Ep 50 | Budgeting & Taxes

Annie: I'm Annie.

Leah: And I'm Leah.

Annie: And this is Lactation Business Coaching with Annie and Leah, where we talk about the smart way to create a compassionate and professional private practice.

Leah: Let's dive in.

Annie: Hey there, Leah.

Leah: Hey Annie, how are you doing?

Annie: I'm great. How are you?

Leah: I am great and I'm just realizing, oh my gosh, this is our 50th episode. Can you believe that that we've been together 50 times?

Annie: 50 episodes, and you know what? We actually did a couple of bonus episodes, but this is our 50th real episode of the podcast. And of course, this is when we're going to talk about budgeting and taxes and all of the yuck side of being in private practice. I'm sure there are some people that are like, no, that's the fun part, but...

Leah: I don't know. Not me. It is definitely not me. I think of budgeting and taxes as like that yuck stuff that you don't want to think about, you don't want to deal with, but if you don't think about or deal with, you're going to get in trouble. So you just have to push through and do it. But it's good to go over and certainly this time of year, it's always fresher in our minds with tax season coming. And I know I'm busy working on all that stuff right now. So it's kind of nice to be hashing through all of this at this time. What are your thoughts on budgeting and taxes? Is it as yuck for you as it is for me?

Annie: Yeah, it is. I mean, I think because ... listen, my brain is filled with trying to be a great lactation consultant and it doesn't have room in it for the tax code and every year things change and just wanting to make sure that everything is being done the right way. And also making sure you don't miss out on something that could save you money. I'm all about how could I just keep as much of my money as possible in the most ethical way possible. And so it's just hard, cause I'm just not really good at record keeping. I'm not really good at maintaining, remembering to enter things into a ledger or even online. I mean, I might be paperless on other places, but as soon as I open up QuickBooks online, my brain kind of explodes a little.

Leah: Oh my gosh! Me too. We're in that same camp together. And I always feel why is it so easy to ... I mean, we put so many things in records all day long with our charting and everything, but I don't know why when it comes to that budget, those numbers - where we're spending, what, when - I don't know. That just all jumbles up in my mind and I just close the computer and I'll look at that tomorrow. I'm putting it off one more day, but it doesn't usually work out. And it's one of the biggest reasons I hired an accountant/bookkeeper to assist me because I was just like, I know that I am not doing a good job at this and not giving it the time that it needs and I'm just not good at it. You know? So it's really sapping the joy out of my life and I know you've done similar, right?

Annie: Oh yeah. I have a bookkeeper who balances everything every month, matches up all the transactions, makes sure that things aren't slipping through the cracks and even things where we can talk about. Like, okay. You seem to be spending a lot on continuing education, Annie. Are you sure you need this much continuing education? And I'm like, you don't know me, okay? Yes, I do.

Leah: I have to do this.

Annie: But it feels so good though, because every month we meet together, we get on the phone. She has me pull up in QuickBooks. She's like, you're going to pull up your profit and loss. You're going to pull up your balance sheet and she goes through and explains everything. Until I started working with her, I did not really know how to even really read those in the way. I would understand the big picture, I can see the big thing, but now that we're drilling down into categories and having a better sense of how things are getting organized, where I am spending my money, because I do want to have this. We've talked about it on the podcast before - profit first - where I really am making sure that anything, I spend that isn't necessary is actually something I want to spend or need to spend so that I can make my money go as far as it can. I mean, I was not able to do it without a person, and I would say the same thing goes for doing my taxes. I actually for a long time, I did do the taxes for our family. I did them for me and I did it for my husband. Who his business situation was like so complicated. I would sit down, and I would be like, do not talk to me for the next 12 hours. And I would have papers everywhere and I would be crying, and I would be this is the worst. And finally, I was like, we need to just hire somebody to do this. And it was the classic case of: Why though? Why hire somebody when you could do it yourself? I don't know, Leah. I think you and I have talked about this. Why is that such a bad idea?

Leah: Yeah. I feel like so many times I look back and I'm like, why did I not do this a thousand years sooner? So, it's always so hard to take that leap of faith and hand something over or recognize okay, this is truly sapping my energy and definitely not the best use of my time and could be handed to somebody else, but there's always that hard hand-it-over moment and then usually you look back and you're like, Oh, that wasn't so bad. I haven't trusted myself with doing taxes for a long time because once it got more complicated when you have maybe people that are working with you and stuff like that. It just got so complicated and I'm like you, I just want to make sure IRS is going to come knocking on my door. I want to make sure I'm doing this ethically and correctly, and at least to have somebody else guiding me in the process because it can get really complicated. And I think some of that comes from how your business is structured. Some taxes might be pretty easy if you have a pretty straightforward structure, but I think they get more complicated with some of the different types of business structures. So when you're thinking about, do I need somebody to help me do my taxes? I feel like that's one area where it changes or it could change if you have some of these different business structures. An S-Corp is definitely a bit more complicated than your straight sole proprietor, those kinds of things. Is that your experience as well?

Annie: Yeah. And I think that was probably the first instance where I realized the true value of getting professional help with that. Not just like, Oh, the internet says you should do it this way, or this is the easy way, this is the cheapest way to do it because you can read about how, and I even talked about it in one of my books. You can go on the IRS website and get an EIN as a sole proprietor, and that's what I did and was a terrible mistake to do that. It probably costs me money. I mean, in the beginning, I guess my volume wasn't high enough that maybe I didn't notice the loss, but it didn't scale. It didn't match my dreams for my private practice. I outgrew it, and then I thought, Oh, well, everybody says... online, you read about oh, you should just get an LLC. And then I was like, hang on a second. Maybe I'll ask somebody and it turned out that for my specific situation, an S-Corp was a better idea and that's very specific. That meant somebody looking at my QuickBooks and somebody talking to me about my systems, where my revenue is coming from, and also what state I live in and saying, this is the entity that you need. So not crowdsourcing that. And I'm really, really glad that I did that because it's a relief not worrying did I do the right thing? I'm like, no, no, no. I did what the person who knows better than me told me was the best idea.

Leah: I agree. I think it's so helpful to have that consultation with an accountant and lawyer, and really figure out what structure is the best for the state that you're in, and the type of situation that you're in with your business. And we've talked about this so much, what's scalable. If you have big aspirations and dreams, you think there's a tiny hint in your mind of this big dream of something different or bigger than what you're doing now, it's so valuable to have that foundation going into it. But it's not just about taxes. When we get down to the taxes, it's all about like you said, the recordkeeping that we're doing month to month, but also the business expenses and the cost of doing business.

Annie: I know we are also going to talk about business expenses and costs of doing business and all that granular stuff about money we spend inside our businesses. But before we do that, we want to just take a moment to remind you about our monthly, Deeper Dives. They are on Wednesdays at 3:00 PM Eastern. We had one just last week with Nichelle Clark. It was amazing. We talked all about her private practice and we got into how you can be more efficient with your time. It was amazing. You can actually catch the replay inside of our Vault. You can also see our past Dives that we've done. You can check out our next month's Dive in April. It's going to be with Rachel O'Brien. So, we're really trying to bring in people who are doing private practice or have great advice for us because we want to learn from experts and we also want to be learning from each other. And definitely when it comes to what I need to spend my money on in my business, I totally want to be learning from other people because otherwise I will just buy all the things all the time.

Leah: Absolutely. It's so true. I feel like our business - we've talked about this before on the podcast - it's so isolating, especially if you're in an area that doesn't have a lot of other LCs. I just love the way our Deeper Dives give a chance to just sit down with another LC who's doing this, and how are they making it work for them and things they've figured out along the way. Those Deeper Dives, they can be so helpful. But I know one thing that has helped me, and I think we've talked about it maybe one or two other times when we're talking about budgeting and taxes and everything, was the concept of business expenses versus the cost of doing business. Because at first, when that first was presented to me, I was kind of like, no. Isn't that the same thing? Aren't you just saying the same thing in two different ways? That was in my baby entrepreneurship time. I'm now a toddler, but I really got tripped up on that because it just seemed like the same concept. And I feel like Annie, you explained this so well, and I hope that you can share with our audience in case they're also thinking, Hmm, what is the difference between a business expense versus cost of doing business? Can you tell us more about that, Annie?

Annie: I can, cause it's something that I actually feel really strongly about. And so a cost of doing business is money you have to spend otherwise you don't have a business, and so you cannot be a private practice lactation consultant without liability insurance. You cannot be a private practice lactation consultant without having HIPAA-compliant or if you're in Canada for PIPEDA, whatever privacy compliance. You don't have a private practice if you're not paying for those things. That's just...

Leah: The non-negotiables. They have to have them.

Annie: It's bad news because what you're thinking when you hear that is great, I'm starting in negative. I'm starting out my business in the red and I don't think there's any business that you can go into where you're going to start out ahead. You're going to have to make certain investments so that you have what you need to run your business and to have a business. Business expenses are things that you might look at as I could do without it. I would like to have it. It actually makes me better at providing services, but they are not things where if you have to wait to buy it, you're going to be okay. And I think a great example of that would be a super fancy charting platform. So there's a lot of them out there. You can go for a fancy one with all the bells and whistles and be really happy with it. But you might say, you know what? I'm going to wait until I have more volume. And for now, I'm going to pay with my time and say, okay, I'm going to do something DIY like through Google workspace or Office365, where it's part of a HIPAA-compliant email that you're already paying for and you're just using the additional services that come with that. So, you're leveraging your cost of doing business into something that does a lot more, that's helpful and you might say, but once I reach this revenue threshold, this income goal, whatever it is, this number of consults per month, I'm going to splurge on a platform that costs more money and does more for me. So that's the difference that I really see. What do you think are some of the things that you look at as non-negotiables versus things you like to have?

Leah: Yeah, well, I definitely think because I do home visits, a good scale is really a non-negotiable for me. I want to make sure that I can provide accurate weights especially in our area because some babies go about two weeks to two months with no check-in, and I cannot tell you how many times that scale has probably saved a baby's life practically. I do feel like the equipment that I'm carrying with me, some of it is fluff and stuff. I don't have to have it, but obviously I need to have gloves nowadays. I need to have a good mask. So, there are some things like that that you might think, Oh, this could end up being a business expense, but some of them really are non-negotiables, like you're not going to be able to do an oral exam unless you have gloves and good ones that don't taste bad, so there are some things there. But I do feel like this is a really good place to remind ourselves to have systems to track all of this, because if you don't have a book keeper, which both of us spent a lot of years not having assistance in this area, and I did - as much as I hated it and I probably wasn't very good at it all the time - I had to really create some processes for keeping up with some of this. So, I made an Amazon business account so that at the end of the year, if I couldn't remember or I didn't write down, Oh, I bought 14 boxes of gloves and I bought this and that, I was like, okay, I can pull open my Amazon business account and I know that everything on there was only purchased for the business. So I know that's all my business purchases and just even little things like that, because we do have to make it easier on ourselves. Our hearts, our minds are oftentimes just caught up in the families that we're working with and to scan that receipt or make sure we get this expense notated in the proper places may not always happen. But I think there's definitely some hacks and work arounds that at least you can make it a little bit easier. So, I feel like the cost of doing business stuff is pretty easy for me to track because it's just going to happen. I know it's there. It's just non-negotiables. I feel like sometimes those one-off business expense things, they get lost throughout the year. Sometimes I have to go back and kind of hunch through my bank account. Did I have anything extra? Do you have any ways that you track some of that one-off stuff, like maybe not something that you buy all the time? What system do you have in place, or do you have a system in place to kind of make sure you catch those?

Annie: My system is super simple. I have a completely separate business checking account and a completely separate business credit card, which is not how I did it in the beginning. I just opened a bank account and I was like, I'll just deposit my checks in here and then add them up and do a spreadsheet at the end of the year, which is part of the thing I was doing when I was locking myself in the room crying every year at tax time. I was adding things up so this method saves me because it's preventing my personal income from mingling with my business income. It's a wall to prevent me from spending my business money on personal stuff without thinking about it. So, with having an S-Corp, when I give myself money out of my business checking account, that actually gets recorded. I have to pay taxes on that. So, I really have to think about, do I want to give myself more than what I'm already paying myself on payroll? So that really helps that everything goes through the business checking account, but everything that can go on a business credit card goes on a business credit card. The reason for that is because I get cash back. I love, love, love cash back. I'm a little bit addicted to cash back.

Leah: Heck yeah.

Annie: And then what I do is I make sure that I pay my balance in full twice a month. So I look at it I pay it on the 15th and I pay it on the 1st of the month to make sure that I am always keeping a zero balance on those credit cards, and that also keeps me in check. If I want to make a big purchase, I have to think, okay, can I pay for it this quarter? Can I pay for in this pay cycle? Can I afford it right now, like when I recently bought a new Tanita. I had the Marsden and I liked it but I had like some problems with my Marsden and the feet kept falling off. I just think I got a lemon because Marsden was like, we had never heard of this happening to anyone. I have not seen anyone in any of the other groups talking about this happening to them, so I think I just got a bad one and I tried getting it fixed and Marsden wouldn't replace it. It was out outside the warranty so then I'm like, all right. I'm going to buy a new scale and I'm going to buy a Tanita because I'm going to get something new. But then I had to think like, I'm going to put it on my credit card, but that doesn't mean I don't have to pay for it. So I had to wait until I could pay it back because the thing that can really hurt you with credit cards is if you carry a balance and you can sign up for a credit card that they'll offer you 0% interest rate for 12 months, but you have to read the fine print because some of them will say if you miss a payment, if you miss a minimum payment, they will bump you up to like 18%.

Leah: Yes! So high. I did that as a mistake when I was really young. I think everybody has done that once, but totally learned my lesson on that. And I do the same thing. I have a just business checking account and that is so helpful. I'm so glad that is one thing I did from the get-go, and it has really helped me so much because only business stuff goes through there and I know anything on there and I use it for everything. There'll be the one-off thing that I random purchase something I'm like, Oh, wait, this is a business expense, but otherwise I try to put everything through there and it really does help. And then having just that one account can all connect it in QuickBooks and all of that, it makes it so much more streamlined and I feel like if you're starting out right now, just do that from the get go even though it just takes some extra time to go set up a bank account and get a credit card and all of those steps. It does really make a big difference and I too have one of the reward cards as well so I try to run as much as I can through that because it is fun to ... yes, I want my money. Pay me. I like it.

Annie: I know. I never use it. They're always trying to get me to spend it on coffee or TurboTax. I'm like, no, no, no. Lower that account balance, please. Thank you. I'm done.
Leah: Yes. Pay me my money. Yeah, that's a great way to also, I don't know, feel good about what you're doing for a purpose. You're giving yourself money back
Annie: And I don't ever have to pay cash for anything. I can't think of a situation where I would need to pay cash. I mean, occasionally for parking, it might be a cash only parking garage. And when that happens, I'm just not going to worry about it. I'm not saving that receipt. I could save the receipt. I could take a photo of it and upload it into QuickBooks, and I'm like, there are some places where I don't need to chase every penny. Life is too short. I don't need to get a receipt for the tip that I gave you for parking my car. It's fine.

Leah: Yeah. I have some stuff like that, random. Sometimes I'll go buy some stamps or something and I'll forget to pay for it on my credit card. And I'll be like, Oh, whatever. It's just a pack of stamps, not a big deal. There are definitely those one-off things, but it really is helpful to have some systems in place if you use a different system. Just be thinking about that from the get-go. I feel like that's something like we're always lessons learned from Annie and Leah's past.

Annie: All the things we did that were the wrong thing to do, and we keep learning. We learn from each other. Every time we record for the podcast, both of us are like, oh, I hadn't thought about it that way before so we're literally learning right now. And in the Deeper Dives, we always learn things from our guests, so please come to the next one. You can come live; you can listen to recordings. We have some membership options where you can register and make sure you never miss one. Sign up for our Vault and you can find all of those at learn.anniefrisbie.com/lactationbusinesscoaching all one word. Everything for our Deeper Dives is in there. We're now in our second year of these Deeper Dives and you can get our Vault and listen to everything from last year, and there's some golden stuff. We should go back and listen to some of those.

Leah: I know! I mean, some of the ones that I don't know, I just feel like I left there a changed person, and that sounds so cheesy, but there were some really, really great and moving episodes. I guess they're not episodes, but meetings that we had altogether and just the amazing people that show up and share what's working for them, what's not working for them and just to see that community, even though we're also distanced right now. I just love the community that is there and we all support each other and we have a lot of regulars. I just love to see everybody's faces so you should definitely come and join us. There's so much fun. It's great to be on them live. You can ask questions. We have so much interactive stuff going on during the Deeper Dive. I love that aspect of it. But if you can't, no big deal. You're going to get so much value out of hearing all the amazing questions that people share. It's just like probably something. I feel like all my new moms are always saying, I don't know what to ask because I don't know anything, so sometimes it's nice to hear like, Oh, I wouldn't have thought of that question, but now man, I needed to ask that question too. I can't wait to see you guys there and definitely sign up, and we will be with you next time. Good to see you, Annie.

Annie: Bye Leah.

Leah: Bye