Welcome to the second season of our podcast. Help- I started a business, now what? At the beginning, there are so many decisions to make and so many things to do. It can feel like everyone else has their business figured out. It’s also really easy to compare your brand new starter business to others that are well established. In this podcast, we will talk about all those hairy first big steps that come with starting a business. For this episode, we’ve brought on Jacob Curtis to talk about financial management systems that you won’t hate!
Find Jacob here on Instagram. Check out the show on YouTube, Spotify, Apple Podcasts or read the transcript below. We’ve even included timestamps in case you want to zero in on one part of the show.
Our show sponsor this season is goimagine! They are a great partner and sponsor, so make sure to check them out!
Episode Transcription
00:00.00
Amber Christian
Hello everyone and welcome to today’s episode of the Now what show. I’m your host Amber Christian and I am delighted to welcome Jacob Curtis from Curtis Accounting solutions as our guest today. I promise we’re gonna have fun. Don’t worry about this one. Don’t tune out.
This is going to be a really interesting conversation and a super important one. Now before we introduce Jacob a little further I’d like to share a message from our season sponsor. We are delighted to have goimagine as our season sponsor for the podcast. Goimagine is focused on building the maker community through a handmade marketplace, Maker business education, custom websites, and a social app designed for artists called maker circle. The goimagine community includes thousands of handmade business owners throughout the United States who are passionate about growing a handmade platform dedicated to quality handmade items focusing on social good that’s helping children in need. So go ahead and check them out at goamagine.com now without further ado I would like to welcome Jacob Curtis to the show. Jacob can you go ahead and introduce yourself and tell people a little bit about yourself?
01:09.91
Jacob Curtis
Yeah Thanks. Thanks for having me! It’s great to be here and talk with everybody. I love the community so a little bit of background to me. I used to be a corporate CPA and work in you know the traditional corporate kind of a world even wearing the day of my interview a suit and tie to it. So- kind of gives you an idea of where I come from. I am a CPA but I have a mom who grew up doing arts and crafts and sewing and things and so she started a business a few years ago. That kind of inspired me to really start my own thing and really use the skills that I’ve garnered to help others in the community. So I started my business scaling solutions in the fall of 2019 so it’s been a few years, but it’s been a great journey. I’ve met great people like yourself Amber and a lot of others. So yeah, does that answer the question a little bit.
02:01.71
Amber Christian
Absolutely and it’s always fun talking with you because you’re in the world of craft. You have a foot in this world and so I’ve been collaborating with Jacob for a while. Because as a lot of people know in the world of craft sometimes when you’re outside of that world some of the unique things that are a little quirky about us as an industry people don’t always necessarily recognize. And you’re already in this world because of the quilt shop world and so it’s like hey no I already get a lot of what’s going on and the heart and the love that goes into all the products and the creativity that people put into those products.
So that makes it fun because I know that you come with this deep appreciation for the industry already. I’m in your background and so it makes it a little easier to talk about a variety of the topics because you have a lot of empathy because you’re like hey been there totally get that. So now what we want to talk about today is this is one of the tougher topics for new business owners. We’re going to talk about the whole finance and accounting world and profit first and what this is. What I want to have people come out that are listening to this episode is just an encouragement to learn more about this methodology. And to be starting to think about, I know you’re spending a lot of time producing your products and you’re like just those first sales are exciting but starting to think about how you make sure it’s going to be a profitable business. So that sort of when the love runs out at a certain period of time there’s money left in that business.
So Jacob can you tell us more about what the profit first methodology is and give us a little bit of background of the thought process behind it.
03:36.69
Jacob Curtis
Yeah, yeah, so the short answer is profit first is a cash management system. It’s basically your Grandma’s budgeting envelope system that’s been modernized and adapted for business for today. Um, in the recent I came across and it’s telling a little bit of a story. To kind of help make it helpfully make sense.
So I mentioned earlier that when my mom has a store- a quilt store specifically- a long arm quilting service. In 2013 is when she started that and at the time I was finishing up school and just helping her a little bit come tax season to do the bookkeeping and all that kind of thing. Graduated school and went on to my corporate job. She continued with her store and then about in the fall of 2019 about when I started my own firm here. She came to me in tears. She called me one day and she’s like can you come over to a house I have a question for you. So my wife and I drove over to their house. We lived about 20 minutes away and we opened the doors like mom? What’s going on? She’s like I want out I can’t do this anymore and I was like – whoa whoa what’s going on? Tell me what is happening and she’s like you’re going to prepare our taxes and you’re going to find out that I don’t have any money and yet the state is calling me to pay their pay sales taxes I owe over Basically over $50000 in debt and I don’t have a dime to my name that can be used for the business. There’s no, there’s no money in the business and I was like that is so weird and I was like but but your sales are doing great like what’s like what’s going on and she’s like I don’t know I just don’t have any money and they’re calling and they’re going to come take away my machines and put a chain on the door and I was like well hold on let’s figure this out. So we sat down and talked and she wanted to know the options of how to get out. Do you file Bankruptcy What are all those things I kind of backed her off the way from the Cliff edge there. It’s like okay off the cliff.
Let’s talk this through what’s going on. She’s like I don’t know what happens to the money it comes in I use it to pay the bills and by the time I need it to pay the sales tax at the end of the quarter I don’t have any money. When it’s time to bring home a little grocery money for myself I barely scrape enough to buy you know the basics. So I said well let’s talk about more of what we can do to solve this. She’s like okay.
So my wife and I sat down and talked with her and my dad and we talked for a little bit about all the nitty gritty details of who she owes and how much she owes and all that kind of stuff and we determined that we should help her out. Actually we came to the conclusion that this is actually a viable business. We just need to shift a little bit and help out and so um to help her get out of the immediate relief I actually became a co-owner and invested a little bit with my mom and because I trusted her in the business model.
I said but we’re going to make a little bit of a change I’m going to step in as your Quote unquote “CFO” and help manage the finances and so that’s what we did for the first year. We made sure the books were all kept up to date. We made sure taxes were paid on time but we really hadn’t made any debt or any progress towards paying off the debt. Um, we know she was paying close to I think 2500 to three thousand a month in just debt payments and for her little store that was huge. Yeah it was. It was a lot and so she um for after that first year I was I was a little confused I was like what’s going on.
I prepared the tax return and we were reviewing it together and she’s like well hold on I don’t understand why do I owe taxes if we don’t have any money and then that’s what it clicked for some reason over the last year I realized that we needed a cash management system, bookkeeping and doing all that kind of stuff was not really enough that was all. After the fact after we had made those decisions. That’s when we had started doing the bookkeeping and recording that and so because those getting the financial reports weren’t as immediate. We just kind of reverted looking at the bank account and guessstimating. You know what? what things were going to be and it turns out that.
We didn’t have a real enough real time system to actually manage the cash flow because cash flow is what’s king in the business right? You have to have cash to be able to pay your vendors and if you have employees and buy supplies like if you don’t if you don’t have cash or you’re in trouble and so that’s when I started looking around it and kind of reached out to a couple different colleagues and friends who are in the industry and the coach and things like that and somebody actually recommended that I read the book profit first. I was like profit first that sounds weird. Why would I put my profit first like that’s like I really want profit but I’ve got all these other things I’ve got to deal with like how can I put profit first but I picked up the book on a you know because we were kind of at that desperate moment I was edging closer and closer to that cliff edge and I realized oh okay, we read the book and it just clicked with me. It’s like oh this makes so much more sense.
And I thought back to my corporate days when I worked for a company that was doing hundreds of millions of dollars a year and I thought that’s why they have so many bank accounts is it helps manage the cash flow of the business and I started thinking in there like as an accountant you know I had I could see a lot of information and I thought oh we have a business I worked for had ah a payroll account. They had an operating account. They had a marketing budget account. They had. We had probably 11 or 12 different accounts for the business to operate through and at click that’s exactly what small businesses need typically when as a small business owner you get started. You go to the bank then you open up your first business checking account and sometimes you’ll get you know a savings account that we may or may not use very often but we get just 1 big plate to look at all of the money and that’s exactly how my mom was operating her business and yet when we look at these larger businesses and look at their success. They have multiple bank accounts. They have a whole treasury department set aside just specifically to manage the cash flow and so profit first is really a small business version of that and that’s what’s been so powerful. So I immediately implemented it and within eighteen months we had paid off $50000 of debt and saved up $10000.
I was blown away. I was like you’ve got to be kidding me. This is so simple to set up how in the world did we not think of this like it’s just like a no brainer. Um, and so and that’s kind of like the amazing story is just simplicity and clarity it brings to how the cash flows in and out of the business.
10:01.29
Amber Christian
So now we’re gonna unpack a few things because for new business owners. So one of the first things we should unpack here is that a big ugly tax timing is not the same as when you collect your taxes, especially like sales tax.
And again, we’re speaking about the US here I’m sure it’s the same in other countries. I’ve done tax work in other countries in their systems. So I know that there’s timing differences between when you may collect the money but you have to remit it to the government later. And depending on what systems you’re using in some cases you may have a system that automatically collects that sales tax and deals with that remittance or you may not.
So here’s a perfect example for everybody I’ll use from my little popup artisan food business that I run a few times a year which I love and no capacity to do more. And I have to collect sales tax as part of that because where I am physically located technically we have to charge sales tax on that and so I have to collect that sales tax as part of the purchase I use square and so I collect it all through square. It’s all set up there. And then I have to separately remit it on a different schedule to the government. So 1 thing for people that um, remember your tax depending on the platform and how you’re doing it. You may have to remit it yourself on a schedule. That’s not the same as when you collect the cash. That’s one of these separate things that Jacob is talking about of well I have to have somewhere to put that tax money so that when the tax man or woman cometh I have it to pay – separate that out immediately. So that’s one of the first big pieces that he is talking about and saying hey. I just naturally have to separate certain kinds of things because there are timing differences in my business. So most people I talk to I say how did tax go that first year and almost universally everybody goes. Oh it was bad!
Unless they knew to get all of these kinds of things set up the other thing you brought up let talk more about this idea of I look at what’s in the bank account to pay my bills and how that can really go wrong as a small business right? Because as you had said well she would just look at well I have this cash in my account. So then I just pay my bills. Where else does that cause problems in the business if you do that?
12:30.89
Jacob Curtis
Yeah, so if you do that too much. What happens is you over buy inventory like that’s what happens in in my case, a lot of my clients cases I work with a lot of people that like that’s my bread and butters people who have in the craft industry who have inventory. So they over buy inventory that they think they can turn around and sell within just a few months and it turns out it’s more like 6 or twelve months depending on what’s going on and so combined with the delay in the tax payments. In our case, it was sales tax and other cases It may be your annual income taxes.
And just making sure that you have that. Credit card bills are another 1 right? Because they don’t make you pay the full balance you can set aside a little bit and just pay the minimum balance for a few months and then you know I’ll pay my my minimum balance for a few months and before you know it that minimum balance is now 3 or 4 or $500 maybe even more and you’re like well hold on how did I- I have all this inventory. Why is it not you know what’s going on here and so that’s kind of where you really get in trouble is when you start not paying for things in with the cash. You actually have you start borrowing extra from even inadvertently from yourself and from credit cards and things like that and it and it can get overwhelming honestly.
13:43.76
Amber Christian
Absolutely or the other thing that I have seen happen to people. Oh I need some money right now. So then they sort of fire sale products or really reduce the prices to move products. Well when you’ve you’ve done that you’re not collecting enough to have Profit margin to pay you something, to pay all of the bills so you can get yourself trapped in this cycle of oh quick quick I need cash so I sort of fire sale or reduce my prices to try to generate quick cash but that gets worse and worse and worse over time. Where you kind of want to back up and say no I have to start sort of separating my cash a little bit setting kind of money aside so tax is 1 big bucket. What else is in kind of earlier stage business?
What else would you separate as they kind of as they’re first thinking about this?
14:35.81
Jacob Curtis
Yeah, so what I recommend if you’re just starting out within you know, either day 0 or you’re within your first couple of years and even beyond if you don’t have these accounts set up I would recommend them so I recommend you set up 6 accounts. You may already have an existing one but the first one where I would recommend is the income account. It’s basically just the collection plate it collects all the payments that come in from your customers and from there you can then allocate or transfer the money to the other buckets and based on some percentages that you work out in your business and so one of those is inventory. One of those is tax. One of those is profit which is actually like your emergency funds and things like that. One of those is the owners compensation so that you can actually get paid for your hard work. I mean you do work and and often owners are the least paid person in a business which is ironic because they started the business generally to make a little extra money if not be the sole provider for their family. And then the last account that you want to open up is your operating account so you should have a total of 6 there where that’s how you manage the cash flow and based on those margins and margins are so key. So if you’re constantly having those fire sales and discounting prices to move inventory because you need the cash to pay bills. Um, that just kind of like you said it kind of compounds if you do it one month couple months down the road you may need to do it again and then again and then again and then again and then basically what you’re ending up doing is about every two months to three months you’re doing this fire sale and that’s only when you have sales right? You maybe have a trickle throughout in between them. But your customers now know oh I know if I just wait a couple of months she’s going to put that on sale.
And then I can get it and that’s not a great plan because now you’ve kind of created this cycle where you get into a panic and money all comes in- you pay your bills. You feel a little bit of Instant relief. But then it starts all over again and you just get in this grind this Rat Race of okay I got to make this. And sell it and put it on Discount. So It’ll sell Faster. So I can get the cash so I can pay the bills but now I need to make more money so that I can pay other bills and it’s just a never ending cycle.
16:37.62
Amber Christian
And I think that’s also an important one of the real risk you run, especially if you’re in early stage Business. You think oh, it’s not that big of a deal. I mean I Just do that a few times and you set that expectation in the mind of the customer and a loyal customer that may come back and want to buy product for you regularly, you’re training them that they should wait for your sale and that becomes problematic in the long run for your business and so even you know a lot of times when people start businesses they start with like no money at all.
Find a way to get a little bit of money into that business and it’s not all about the sales whether you might have to work a side thing or come up with something to have a little bit of cash of seed money to start that so that then when the revenue comes in. You can start splitting it if you try to start from.
Oh I I sort of even financed this first part on my credit card and then I’m getting in the sales day one you’re going to end up in a fire sale problem. So a big thing if you’re early stage really think about how will you make sure there is enough cash to do this properly when getting started I think it’s not wise to say.
Every dollar I invest in the business I’m going to get back immediately because you’re not um and that’s going to take a little while and this is something We don’t talk about as an industry to say you have to have a little cushion as you get started.
Doesn’t necessarily have to be enormous, but you have to do that so that you can properly set your profit margins and get things and then wait people out if it takes a little longer to sell so that you don’t have to train them. So that’s another thing I’ve seen a lot and I want to kind of caution people to say be careful about that.
Because that’s setting up what you do going forward in your business so we are getting close to our 20 minutes already I could we could go on and on for years and I’m pretty sure I’m going to have you back on some future episodes so we can just keep talking about some of this because there’s a lot of nuance to how you manage it.
How you manage as it grows even the lifecycle of cash is a whole another kind of topic that I think is really good to talk about so that business owners are like okay I understand there’s a flow to all of this stuff.
So now tell our listeners where they can find out more information about you and about your company.
19:00.43
Jacob Curtis
Yeah, so my name’s Jacob Curtis I’m a CPA you can follow Jacob Curtis cp on Facebook and the other socials you can also follow me with at Curtis Accounting Solutions I have that’s my website curtisaccountingsolutions.com. I have on my website, a free starting guide that kind of walks you through the steps of setting a profit first in your business. Ah, and I’m always available for a phone call. You only schedule a call we can get on if needed but you can follow me at Curtis Accounting Solutions.
19:33.33
Amber Christian
All right? Wonderful! Well thank you so much for joining us today Jacob and thank you again to our sponsor go imagine. Go check them out. Go check out what Jacob has to offer again and we’ll see you next time.
We hope you enjoyed this episode on a financial management system you won’t hate.
Want more of the Now What Show? Check out these previous episodes:
Episode 7: How I’m iterating and learning to refine my target market with Megha Mundandishe
Episode 6: Creating marketing strategy through brand collaborations with Elaine Kinney
Episode 5: Getting Ready for your first craft fair with Nicole Stevenson
Episode 4: How my first wholesale order happened with Livvy Ramos of Fera Fox
Episode 3: Getting your first PR with Stephanie Blanchard
Episode 2: Establishing a web presence with Erica Martin
Episode 1: How I got my first large custom order with Lindy of apothecary 19
