Business Accounting: A Deeper Dive

something I started doing about a year ago here at wow that has been incredibly impactful is I put everything on a calendar you know it seems like a small thing but it has turned out to be an amazing idea to help keep that helps keep us organized and helps kids get get the numbers quicker and on time and not let things slip by I can't stress how important that is to to have a rhythm to have a system because if you don't then accounting is what gets pushed to last it's just you know it just is what it is so people don't like to do it uh when I started here at wow Todd was probably you know four months back from billing his clients and it was so messy and you know I had fun trying to catch up but it's just not healthy law it's not healthy long term for a business right so I heavily recommend you saying hey I'm going to do this every day of the month and you stick to that when you do that it's going to pay off in the future for you welcome to the Spiro podcast managing your real estate photography and videography business with your hosts kivamaki Craig Magnum [Music] welcome to the Spiro podcast managing your real estate photography and videography business Sphero is a software platform designed to really help you manage and grow your real estate media and marketing business I'm Craig magrum I'm the host for the Spiro podcast and normally with me flying uh flying co-pilot and pilot we switch back and forth is our owner and our founder Todd kivamaki but he's not with us this week so we have a guest co-host in and guest in general you've heard his voice before you've seen his face before and I'll introduce him in just a minute but uh before we get into that I Just Want to Thank you new subscribers to the podcast uh whether it's it's the YouTube video version or you're listening on podbean or apple or Spotify whatever uh thank you for for stopping in and listening I just want to encourage you leave a comment if you're watching the YouTube version leave a comment on the episode if there's something that stuck out to you or maybe a question that you have or an idea about today's topic feel free this is is uh really it's a community of Education to really make our businesses better so we would love to hear from you you can also email us hello at all right so back in September of I believe it was September it was at least the fall of 2022 uh we had on as a guest a wild video tour CFO Derek Mayer and we talked about the basics of business accounting I know super exciting topic for many of us but a necessary topic uh you know we hit we have these real estate media businesses that that we started wait might be a small business you might be a you know a solo shooter and business owner you might be a regional Company by now but we started this these businesses out of a passion for what we do but for many of us myself included um that the number crunching isn't necessarily what we're most passionate and excited about it might even be a challenge and for many of us we've you know when we start this business a business we have to kind of brush off some of the accounting books and the things that we learned in college or you might even be learning from scratch some of these Concepts to run your business profitably and in a healthy manner financially speaking so Derek walked us through some of those basics of of accounting in the fall of 22 and he's back this week to talk with us about some more advanced topics in diving deeper into the accounting of our businesses and he's also going to address a listener question that came in from Brian in Connecticut so Derek welcome back to the to the Sphero podcast super happy to be here always love talking about accounting and helping businesses out so happy to be here I I will say personally I am glad there are individuals like you that appreciate numbers can understand them have a great Insight on them because guys like me there's things that I just don't know I don't I have trouble sometimes with numbers so I appreciate that you have a god-given talent to dive into this and assist a business and others like you assist businesses in really being healthy and and profitable so thank you for what you do for Wild video tours you're welcome and it I'm learning new things every day so even with all the time I focus on it like I feel like I'm still I'm still learning a ton every day so I'm happy to share I'm happy to share my knowledge and um I hope it helps yeah absolutely so let's let's dive into things sometimes um there are sometimes we don't know what we don't know about a particular topic and I kind of have that feeling that that might be the case for today's topic um is as we dive into more advanced accounting issues there's this question I just don't even know what to ask uh to cover so I'm kind of thinking that you're going to lead this episode and I I understand you've got four points that you want to go through uh to help us understand business accounting a little bit better but before we get into that we always encourage listener and viewer questions and comments and uh Brian from Connecticut he's the owner of flybri I hope I pronounce that right flybrite visuals um he he sent us a question he said love the podcast and I've got this question about costs versus profits and the question he had was what are the important costs that we should be tracking as business owners uh versus the money that our businesses take in and my my initial thought just as a guy that's not super deep into accounting is well you got to track every cost and and categorize that I mean that's just part of your your basic accounting principles but I'm guessing there's a more nuanced question in there Derek yeah that's a great question Brian and um like Craig said all costs are extremely important to track and track appropriately um and somebody said it I can't remember who it was but like every dollar you spend is a dollar less a profit so you really need to consider you know what you're spending on is it helpful so there are you know costs that kind of can be lumped together to track you know a little bit more systematically so I believe that's kind of what Brian's question is so I'm going to start with actually the revenue okay so for your month you have your total revenue and that represents a total amount that you're going to bill your clients for and then we have two categories of costs your first your first is your cost of goods sold this represents the cost directly related to that job such as the photographing of the job and the editing of the job and then to keep it simple I would consider all other costs overhead costs you know so that's how we do it here at wow we have you know our total revenue we have our cost of goods sold and then we have all other operational costs okay so if it you know for a month if you have 2 000 in in revenue and it costs you one thousand dollars then the other thousand dollars can be split to cover all your other other expenses yeah yeah exactly so um that's how we do it at wow and uh kind of really my next point is I want to take you down that line of thinking and cover you know four different areas um of your business that I think you can systemize to help you get to the correct numbers to make uh good business decisions okay something I started doing about a year ago here at wow that has been incredibly impactful is I put everything on a calendar you know it seems like a small thing but it's turned out to be an amazing idea to help keep that helps keep us organized and helps get get the numbers quicker and on time and not let things slip by okay so when you're talking about putting things on a calendar you're really setting up kind of a rhythm of of activities for your accounting practices exactly yeah I can't I can't stress how important that is to to have a rhythm to have a system because if you don't then accounting is what gets pushed to last it's just you know it just is what it is so people don't like to do it uh when I started here at wow Todd was probably you know four months back from billing his clients and it was so messy and you know I had fun trying to catch up but it's just not healthy it's not healthy long term for a business right so I heavily recommend you saying hey I'm gonna do this every day of the month and you stick to that when you do that it's going to pay off in the future for you okay so that's really my um you know my first thought put it on the calendar do it every month it's going to actually save you time and it's going to save you money as well so the first thing I'd put on calendar is make sure all your jobs are invoiced you know I talked about a little bit earlier about if you invoice like net 30 or you you take a you allow them time to pay your bill um then you really need to make sure you're on the invoicing and on the collections or that can become you know a disaster and then you're basically playing bank for your clients you know and clients they they they know what they're doing they know if you don't if you're not on it then they'll take a long time to pay you know they're not trying to they're not necessarily trying to take advantage of you but that's just they're going to go the path of least resistance they're going to pay the bills that you know um are going to collections first or or don't have late fees first so um if you are currently you know billing Net 30 Terms at 30 that means you know it's due 30 days after they after you send the bill then um you know you definitely have to be on your invoicing every month you have to look to say hey he owes me a lot of money let me call them and uh make sure you know see see about payment because with a small business like you just can't afford to float all of that forever right so is is that something where you're sending out a weekly invoice or do you do all the invoices once a month or you know Spiro the the software that we have that you've got a couple of different options people can uh pay right away when when they order or they pay when they download the media or invoice the the net 30 that you're talking what from your Viewpoint Derek what what's the most effective way to stay on that regular rhythm of invoicing making sure people pay yeah great question so what's super nice about Spiro Is is you know you can invoice weekly and that's what we do for our clients it sends invoice every week it's automatic I don't think about it the reminder part yeah I definitely recommend sending it out weekly if you haven't gotten anything in you know two or three weeks give them a call see where see what's going on and there some people are just like hey I changed my email address you know hey I changed companies and yeah no problem let me change that let me send it to you and we'll pay no problem but others are wait let me you know I'll call you back and then you just got to make sure you keep on them to pay which is a good question um and what Craig mentioned earlier that I I do believe for your business it's important to either pay when clients place an order or pay before delivery I can't stress how important I feel that is for your business because think of all the time that goes into invoicing all the time that goes into trying to collect the money and chasing people down and it's just not creating a I feel like a strong relationship with your clients up front um you know it it's not wrong to wait for payment and it is helpful to clients but I would challenge you guys to get the money sooner and do it in a way that's systemized so that you can continue to focus on your business not focus on trying to get money to grow your business so right that would be my um you know Pro tip or recommendation for you makes sense I mean you go to Amazon to buy a product you you put in your credit card you get charged right away I mean that's not a foreign concept to people so yeah correct and we're fighting more and more people in our industry are doing that so which is a good sign for for our industry all right so there's there's point one dude you had four points correct correct yep Point number two um so you got your invoicing done or figured out or maybe it's automatic so that you can cross that one off um but Point number two is you need to make sure that you are reconciling your bank account you know I know it's so fun so I know this one gets a lot of grief but it is and it is very important for you to make sure all your line items all your transactions are accounted for it's important from a tax standpoint and it's important from a planning standpoint so if you don't feel comfortable with that or you don't want to do it and that's completely okay find someone that can do it it's not going to cost you a fortune it's not going to break the bank but it is important enough that you'll save that money in the future just with making better decisions and making sure everything is correct for your accountant so um Point number two is reconcile your bank QuickBooks and zero accounting softwares I find QuickBooks to be a lot more user friendly and um and zero is not quite as user friendly but um but they're all built to help you you know reconcile so right if you if you're finding it confusing switch to a different accounting software because reconciling is that important okay yeah reconciling super important I'm kind of convicted a little bit Derek I my personal uh reconciling needs to happen right now too um so thank you for the reminder on that all right so uh setting a regular rhythm of accounting tasks in the month 0.1.2 making sure that you stay current with your reconciling and accounting for every transaction in your business let's go to point number three what's uh what's number three for you yeah Point number three gets fun because now that you know that you know everybody's been invoiced that feels good now you know that all your line items are accounted for which is just you know just it should make you feel great because you know that everything is in its place so now I can look at my profit and loss statement you know also known as your income statement and now you know those numbers are correct and you can start to make decisions based on those numbers so that's when it gets really fun so let me interrupt you real quick there Derek um you just you made an interesting statement so everything is accounted for now we can start making decisions other other decisions based on that on that profit and loss statement because we have our numbers in order can you give an example of what kinds of decisions would you be making based on that p l report yep great so I've always heard it said that an income statement won't give you answers it will just allow you to ask questions so you should look at an income statement and it should just create lots of questions for you so to kind of now go into Brian's question of you know tracking costs versus profits and other expenses um you know now you can look your income statement everything is probably properly allocated you can show like hey here's my here's all my costs here's all my cost of goods sold here's all my operation costs well if I compare that to last year my you know my cost control is increased 30 percent well why so now you get to do the fun work and say hey what happened oh well I um you know I hired another photographer who was you know more expensive but he could do drone you know so uh yes I it cost more per job but look at my Revenue my Revenue went up you know so I'm actually making more money even though there's more cost so I just answered that question uh you know but it the whole point is I was asked that question or like it popped out the questions popped out so right or it could be hey my operation expenses just increased 50 percent well I you know I took on an employee to cover some of my day-to-day operations and scheduling or what have you not so um so yeah that is going to come at a cost you can see it on the income statement and then be like okay well that freezed my time up so now I can go shoot more or I can go up sell more to try to get my you know my Revenue higher so it's not um it just helps you it helps you try to solve the problems by creating the questions okay and it helps you identify too okay where can I cut some costs what's eating into my profits that's not necessarily not necessary um so questions like that yep absolutely yeah we do that every year here at wow and I think I spoke back in the beginning of the year on budgeting and projections and goals and yeah you definitely need to watch those costs um because you feel like hey I like to eat out you know every meal you know and that adds up very quickly or hey this new um you know this new piece of equipment is going to be the thing and um you know and then it turns out it's not like that all every dollar you do not spend is a dollar more on your bottom line so you definitely have to have that in mind um and you want to keep those costs in check all right Derek so uh We've we've covered three areas where we're diving a little bit deeper number one again reviewing um we are number one we are making sure that all jobs are invoiced we're getting on a regular um regular schedule of accounting tasks that we need to do to stay healthy in our business point two we are reconciling all of our ex all of our transactions for the month and staying current with that and making sure that everything is accounted for which leads to then uh your third Point um reviewing the profit and loss once we have all those transactions accounted for so that we can ask questions and make decisions for the company on on a financial basis great stuff we're diving deeper here what does uh what does 0.4 look like then for diving deeper into our our business accounting 0.4 is probably everybody's favorite word cash oh yeah there we go so uh cash is King and especially for our small businesses here we always have to consider cash and that's why I believe it's important to look at your cash flow statement your accounting software should have that uh as a core statement um to use and um I would always make sure that uh you're looking at cash flow statement and that tells you where the money went so think about cash flow statement where did it go um you know I always it's like it always goes you know it always goes somewhere and um so if you look at your cash flow statement it'll show hey this is what we brought in this is the money we actually brought in not necessarily what we build what we actually brought in then it will it will take into account what we spent so all your operation expenses um are in that all your direct costs cost you could sold any money that went out is the second part of that cash flow statement and then you have you know other cash uh which could be you know you as an owner you took money out and um it could be you uh paid off something so all the cash is considered so literally the entire Cash picture is in the cash flow statement and you can look at the end of um at the bottom number and say yeah my business you know I have more money in the bank or I have less money in the bank and and then you can know why that is okay so that last point I think is going to clarify somewhat the question I was just forming in my mind as you were explaining cash flow statement I really I'm trying to and this might be a dumb question but there might be others wondering if if we've looked at the p l the profit and the loss statement where we can see what we've spent and what income has come in how is that different than from the cash flow statement that kind of sounds like it's covering similar or the same things yeah is it that bottom number correct that's a um a great point and they all numbers do work together the cash flow statement encompasses you know all your investment activities or all the owner draws that doesn't necessarily have the owner draw you know now you may pay yourself a salary and as an employee then that would be on the income statement but if you're just taking distributions that's not going to be on your income statement that's going to be on your a balance sheet item which then filters through to your cash hello okay just get a little a little techie there with yeah well that that's where you know the the you don't know what you don't know uh question for me comes in in understanding some of the the terminology and the vocabulary in in business accounting so thank you for clarifying that for us so okay so yeah that there's there's your Four Points um do you want to just kind of summarize real quick again then the deeper dive into accounting and we'll just kind of then wrap this up so my challenge to our listeners today is to systemize every month they're accounting you know put on the calendar um you know I know you don't want to do it but when you put on the calendar you're more likely to get it done and um you know once that is done the four points for you to remember every month or number one make sure your jobs are invoiced get them invoice get the invoices out if you you know get paid before delivery if you you know take payment when you deliver the photos or pay me a time of order then you can almost cross this point out because a lot of it will be done and uh that'll make you feel good so um the second thing is make sure your bank account is reconciled get all those transactions if you have a confusing one get it done make sure those are all allocated correctly if you find a cost of goods sold in operation cost move it out put it back into the cost of goods sold you know so make sure the transactions are um or you know allocated correctly or hire a professional to do it number three is review your profit and loss what is it telling you what questions are you getting from that and then go find the answer you know if you realize something is off go fix it if you're not making as much money as you want to make then you know maybe you need to add new products maybe you need to try to upsell more at when you're at the property and say hey would you like a drone of this you know and um you know those should just start to create some actions for you questions and then what are you gonna do to fix it and then review the cash flow statement you know that is really the heart of the company is like is it bringing cash if you if you invoice and not take payment up front then you know you're going to have it's a little bit harder to calculate your cash flow because you don't know necessarily when the money is going to come in or you might have one month where you got lots of money in so you're like wow the business is doing great but that's not really a clear picture of what's going on so yeah just make sure you're looking at that monthly what's going on and then also that should point out some questions too and be like oh that's where the money went do I really want to spend money on that do I need that because it's affecting what's coming in at the bottom line so uh those are the four points and then a bonus tip a bonus Pro tip oh we like bonuses a pro tip an extra thing for those who are you know maybe like you Brian they want to attract more and love metrics so here are a few for you to start tracking every month to really get an idea for what's going on in your business and what what costs are increasing and look back over time to say hey I'm you know I'm doing good like costs are going down revenue is going up great or costs are going up and actually outpacing my Revenue so I gotta fix it you know so these metrics are for you the first one I track is average sale price and average sale price is you know I'll do it from a monthly level so for the month let's say I made thirty five thousand dollars okay that's my total revenue if you divide that by your number of jobs let's say I did uh 200 jobs that month that means my average sale price would be 175 dollars per job okay so that would be my recommendation for um so you just start tracking every month is what's your average sale price and you might notice if you're in a colder climate hey my average sale price is lower in the um you know in the winter months oh because you know people aren't adding on drone or something like that you know and then it might start to creep up in the summer months as they start to add more so that would be something that that is a a good metric for you to keep track of is your average sale price and then challenge yourself to increase that because when you increase your average sale price that means you're doing more at each listing you're adding on more services at each listing which is awesome for you because it's just a great use of your time to do more service while you're there to make more money while you're there so it and here's it let me let me jump in there real quick too if if you can increase your average sales price you don't have to worry about raising prices every year as much because if you're setting a certain Financial goal and you're thinking well the only way I'm going to reach that is if I raise my prices across the board which is a problem in and of itself with clients because none of your clients want a price increase right well you can achieve the same goal by just yeah adding on more services and increasing that average sales price yep that's an excellent point Craig and I I highly recommend that there's other ways to get more money other than just increasing prices so but there could be a time when a price increase makes sense too so you're the way way the pros and cons of that and make the best decision for you so average sale price is the first metric that if you're not calculating that now monthly start putting it start calculating a monthly and keep track of your previous months as well it's super easy one the second point is your metric is your cost of goods sold metric so this is kind of where I again it's important to track things over time so cost of goods sold old we defined it a couple times as any any expense assigned to that specific job and in our case I would assign the editing cost and the shooting cost so for example if you're costing goods sold for that month let's say we had 35 000 in Revenue it costs you ten thousand dollars you know to shoot those for the month and you had 200 jobs you take your ten thousand dollars divide that by 200 jobs that equals 50.

So you made 175 for a job your cost of goods sold was 50 which leads the rest of yours um your money for allocated to your operational costs so um and that's like that's the third metric is your operation cost those would be the metrics that I would start tracking every single month and look for Trends over time you know if you notice your profit margin is shrinking why is it my operational costs are increasing is it my cost of good sold Orange increasing or is it my revenue is decreasing and then why which which one and then figure out the why if you can figure out the Y behind it then you can make more strategic decisions to um to fix the problem and keep that bottom line that profit number healthy perfect so our guest this week Derek Mayer CFO of wild video tours with some more uh Advanced and a deeper dive into the accounting of your real estate media business Derek thank you so much for for taking us down this road if uh if people have more questions like say say they have some challenges reconciling or they just have some more specific questions is it okay for them to reach out to you and if so how how can they get a hold of you absolutely yeah my email address is Derek I'm happy to answer any questions and you know if you have more you know technical or tax questions I would definitely recommend finding a professional find a good yep find someone you can trust you know you might have to talk to a couple people but feel like you can connect with them and trust them and and that will also help you in the for the future of your business absolutely Derek thanks again my pleasure all right well that wraps up another episode of the Spiro podcast this week and uh again thanks to Derek mayor for joining us and thank you for for listening for watching as well you know if you found something uh helpful that you know could help somebody else's business that you're you're uh you know a friend a colleague uh please share the the sparrow podcast with them uh make sure you like it as well that helps it get out to more people the whole algorithm thing and you know just uh they make it more visible uh subscribe if uh if you'd like to get notified of future new releases that come out and uh finally if uh if you'd like to share a comment or a question um maybe a topic idea that you'd like to see covered about the business of real estate media send us an email hello at is the way to get a hold of us and uh specifically if you have more questions about the Spiro software platform we would love to talk with you with you about that as well again you can email us hello at or visit the website uh it's very simple it's just Sphero dot media we make it pretty simple for you and we'd be happy to schedule an onboarding call with you we can do a zoom demonstration but we'd love to share with you the software that we've developed in-house to uh really manage and and grow and expand while video tours business uh in in the part of the country that we're in so uh don't forget you can catch the Spiro podcast both on YouTube if you want the video version or if you're just listening in between shoots you're driving you can catch the audio podcast on any of the major audio podcast platforms like apple music Spotify Amazon Etc so again thank you so much for taking a few minutes this week to uh to listen to join us in this education Community uh when it comes to real estate media business and we just really appreciate you being involved we appreciate your questions your comments and sharing the podcast with others just be thankful for the blessings you've been given this week and take take a breath have a great week thank you for joining us for the Spiro podcast managing your real estate photography and videography business this is a production of Spiro and wow video tours you can find out more about Spiro's real estate media business management software at our website

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