Top Five Bookkeeping Blunders In Small Business with Jennifer Cail

Navigate the treacherous waters of small business finance with our latest podcast episode featuring the savvy Jennifer Cail from Medrano and Cail Bookkeeping. Together, we dissect the critical errors that can capsize even the sturdiest of entrepreneurial ships—from the deceptive simplicity of mingling personal and business expenses to the subtle nuances of what really counts as a business deduction. Picture this: you're styling your hair for a professional event, but is that a tax write-off? Cail brings her expertise to bear on this conundrum, sharing tales from the trenches about the importance of regular bank reconciliations to snag fraudulent charges before they wreak havoc on your financial stability.

This episode isn't just a cautionary tale; it's a treasure map to fiscal responsibility and growth. We discuss how leveraging free accounting software and tapping into local resources like SCORE can keep your ledger in the black and your credit score shining. And for those needing more tailored support, Jennifer provides a lifeline—Medrano and Kale Bookkeeping, ready to answer your distress calls. It's all about laying the keel of sound financial practices, so your business doesn't just stay afloat—it sails triumphantly through the choppy seas of commerce.

Visit us at jenniferannjohnson.com and learn how Jennifer can help you build the life you dream of with her online academy, blog, one-on-one coaching, and a variety of other resources!

Transcript

Jennifer Johnson: 0:37

Today we welcome into the studio Jen Cail. She owns Medrano and Cail Bookkeeping and they assist small business owners with their finances so they can focus on what they love and what they do best. Welcome, Hi. How are you? I'm doing well. We had you in last season. We talked about a lot of different topics. Today we're going to talk about something different but still related, and it's about accounting. I know I tell people I don't math. I hate that part of the business. It's a necessary evil, Right, but it needs to be done. It does need to be done and inevitably there's always mistakes that people make All the time, I'm sure you see it a lot.

Jennifer Johnson: 1:20

I see a lot.

Jennifer Cail: 1:23

Yes, some are very creative too.

Jennifer Johnson: 1:24

Maybe they weren't mistakes.

Jennifer Cail: 1:25

Well, I'll say they're mistakes.

Jennifer Johnson: 1:35

I mean, I have seen it because I used to do my books once upon a time and I remember it was my mother-in-law does books and I remember her helping me and she's like can you just explain to me it was like the back doorway of doing something that should have been the front door and I'm like I don't know. That part of my brain just doesn't function like a normal person.

Jennifer Cail: 1:53

Yeah Well, I'm not creative, so it's fine.

Jennifer Johnson: 1:57

So yours would be straightforward you wouldn't be going through the back door.

Jennifer Cail: 2:01

No, no, I would be matching colors that don't even need to be matched. Oh my God.

Jennifer Johnson: 2:05

So let's talk about mistakes that people make in their accounting Yep. And we're just going to start there. The second half we're going to talk about, not the creative ways to go about it, but let's talk about five ways that people make mistakes in their small business accounting Yep.

Jennifer Cail: 2:28

Well, you touched on the first one. It's just poor bookkeeping, just not keeping your books like you're supposed to. That is huge. Every time people do that, they think it makes sense, but it doesn't make sense. Another one is mixing business and personal finances.

Jennifer Johnson: 2:42

Oh, people do that all the time.

Jennifer Cail: 2:44

All the time they use the wrong debit card, they use the wrong credit card. They're saying, oh, my kid's soccer is fine, it's a no-no. You can't mix business and personal, so does that get?

Jennifer Johnson: 2:55

Obviously, if you were audited, that will be a problem.

Jennifer Cail: 2:58

That is a problem. You have to provide explanations as to why that's on your business books, and then it's up to you to provide information as to that is a qualified expense or not a qualified expense.

Jennifer Johnson: 3:09

And would that be something and I know you're not an accounting attorney, but is that something that would tip somebody off on an audit Like, oh my gosh, they're not looking for that, are they, or are they?

Jennifer Cail: 3:21

It's not that they're not looking for that. It's how you maintain your records. So that's why you have a CPA that will say, okay, let's go through your books and definitely see you contributed this money to yourself, you distributed this money, what did you do? It's how you keep it in the books. As long as you're not putting it towards a business expense and thinking it's qualified, then you can always explain it. It happens Sometimes. You only have a personal card that goes through I never suggest it, but again, sometimes it happens or a business. So that would be a big one mixing business and personal. But if it's more than quite a few times, then that's a pattern.

Jennifer Johnson: 3:56

So that's definitely not. Make sure you're not doing that. Unless it is Correct, you're on camera all the time, so you go get your hair done and your business pays for it, because it's part Is that permissible.

Jennifer Cail: 4:07

That is a very gray line. Oh, so that just depends on where your CPA is looking, on the left or the right side of that line. So anything can be explained to the IRS, so you just have to have documentation Is it a reasonable call of duty expense.

Jennifer Johnson: 4:22

I'm always on camera, I'm always in front of the Yep, so do you.

Jennifer Cail: 4:29

is your hair only for business use? Well, I wear it every day, Are you? And again, you know that's kind of what they're looking at, but there's ways around items like this. Oh, that's interesting. It is interesting. Another one is not reconciling the bank accounts. There's a lot of people that don't even look at their bank statement. And at the end of the year. They're thinking what came out of my bank account? So, at the end of the month, if you're not looking to make sure all those checks came out, all those deposits came in.

Jennifer Johnson: 4:52

That's a big, big mistake that people have Well, I've had it where the bank is actually long story, short right, that means it's going to be a long story. We went on vacation a couple of years ago and came back to many fraudulent charges on our business check card.

Jennifer Cail: 5:09

That's the worst.

Jennifer Johnson: 5:10

And Did you know that as a business, you only have I think it's 10 days? That is correct, but as an individual it's like 30 or 60? 60.

Jennifer Cail: 5:21

I never knew that A business, you're held up to a different standard because it is a business and there's so many transactions.

Jennifer Johnson: 5:27

So, yes, so here we are. I mean, it wasn't small change either. It was a lot of money and they got creative. Talking about getting creative, they actually wrote checks with my signature, a totally erroneous logo. That is a logo that we use, but it's not a logo that we normally use.

Jennifer Cail: 5:48

So creative and it usually starts with small amounts too. So start with like $50, $10. They want to see what comes out of it, and then all of a sudden those big amounts come out $5,000, $10,000, $15,000.

Jennifer Johnson: 5:59

And that's kind of what it was yeah, and you didn't catch it. We did not catch it because we were gone and they were not going to refund our money. They refunded everything but like $4,500.

Jennifer Cail: 6:10

And they're like no, we can't.

Jennifer Johnson: 6:11

They're like no, we can't.

Jennifer Cail: 6:12

And we pushed, and, pushed, and pushed and finally they did Well, that's a good bank, but there's a point where you just need to continue moving forward with it and say, okay, it's not going to happen again. I tell people check your bank account daily. Right, you need to daily.

Jennifer Johnson: 6:28

Well, the sad part is that they tried to chase down the check and none of that matched up. They don't do anything. They don't.

Jennifer Cail: 6:39

Which is really wild. But by the time you think about it, the money's gone. Where did it go? You can't find it Right, so that's.

Jennifer Johnson: 6:46

I know. So yes, I mean check your bank account statement. I mean if you can check it should you be checking it daily?

Jennifer Cail: 6:55

If you can check it daily, I would say check it daily because you never know the pending transactions. What if you got charged twice and it's a big amount and you're going to overdraft on your bills? That's a huge thing also. Or payroll, which brings me to the next thing. Another thing is people confusing employees with contractors 1099 employees.

Jennifer Cail: 7:10

That is a huge common mistake. Everyone says I have 10 employees. I Huge common mistake. Everyone says I have 10 employees. I'm like, oh, that's a lot of payroll. Well, no, they pay their own payroll, all their contractors, and there's rules against that. You know employment laws. So there's a big difference in employees and contractors, especially at the end of the year where a deadline comes in and you have to give a 1099 to all your contractors, w-2 to your employees. So that's a big common mistake.

Jennifer Johnson: 7:32

You know, I just heard something, and it was regarding Venmo and those cash apps.

Jennifer Cail: 7:43

Yep, they changed something this year. They changed it again. So right now it's still up in the air. It's supposed to be documented by the actual business. But now they changed it, where maybe it doesn't need to be more than $600. Because if you think about it, how much are you sending to your babysitter? How much are you sending to your repairs guy? What are you sending? So they're trying to keep it more liable to the business owner. But that's why you have a business account and a personal account. So it's still up and it hasn't passed yet. It's just still going in. So what is it? Right now, $600. But that's why I always tell people if you do cash up or you do Venmo, they are responsible. But just do one, just in case Got it, because you don't want to be the one to tell the IRS oh, I was waiting for you guys to pass a rule. They'll say, oh great, we're still waiting on that too. That's so funny.

Jennifer Johnson: 8:25

It's hilarious because somebody I'm attending this event and I bought the tickets Everybody has to pay me back. And they're like do you have Venmo, do you have, is it Zelly? I'm like don't have any of them, but I guess I need them, it's the way of life you need to.

Jennifer Cail: 8:40

It's the way it happens right now. You could tap a phone and get someone's information right away. So what do you think about money? Honestly, it's crazy. I have contractors that prefer to get paid on Venmo. I'm like really Okay, it's a business transaction. I guess I know, I know this is crazy to me.

Jennifer Johnson: 8:57

I know.

Jennifer Cail: 8:57

And the fifth mistake that I most commonly see is people don't know the deadlines for taxes, quarterly taxes. What I know Like big taxes Even small ones, like state taxes, if you have a sales tax. I don't know if they're supposed to pay it by the next month, or quarterly taxes or what are their tax deadlines. So that is huge. These are the most common mistakes that I have to go in and help and fix where they're coming and they're getting notices and it's just like one snowballs into another.

Jennifer Johnson: 9:21

Then it becomes a really big problem and all of a sudden it's out of control and to regain that usually is a lot of money.

Jennifer Cail: 9:28

And a lot of work. And a lot of customer service people in the state that are not happy to pick up that phone call.

Jennifer Johnson: 9:33

Yeah, I would imagine. Call the.

Jennifer Cail: 9:35

Department of Revenue sometimes.

Jennifer Johnson: 9:36

Oh, I don't want to. No. Four hours to get through, let's not. Oh my gosh, I can't imagine the things that you've had to clean up.

Jennifer Cail: 9:44

It's been fun.

Jennifer Johnson: 9:44

Like you said creative, creative.

Jennifer Cail: 9:47

It's been fun. Yes, but it's also asking what were you thinking? Can you walk me through this process? So I can understand, and then I can explain what you're trying to do.

Jennifer Johnson: 9:55

And then redirect you.

Jennifer Cail: 9:57

Right, Sometimes it is logical thinking, but when you're doing math it's not always the same, especially with taxes.

Jennifer Johnson: 10:03

Is math really logical? I mean not in my brain.

Jennifer Cail: 10:07

No, math is true numbers, I love math.

Jennifer Johnson: 10:09

Numbers don't lie.

Jennifer Cail: 10:10

Numbers don't lie. But how do you get that number?

Jennifer Johnson: 10:14

Well, I added oh, I maybe did it wrong in the calculator.

Jennifer Cail: 10:19

That nine happened to be a four and that's skewing a lot of numbers, oh, my gosh Correct.

Jennifer Johnson: 10:23

All right, when we come back from commercial break, we're going to talk about these mistakes and how we can avoid them. Is your closet overflowing? Or maybe your kids' closets are as well, or maybe you just want to redecorate your house. If you're wondering what to do with all that stuff that you've accumulated, bring it all to True Fashionistas, or even ship it to them for free. They'll sell your unwanted items for you by taking away all the hassle and doing all the work, and all you have to do is sit back and collect your money. You can reach out to them online at truefashionistascom. Come into the store or check them out on Facebook or Instagram truefashionistascom. Come into the store or check them out on Facebook or Instagram. That's truefashionistascom. All right, friends, we're back in studio with Caial and and we are talking about business accounting mistakes. We've all been there. We've all made them.

Jennifer Cail: 11:12

I am sure.

Jennifer Johnson: 11:13

I make them too, you do, I do, we're all human. We're all human. I say po-buddies, nerfect. So why do people make these mistakes? Is it sheer time?

Jennifer Cail: 11:23

It's limited resources. If you think about it, you're a small business. You're getting up in the air. You're trying to figure out the admin. You're trying to figure out the brick and mortar. You're trying to figure out what is going on. Accounting is not something that you're going to dive deep and do it, so you're one person sometimes. Look at the solopreneurs they're trying to do it all. We all start somewhere. So it's limited resources. It's also not having the training. There's a lot of times they won't reach out to get at least consulting, set up their books properly. What does it look like? What am I supposed to do on a monthly basis? So it's just growing too fast. You want to grow, but numbers are important. So these are common mistakes. It's just making sure that you have the right background that you need, and this is common mistakes that people have.

Jennifer Johnson: 12:03

Right, yeah, consequences Right. I know the big bad wolf will be knocking on your door, but besides the IRS coming after you to audit and want their money, what? What other consequences are a direct correlation of not having your financial house in order and making these mistakes?

Jennifer Cail: 12:24

Financial loss. Let's say you overstate your income and you think you have $200,000 that you made this year and you look at your bank account, it's negative $500. You've lost so much money because you don't understand what's going on, so that's a huge loss. That's damaging your credit. Also if you end up getting all these credit lines and you're thinking, oh, I'm going to pay this back, or just going into debt and not being able to fix that I want to talk about I know this is often a tangent, but debt, oh yes.

Jennifer Johnson: 12:53

So I remember talking to somebody a while back and they're like you know what? But not all business debt is bad debt, and I think of debt as like, oh my God, it's so bad. But they're like you've got to leverage it too Correct.

Jennifer Cail: 13:08

So there is actually a company locally that leveraged their debt and ended up selling for about six times that debt. How is that possible? They leverage and they grew quickly. That is a risky move. It worked in their favor. I can see where someone says debt is not bad for the business if you can control it. You buy equipment but it's going to pay off. You know your books are in order. You get a line of credit but you know you're going to pay it off, so you're always forecasting that money that's coming in and then when you sell you can equate that debt in there. But it's too risky sometimes.

Jennifer Cail: 13:46

And these are those consequences where, if you don't have those accurate books, that debt can get out of control.

Jennifer Johnson: 13:52

And that's another consequence.

Jennifer Cail: 13:54

Correct Right. A lot of people think business debt is like personal debt and it's not. Business debt is ingrained with your personal debt too, so your personal score affects your business debt, it does Okay.

Jennifer Johnson: 14:06

So if you have a lot of debt personally, it's going to affect your. Is it Dunn and Bradford? No, how do they?

Jennifer Cail: 14:13

Dunn's and Bradford they do it the. Dunn's number. But they also pull your credit report Because when you start off, who's the guarantor?

Jennifer Johnson: 14:19

sometimes it is your business, but it's your personal.

Jennifer Cail: 14:21

So as your personal credit score is lower than what? 650 now, you're not going to do anything good with your business loans. You're going to get those high interest rates. You're going to just debt snowballs there. What's a good credit score? Well, nowadays depends who you ask.

Jennifer Johnson: 14:34

But I would say 750 or above.

Jennifer Cail: 14:37

Okay, got it, but it depends, because I see people with 800 that can't get credit sometimes.

Jennifer Johnson: 14:41

Isn't that crazy.

Jennifer Cail: 14:42

Exactly Because they have no debt.

Jennifer Johnson: 14:46

Oh, so you know. I mean, I'm glad we're having this part of the conversation because I think, as business owners, most people don't see that personal affects business and business does affect personal Right, and what you do in personal you're going to do in business.

Jennifer Cail: 15:03

So if you can't keep a budget, on your personal side. How are you going to keep it on the business? It's a pattern, it's your lifestyle. Just because you made a business doesn't mean you made a new person too. That's so true. It's just they affect each other. So if your house is not in order on that personal side, there goes a business.

Jennifer Johnson: 15:24

Absolutely so, given the fact that we know that mistakes are going to happen, how can we avoid those? How can we avoid making these mistakes that seem like they're no big deal? But, to you. They're a big deal.

Jennifer Cail: 15:33

They are a big deal. I always tell people if you can't afford an accounting software, find one that works with you and is probably free. There's a lot of free ones there that can start you off. Get an accounting software. They walk you through it. Get a consultation with a bookkeeper locally. Call someone. Get training on YouTube. Don't go on other social media platforms but go to actual, substantiated channels. There's free courses on the college websites that you can get. Local colleges they give free accounting softwares and energy trainings, so you can get so much of it. This is how you prevent it. You want to learn as much as you can on the accounting side and then just call and ask your state as well. You can call Florida Department of Revenue hey, I think I owe this or I think I might have to pay sales tax. Call people who actually know, but don't stay to the point where, when you're in that bubble where you don't know how to get out of it, you start asking for help. It starts from the beginning.

Jennifer Johnson: 16:26

And that was going to be my other question resources for small businesses to learn the things that they don't know. And you've said you know some of the like. The community colleges have things Right.

Jennifer Cail: 16:36

There's also SCORE. They're local, they're free and I'm giving a training coming up. You know there's a lot of mentors on there that just love to provide help and assistance to business owners. Get your local score involved, go somewhere and just ask for help. The library has books for bookkeeping, for dummies.

Jennifer Johnson: 16:55

It literally says something or it says five things to know if you start a business for dummies probably, although I have a complaint to make to those people because there's one Spanish for dummies and I couldn't figure it out.

Jennifer Cail: 17:11

That might be a little bit different, I probably can't figure out German for dummies. But there's always help everywhere. It's just getting it and as well as a business owner, you're doing so much also, so maybe it just might be hey asking a significant other for help, someone you know, a friend who did accounting or knows a little bit about accounting, just something. You want those accurate numbers and if not, the minimum is make sure you know what's in your bank account, because that's important.

Jennifer Johnson: 17:36

It is very important. Well, you have shared so much for our listeners here. It was really packed with good information. But to take this further, if our listeners want to reach out to you for your services, how do they reach you?

Jennifer Cail: 17:51

All right. So I am on Instagram, I am on Facebook, everything is Medrano and Cail, my website and my telephone number, which will never change after so many years. So direct cell phone 239-677-5888. Definitely, I answer all the texts and calls that come my way, so it's very personalized. I love to help individuals and she does.

Jennifer Johnson: 18:09

I've texted her before so I know she answers. It was fabulous having you on today. Thank you for having me.