What is the importance of book-keeping and financial planning? Which key financial numbers to follow? These are some questions I asked Sara Verheyen, a professional bookkeeper.
What you will learn in this episode:
- What numbers to keep an eye on
- What to do with these numbers
- The importance of financial planning.
About Sara Verheyen:
Sara is a professional bookkeeper for ambitious entrepreneurs and small business owners who want to grow their business into a sustainable one that serves their quality of life goals, by allowing them to focus on the parts of the business they love rather than the numbers. She has helped clients get organized and understand their financial standing and cash flow in order to make informed business decisions and identify strategies for growth. She lives in Texas with her husband and two boys under the age of 3.
Connect with Sara:
TP: Hello, today we are speaking about bookkeeping and numbers. My guest today is Sara Verheyen. Welcome Sara to the podcast.
SV: Thank you so much for having me.
TP: Can you please share your story of becoming an entrepreneur?
SV: Yes. So I've always had a bit of an entrepreneurial spirit. A few years ago, I had an Etsy shop for planner stickers, and that was just kind of more of a hobby, but always kind of into starting my own business and studying accounting, you know, just kind of brought me closer to that. And a lot of it actually happened during the pandemic, which I think a lot of people went through this kind of re-examining of their life. What's important, where they're where they are, what they want their life to look like, even as our daily routines are being thrown upside down. And so I kind of dove into a way to bring my accounting knowledge to help other women entrepreneurs. And the fact that it happened during the pandemic made it even more convenient to do it online because everybody was doing so much online anyway. So that's kind of where it all started.
TP: Great. What is the best part of being an entrepreneur for you?
SV: For me, it's the most fulfilling part is creating something from scratch. You know that this didn't exist before and now it does. And I have this business and this community and meeting people. And also, of course, you know, the what I think everybody talks about is the freedom of setting your own schedule. You have more control over the money you can make. You know, in a corporate job, you might get an annual raise, but in your next paycheck, it doesn't seem like very much versus, you know, when you have your own business, if you put in strategies, you can see big increases right away.
TP: All right. So we are speaking about numbers and a big part of the business is numbers. Can you please tell us what numbers can tell us and which numbers should we follow?
SV: Yeah, so profitability is definitely the most important thing to look at because while sales are important, it's definitely not the whole picture. And if you're not profitable, your business isn't sustainable and it's not creating that freedom that you're looking for in your business. So let's to look at the formula. Sales minus costs is your profit. And another cool kind of metric to look at is your profit margin, which is your net income divided by total revenue. And that just tells you how many cents of every dollar you're keeping as profit. And it's not something that you generally have a metric for, like, "Oh,this is what you should aim for". But I think it's nice to have analyzing in your own business and comparing yourself month to month and see whether that's increasing or decreasing and comparing that to the phase of business you're in. So those are the two biggest ones. And I also find it really helpful to tie expenses to a source of revenue. And so you can kind of gauge your your return on your investment, your ROI, on different expenses to make sure and also see if, like different channels of your business, if they are or are not profitable, because when it is all combined together, it's hard to tell which. And a lot of online entrepreneurs have so many streams of revenue like coaching or online courses or products and things like that. So that's really helpful. And the last one I like to look at is breaking out those sales again and determining the percentage of sales each income stream is. So, for example, if you have a digital product that you're putting a ton of time and energy in and it's only actually five percent of your sales, it's a good way to bring that into clarity and think, is this something I want to continue doing or would I be better off dropping it and spending my energy and somewhere some aspect of my business I'm enjoying more?
Profitability is definitely the most important thing to look at because while sales are important, it's definitely not the whole picture. - Sara Verheyen, Podcast Step Up & Thrive
TP: What if the answer is: yes, I like doing that one so much that there is no way I could drop that. What then?
SV: That depends on what it is. Of course, not an easy question to answer, but you'd have to kind of look at strategy and what's preventing that from becoming a higher percentage of sales. And maybe on the flip side, there are some that are a fairly high percentage that, you know, aren't as fulfilling to you. And it's kind of that's the beauty of starting your own business, is you get to focus your energy where you like to focus it.
TP: So even if you have numbers, you still have to make those important decisions.
SV: Yes, absolutely. Yes.
TP: So like, "OK, this number says that I have to drop that. Definitely. And no questions asked".
SV: Yeah, it's definitely part of the whole picture. And that's what I'm all about, too, is kind of bringing the human back into business and accounting and, you know, a more holistic approach of, "Yes, there's the data. That's not the whole story. Yes. There's no intention. That's not the whole story either. You need both pieces".
TP: So you are bookkeeper and you have a lot of small business owners. From your point of view, what changes can be done to become more profitable?
SV: So looking at the equation of sales, minus cost equals your profit. Logically, you have two possible solutions to answer is which is either you increase sales or you decrease expenses. And how I look at it as so increase sales kind of has to kind of subparts. You can either raise your prices. That's an option or expands the quantity. So maybe the number of clients you have, the number of customers you're reaching and things like that, and the number of sales basically, and then the expensive side is pretty straightforward. You would reduce your expenses and that's where that exercise can come into tying expenses to revenue and seeing and even just going through them. And how do they feel? And do you feel like you're getting a good eye on this expense?
TP: So, again, important decisions.
TP: Can somebody make those decisions on behalf of myself. So tough actually.
SV: They are, they're very tough decisions.
TP: So now it's time for our Quick Tip section and this is something that we do regularly on our podcast. And my question to you is, what is your biggest revelation about numbers in business?
SV: My biggest revelation is, you know, I will talk all day about the importance of bookkeeping. And I obviously think it's very valuable. But there's also more to it because bookkeeping is looking in the past. Even if you're doing it every month, you're still looking at the month that just passed. And so my biggest revelation is the power of budgeting and forecasting. And I think it's so interesting that so many people have budgets for their personal finance, but not for their business. But in your business too... Like cash is so important. Without cash, you can't continue your business. And so it's planning, making a plan for each dollar that's going to come in and really prioritizing what you want to spend, not all your energy and your time on, but your money on.
TP: Any special tips for that, for planning?
SV: Yeah, it's tough. It doesn't seem to be as big of a product that actually like bookkeeping is. But I am working on I don't have it ready yet, but I am working on a tool to help out with that. A little Google Sheets template coming soon.
TP: Yes. So it's definitely worth for signing up those coming great helpers for our business owners.
SV: Mm hmm.
TP: Thank you so much, Sara. Yeah. Numbers and bookkeeping, it's a really tough thing. And I know several of them, partly me as well, who is trying to avoid going through that part because creation is so much fun. Numbers often are not.
TP: But if our listeners would like to know more about you and follow you where they can do so?
SV: So I'm most active on Instagram, it's @mareishbooks, and that's where I post most. And if you go there, you can find out when that budget tools released.
TP: OK, time to follow Sara! Thank you so much again , it was valuable. And if you really want to make change in your business, then numbers are the one part of the business you cannot miss. Thank you again, Sara.
SV: Thank you so much for having me.
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