Entrepreneurs may like making money, but not everyone likes to manage money. Katherine Pomerantz, founder of The Bookkeeping Artist specializes in working with entrepreneurs who work in the fine arts and other creative fields. In my interview with her, she shares strategies for taking the stress of out of your small business finances.

Transcript

This transcript has been lightly edited for readability.

I’m Gerri Detweiler, education director for Nav and joining me today is Katherine Pomerantz, The Bookkeeping Artist. Katherine, tell me a little bit about your business.

Yeah, I am a money mentor for creative entrepreneurs, so I sell bookkeeping and tax services, but you have to do a lot more with your money, in particular, on the bookkeeping side. So we are in day-to-day money management for small business: profit planning, cash flow, looking at how you’re making money, how you’re leveraging money, what it’s doing for you and making sure you’re not just working for the government once a year to file your taxes.

So I want to get into a few specific tips, but the one thing that just comes to mind is that I would guess, I’m just guessing here, that some of the creatives that you work with don’t really think of themselves as small business owners. Do you find that?

Yeah, absolutely. This is a fight, well, a fight, a rant, something I’m very passionate about. This is something that I get into a lot with people where they don’t think of themselves as a business owner, especially my fine arts clients. They’re even making money, they’re even making an average amount of income, good money if you’re just getting started in the small business.

And they’re not thinking like a business, so that’s why they’re so struggling, not scaling, not investing in their own business credit, finding out financing, all of these things that they’re just not trying to think about as they’re pursuing their passion and what they really love. And they think that learning about money and bookkeeping kind of takes away from their passion and so that’s something that I like to do, is that we can put those two together to actually support it better, so.

So what are a couple of very common financial mistakes that you see? Do you see them co-mingling funds? Do you see them not really paying attention to taxes until tax time and then finding out they owe a lot of money? I mean, what common mistakes do you see?

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Yeah, a really common mistake, you’ve actually alluded to the biggest two, right, is co-mingling funds and then not paying attention or doing bookkeeping until tax time. They leave it to the last minute, it becomes super frustrating, super painful and they don’t really know, right? I mean, they don’t understand all the deductions they can actually take and then even if they’re trying to fill it out or find the right adviser or try to use a good app that can help them because they’re not tracking it year round, they’re left to guess.

And that’s probably the number one mistake because bookkeeping– I’m the bookkeeping artist even though my firm does so much more because that’s really where it starts. You do have to do it day to day, year round, just look at what it’s going to, look at what it’s tracking, understanding if your money is supporting your values so that when it comes time to do the compliance part, file your taxes, it’s easy and you already have the information you need to strategize it and pay the least amount of taxes and keep more of what you’re doing so you can keep doing what you actually love to do.

So that’s probably the number one thing, it’s just not thinking about it until it becomes a massive huge stressful pain point because the deadline is coming up and oh, my gosh, I haven’t even started. Also, I don’t know, so we’ll just guess or pay somebody a bunch of money and still feel unsatisfied about it, neither of which are good options.

True confession time here, okay. I was self-employed for many years and I was a tax procrastinator. And I will tell you there were times when I would look at a deposit and I couldn’t remember where did that money come from, which client or did I put it out of my own funds? It’s really stressful but let’s talk about the positive side….What benefits are there to setting up these systems right from the beginning? How will it help your business grow?

Yeah, great question because I love the positive side, right? And there is a really good positive spin on this. You’re going to gain a level of clarity and control and confidence that if you’re not doing these things you don’t even know you can achieve because money is really stressful and money is really confusing and life is hard.

Full confession time too here, I recently, I had a very busy summer, lots of family events, lots of getting ready. I was really stressed and I realized I hadn’t done my own personal bookkeeping. I mean, I have a good team, so I’m not falling down as far as other people have fallen because I’ve come a long way.

But I realize I hadn’t been doing my normal checking with myself and following up with these reports and sitting down and giving myself the time for like four months. So no wonder I was really stressed and confused and felt like things were out of control because they were because I wasn’t paying attention to it.

So when you get this system and you start looking at cash flow and you actually start to know what that means and start timing things and start scheduling things, you can get the information you need to start planning ahead and dreaming about things and getting excited about things and realizing it’s possible to do these things and that’s great, that’s awesome.

People who aren’t in it don’t even know how it feels to just be like, “Wow, it’s my money, I’m making it. Nobody is taking it from me and it’s going to things I truly value.” Not just to the government once a year, which is super painful and gross and nobody likes. Yeah, the level of empowerment and just the confidence you’re going to gain as a business owner, as a human, as a business owner or an artist who’s trying to impact the world, it’s unbelievable, it’s phenomenal, it’s why I love what I do.

That’s awesome. We did a survey of small business owners at Nav and we asked them about business bank accounts and unfortunately, not all of them have a business bank account. The number one reason was they hadn’t gotten around to find the time to set it up, right?

But those who did, the majority were checking their business bank accounts at least once a week and sometimes daily even. And I think that’s important for a small business owner because one thing they don’t know about is, they don’t know about fraud, they don’t know that there’s business identity theft, that there are crooks who will access a business bank account, and make a small test purchase on a debit card, for example, to see if they can make it come through.

So I would imagine that part of what you’re doing is also empowering small business owners to feel more in control and on top of their finances.

Yeah. And those are big scary things that you brought up but true things, so it’s like we should talk about them. I have seen business owners get in trouble because they didn’t even know when money was supposed to be coming in because the invoicing system was broken, which meant bills were getting paid late, they were getting fees for it.

And they didn’t know when bills can go out and things were mixed with their personal finances, so maybe it was their husband’s or their wife or their kids. And when it’s all just one big mess and you don’t have any control of the flow, you can’t grow, you can’t leverage it, you can’t get the data you need to build your business, to invest in yourself. And you’re right, it’s really easy to go in at that point and take a little bit if you’re dishonest, to just take something that isn’t yours because you’re not watching it.

And that’s not fun to talk about and it’s fortunately not horribly common but it’s horribly common just enough to be like, “Hey, this is another benefit of doing this and paying attention to it.” And it really does put you back in the driver’s seat, which how many of us can relate to feeling like something is just happening around us and to us and we’re not really involved? And it’s really more of a mindset shift and money is a really good way to get a handle on that. And so it’s what– this is the advice I would give to people who are worried about those things is doing the stuff.

It isn’t about the fear though, it isn’t about that this scary thing could happen, I need to prevent it, it’s about the use of the positive. I can prevent this and I can control this and I can make sure good stuff happens. So that’s what we want to go after. We’re not doing it out of fear, we’re doing it out of love.

Yeah, and I would say in my life, in my own professional experience, the hardest things that I mastered were the things that made me feel really good, right? So tackling it can be very empowering.

Well, Katherine, I love what you’re doing to help the small business owners. Share your website.

You can find me at The Bookkeeping Artist (BookkeepingArtist.com). I’m also on Facebook under the same tag, so The Bookkeeping Artist. Thank you. You too, I love you, I love Nav.

I’m happy to rep you and do things like these and collaborate.

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