my
dedicated practice checking account.
I do have it in this personal
savings account over here.
So in order to make that purchase,
now I've got to move money from
personal savings to business
checking and then make the purchase.
That pause alone will not necessarily
stop you from making the purchase, but
it will help you make the purchase with
more confidence because it has more steps.
So before you transfer the money from
personal savings to business checking,
you'll an opportunity to say to yourself,
" Am I sure that it's worth reducing my
personal savings to do that training?"
The answer will be yes or no,
but the pause over time will
help you make decisions that
you're less likely to regret.
Now, practically speaking, you may
say, "Well, I actually wanna make
the purchase on a credit card 'cause
I wanna get points," or, "I wanna
get a promotional interest rate."
Hopefully, that's not the case as
often, but let's say it's for points.
So you'll say, "Can't I just
make the purchase and then pay
it off with whatever funds?"
Yes, you could, but I'm going to suggest a
workflow that not only gives you that same
pause for improved decision-making but
also makes tracking easier for reporting.
So let's say I'm gonna use a
personal credit card to make the
two thousand dollar purchase.
Your normal workflow would be swipe
the personal credit card, pay off the
credit card with the personal savings.
The problem with that is then the
business finances are not aware of the
transaction because no money flowed
through a dedicated business account.
Now, if all we did was insert a business
checking account in that process, here's
what it would look like: swipe the
personal card for the purchase, transfer
the money from personal savings into
business checking, and then pay off
the credit card with business checking.
Now, the business's finances are
aware of both the two thousand dollars
that the person funded into the
practice, which allows you to track
over time how much money have I put
into this practice to help it succeed.
And then when you pay off the personal
card from the business checking account,
that's where we track the expense.
We say, "Oh, two thousand dollars went
out of the business checking account.
What was it for?
Oh, it was paying off a, a personal
credit card for a training."
We categorize that transaction
as the training, and now the
business is fully aware of all of
the everything that the money did.
It was funded into the business
by the business owner And then it
was used to purchase a training.
All the relevant information is in place.
The reporting is clear.
There's nothing to chase down at tax time.
Nice and simple.
It did require a couple extra steps up
front, but on the back end, at tracking
and reporting time, and when it's
time for you to evaluate the practice
and whether it's working and whether
you're happy with its performance,
it makes all of that so much easier.
So all of this starts with that dedicated
checking account for the practice.
Now, does that dedicated account have to
be an official business checking account?
No.
That is ideal, but it doesn't have
to be that way at the first step.
What you can do is, whatever bank
you're using for your personal
checking, just open up a new checking
account and designate it for yourself
as the practice's checking account.
Money can flow into it and out of it.
We get all the benefits we like.
We don't get some official, like,
maybe some liability benefits that
could relate to separating the, the
business' transactions in an official
way from personal transactions.
So eventually you will want to get what's
called an EIN, employer identification
number, and maybe even form an LLC.
I would encourage you to consult legal
professional about those decisions.
But once you do that, you can migrate
from this checking account that is
technically personal to one that is
technically business at your bank.
It's a simple migration.
But until then, you're getting all the
benefits of a dedicated account without
having to open an LLC or get an EIN.
So that's just a little technical piece.
Please do not let that be an obstacle.
I've had too many conversations with
coaches over the years where they
kept their practice finances messy
because they felt like they would
have to jump through big hoops and
clear high hurdles in order to have a
dedicated account for their practice.
No, just open a new account.
Technically and officially, it will
be a personal account, but you'll
be treating it as a business account
and getting all those benefits.
I'm telling you that this one decision
ends up being an incredible filter from
my perspective as a person who's helped
hundreds of coaches with their finances.
It filters those who are maybe a little
bit more anxious, maybe a little bit more
avoidant, from those who are willing to
look at their finances head-on, wanna
make their best possible decisions as
it relates to their practice finances.
It is the simple decision to either have
dedicated accounts for the business or not
have dedicated accounts for the business.
Strongly, strongly suggesting
that you have dedicated accounts.
Now At getplucky.io,
you can hire me and my team to
help you with your bookkeeping.
If you're a person who has made what
you might call a mess of your practice
finances, where you've got your
transactions spread across multiple
accounts, some business, some personal,
whatever, we are pros at helping you
organize all that, In either case,
when you hire us at getplucky.io,
you remove the step of having to
organize the information and keep
track of it and put it into reports.
We'll do that part for you,
and I think you'll love it.
With that, I look forward to
talking to you in our next
episode of Money for Coaches