3 Keys to Creating Financial Stability in Your Business with Krista McLellan

3 Keys to Creating Financial Stability in Your Business with Krista McLellan

Welcome to this episode of The Determined Mom Show. I am your host, Amanda Tento, and I have the amazing Krista McClellan here with me. She is the owner of E&M Bookkeeping and a published author, QuickBooks, an online geek who built her bookkeeping business as a single mom after her husband lost his battle with cancer.

We will be talking about something very important to us business owners. Thank you for having me. It’s great to be here, share some information, and spread the word that we can do it as business owners. So before we get into the actual topic, I would love for you to share your story and how you got into bookkeeping and figured out all of this enlightening stuff you will share with us.  I started, it was an accident. I was pregnant with my first child and didn’t want to leave her.

I wanted to stay home, so I started a home daycare business. To stay home gave her great socialization and was good money. However, I was good at doing the books for it. And my tax professional asked me if I could help his other daycare moms do their books. And my husband became a firefighter, and firefighters always have part-time jobs or side hustles.

And so I helped them. And then it just got so busy I had to shut down the daycare. It was a total accident that I should have known I’d go this way because everyone in my family is a bookkeeper or an accountant.

It is what we do. So I just shouldn’t have fought it.  I’m good at it. I love empowering business owners to understand their numbers. I loved being a full-time mom and making money because I could work around my kids. It was a blessing when Scott got sick because computers would travel, and we worked in doctor’s offices and treatment centers.

And I worked when my kids were at dance or soccer, and I could be flexible because of what I built. What a blessing that is. And that’s really what this show is all about. It’s about having that determination as a mom, which you had. And making it work, like whatever you need to do to build your business, whatever you need to do to be there for your kids, that’s what we want to do.

And I love that you are a determined mom as well. The proverbial crap hit the fan after Scott passed away, and I realized how badly off we were. Firefighters, you don’t get life insurance, and in our tiny town, there’s no disability, and firefighters don’t pay into social security, so you don’t get that either.

Here we were without his income, and I was on my own, and I had to figure it out, and I remember. On some dark days, do I get oil or buy food? And then there was a, my kids were always, they were young, they were six and nine when he got sick. And so they were part of figuring out our finances because I was honest with them.

And I said it’s not that I don’t want to give you what your friends have. But here’s the reality of our life, and we decided together to fight for our home, not give it up, and move back in with my mom. We decided to give up Christmas presents and cable and work on our finances together.

One Christmas, I was trying to figure out how to get new tires, but I needed to get oil so the pipes didn’t freeze, and my children, who were nine and 12, my oldest, slid the Christmas gift cards she got. She slid them across the table to me and said, Mommy, we want new tires for Christmas. Oh, my goodness. That touches your heart.

And it’s like the note also. You’ve raised them in a way that they want to give back to the family, and they’ve realized what contributing to a family means, too. It was a pivotal moment for me because of The guilt and the shame I felt over being put in that position. It was brutal.

I was proud of her. I was proud of my children for wanting to do that. But at the same time, I was in this position of feeling like Star-Lord O’Hara, right? I will never be poor again. At that point, I just started devouring any information I could about understanding cash flow and making a profit and dealing with debt and all these things that my Children, then we gamified it as a family on how to put us in a better position.

And I shared that information with my clients so that they could put themselves in a better position. It was. It’s us working together and not being afraid to say, you know what, that’s not the best use of our funds right now and looking at our priorities and understanding that we have a lot of say in our cash flow.

That’s awesome. And I’m sure that was a valuable lesson for your kids at that point too. And what. What does that look like for them now, as they’re a little older? So now it’s been 11 years since Scott passed away. They are now 20 and 23. Wow. My oldest did her bachelor’s degree in three years and her master’s in one.

She has her master’s in accounting. She is now studying for her CPA. My youngest went to college on a full scholarship as well. They both got full academic scholarships. They were both very motivated students. But my youngest realized that college wasn’t for her. There needs to be a degree that is going to serve her.

She is more interested in some blue-collar skills and doing very well at them. They moved out together two months ago into their apartment. They both support themselves. They pay for their cars, they pay for their insurance, they do not, they don’t put their hand out and ask me for money.

You’re a very independent young woman doing very well on their own. That’s awesome. They’re thinking about buying a house together as an investment. A duplex to look at. They could live in one half and rent out the other. That’s awesome. That’s so smart. And I love that it gives me goosebumps because I have three girls, and we have that vision of like them always, sticking together and being together and having each other’s back.

So to hear that they do that’s awesome. It is. It’s, I’m very proud of the relationship they have with each other. And with me, it was like three of us against the world for a long time, and we still are very close and that adversity and refusing to give up, we refused to give up.

We were not going to be victims. We were not. We refused to lay down and let the world beat us. And there’s been a lot of joy and, when you have no money, you do many things to be creative, to entertain children. They and their friends will come around and laugh over memories about what we did to entertain ourselves for no money.

And it’s beautiful memories of just being fierce and not. Not wanting to be a victim because we aren’t that’s great. And that’s that alone. That one experience gives them tools for the rest of their life that will allow them to, no matter what happens to them. Bounce right back.

I love it. Teaching children at a young age how to understand cash flow is huge. Still, I find that the first thing I have to do is teach the adults because a lot of adults need to understand whether they’re in business and are good at making a sale and making money, but then they need to know where it goes.

And that’s what I love to do. I’m not a gatekeeper of information. I love to share it. I recently got fired by a client because I trained the client so well that they don’t need me anymore. Oh, that’s great. I knew it was coming because I saw as they were learning. I saw them need me less and less.

And for me, it’s more like a graduation. And when they said, I don’t, we think we can do this independently from here. And I said, yes, you can. That’s awesome. That also brings a little tear to your eye. It’s like your client’s baby is moving on. It’s exciting, and many people like, why would you train yourself out of a job?

It’s not training myself out of a job. They’ll come back to me for other questions and information, and they’ll know that I’m here to support them in Their profitability and their success, that I’m not here trying to bill for every phone call and email that I’m here to support them for their success.

But it’s understanding your numbers. I call it getting comfy with the F word. It also opens you up to help someone else who needs your help. Wherever that client was at the beginning, they’ve graduated, and somebody else is starting over at the beginning.

Three keys to creating financial stability

 I call it getting comfy with the F-word finances. Money is not a thing that we easily talk about in this society. It’s Facing our debt; there’s a lot of shame and blame. I was working with a woman yesterday and showing her how to use  QuickBooks and how to do it herself again. So she doesn’t have to hire me to do her books. She can hire me to do it herself. And so, as she was going through, I could feel her getting upset with herself. And I said, we don’t should on ourselves.

This is what your past was. You’re seeing it now because you’re tracking, and you can be more intentional. So the big thing, the three keys to getting financial freedom, is, first and foremost, doing your tracking. Understanding that you have to track where your money comes from and where it goes, you can take tax deductions if you’re in business.

If you don’t track it, you can’t. Deduct it. So, you maximize those deductions by tracking your expenses and talking with someone who understands what you can and can’t deduct. And that’s one of the big things is just tracking it to maximize those deductions. And by doing that, you also make yourself audit-proof.

The IRS is auditing one of the biggest fears most people have. I will tell you, anybody I work with brings the audit on. We win. Anytime I had a client, we went back and forth. She bought a yacht. She was a real estate agent, and she bought a yacht. I disagreed with writing it off. I said you are going to get audited.

This is a red flag. And she’s okay. So we took a bet, a little wager, and said if you win, I’ll give you three months of free bookkeeping. You can take me out on the yacht with my family if I win. So she’s, and cause she did, she got audited. She won. She’s a real estate agent who was showing her client, potential clients, the real estate on the water.

Wow. The IRS allowed the deduction, but we got to take more deductions because everything was right. Everything was there for the IRS to see. We had her eyes dotted, her T’s crossed. We had the source documents. We had everything the IRS could tell. She was serious with her books. She was not trying to shove stuff under the rug.

So they granted it to her. That’s awesome. I was floored, happy for her. But, I’m like, that’s a red flag, and it was a red flag, but we won the audit. It’s okay to audit. We can get audit-proof, which means it’s not that you’re not going to get audited, but you’re going to sail through and potentially get even more deductions.

And once you get audited once and don’t lose, the chances of being audited again are small.  Because they know you’re like you, you said she was serious. So they know that you’re serious if you haven’t haven’t done anything wrong. So when you can pull those documents, they look for the, it’s the proof of what you did.

It’s the receipts. It’s all those things we need to do that  I say you need to track your income and those receipts to prove what you spent. And when it all matches up, the IRS sees That you’re doing what you’re supposed to do legally. When you’re in business, you are legally obligated by the IRS to do your bookkeeping.

It’s mandated. So when they see that you’re doing it and doing it right, they don’t come back and bother you again. They’re looking for the people that are messing around. So that leads to cash flow. When you track your income and track your expenses, you can be more strategic with when you pay things.

You can be strategic when you bill things, meaning you can make the most of your cash flow and keep more cash in your pocket. And what do I mean by that? Cashflow is the lifeblood of business. It’s all of the inflows and outflows and that’s all accounting is tracking. Where did it come from?

And where did it go to? When you break it down to being that simple, it’s okay. Why do I need an accountant? You can do a lot of it yourself because it’s that simple. And when you see, Hey, okay, so I only have income coming in this date, then you know, not to pay a bill that will bounce.

Then, you can stretch out that payment. And so you have the money that will cover it, or you can get better terms and negotiate with your vendors for better times to keep more money in your bank account for a longer period. And it also means maybe it’s at the end of the year, and you don’t want to invoice because you’re saying, okay, here’s my profitability right now.

This is what I’m going to get taxed on. So I’m not sending out that invoice to get paid until January 1st, or I may have all this profit because, again, we’ve done your numbers. To reduce your taxes, we’re going to make a purchase that you’re going to make in January or February anyway; make that purchase now in December.

So again, it’s still going to be expensive no matter what you were going to spend the money, but now we’re going to make it work for you and make it so that you have less taxable income this year and keep more money. In your bank account, I love that I love playing games with numbers. It’s fun.

And it’s one of, for me, at least this is historically, I’ve never thought that far ahead of a purchase. Oh, I’m going to need a new computer soon. I think it is something other than September, January, or whatever. It doesn’t occur to me. I need it when I need it.

A lot of business owners are like that. But if we can get that strategic hat that you’re putting, you’re talking about and put that on ahead of time, or have someone in our pocket like you, that’s going to peek out and say, Nope, do that this time. That’s even better.  I have a lot of clients that used to be weekly, then they went to monthly, quarterly, and now they’ll touch base.

And what we do is we’ll do a mock close in October. So it’s starting now. We’re starting to book our mock closes to see what they look like. A, and make sure they have all the documents ready. B, it gets to see, okay, where are we at for profitability? And now let’s be strategic with where we’re at to decide when we will buy a necessary item, equipment, new computer, whatever it might be.

I had one client, who just gave herself. She, her husband, and her children are on the payroll. She gave them all bonuses. Because now, yes, you’re paying payroll taxes, but it’s going to your family. And now it’s a business deduction instead of just an owner’s draw that you will pay taxes on. I love that.

I love it, and we had talked about this a little bit on the pre-call, it is about making your family members on the payroll. And this is, I don’t know if I’m jumping the gun here, maybe I’m jumping the gun. But I love that you mentioned that because that’s something that it didn’t even occur to me to do.

So, can you chat about that?  I put my kids on my payroll. First, you cannot put yourself on the payroll if you’re a single-member LLC. The IRS doesn’t like it. You can, but then your accountant has to do a reverse and treat it to your taxes. So why pay them to do that? It’s your money.

You get to take it. However, I put my children on a payroll at a young age, and I did that for two reasons. First of all, because I needed to take money out of the account out of my business account to pay my bills, right? It’s my money, and I’m earning it to pay my bills. Some of my bills included their They’re clothing.

My youngest did dance. My oldest was more into sports. So what I did is I put my children on the payroll. Yes, they did work in the business. At first, my youngest was, there were more social media pictures than anything else, but you get to pay them for being that. My oldest quickly learned she loved accounting and started helping me at 12.

She started helping me in bookkeeping. My youngest was good at social media. She helped me with my website and things. I paid them for that. Then, we started with weekly because they were younger. They then paid for their wants and their needs. I gave them a paycheck based on what I would have paid for them for their dance, soccer, clothes, and all these things, and they then paid for those things themselves.

So, instead of being an owner’s draw, which is not a tax deduction, It was now a business expense because I paid them payroll that went into their business and their personal banking accounts, which have my name on it, too. After all, they were too young to have their own, and they paid their bills and they learned how to handle their money. We moved it from weekly to every other week to once a month so that they learned how to stretch their money better.

And they started 401k. Wow. I then contributed to their 401k, now a business deduction, but it’s paying for my children’s future.  And is there a minimum age that you can do that? Can you, like, what about work permits and things like that? You don’t need work permits when they’re your children.

However, I had to have my children on workers comp in some states. Okay. What are they going to get? A paper cut? Who are they going to sue me?  I strained from looking at the computer. I did have to have them on workers comp, which I thought was crazy.

I’m paying their health insurance and doctor’s bills, but that’s New Hampshire. Other States have other laws I could have. And I know there are some of my clients, including a photographer. She has her six-month-old because she uses her baby all the time. She has her six-month-old on the payroll.

That’s great. I love it. I have an eight-month-old, so I don’t know if I would use him for anything in my business, but I have to think about that. Social media posts. Maybe something. And when I didn’t pay them more. So there’s each year, there’s a threshold. And this year, it’s 12, 600.

And again, I’m not a tax expert, so I don’t always keep—my tabs on those things. But I believe it’s 12,600 this year. I never paid them more than that because they didn’t get all their taxes back up to that point. So I didn’t pay them more than that. It sounds like a win-win for the business, for you, for your kids, and their cell phones. Because they’re in the business now when they got cell phones, and I put them on my business plan, and they do work in the business. I was able to make the most of being a business owner. There are all sorts of things you can do. There are hacks written for business owners.

And when we realize that, the government rewards us for being in business. That’s where the magic is. Awesome. It gets super exciting. That’s great. I love it. And did we go over the third key? So, three keys were doing your tracking. So that you can maximize your deductions, that was number one.

 You want to ensure that you are, and I love making sure that people are audit-proof so that it doesn’t mean you’re not going to get audited, especially with the, what was it? 11, 000 or 11. I don’t even know how many. Many new IRS agents are auditing small businesses because they know that we don’t do our books well.

So we want to become audit-proof, which means still tracking your stuff and making sure your paperwork is aligned to support what your books say. You have to have a piece of paper to support those expenses, and you have to have, if you look at your balance sheet, you have to have a document that will support each number on that balance sheet.

That’s what they’re going to look for. They will look at your credit card, and you must ensure you have proof of your expenses. You can’t just say it’s a business expense just because you bought it. From your home office, which could be your bed or your couch, doesn’t mean it’s a business expense, right?

You can now be strategic with your cash flow to grow it because when you grow your cash flow, and you can keep more money, now we can survive when there’s a shutdown, right? Many businesses that worked with me and followed my suggestions, had the cash flow set up to survive the three and six months shutdown.

They could go through it and sail through it without a problem because they had listened to some of my advice about having that emergency fund that you bill from having a good cash flow. That’s awesome. Negative cash flow, sales, it’s not all about sales, right? You can have a million dollars in sales, but if it took you 2  million to make those sales, you now have a negative cash flow, and you could have gone to the beach and done nothing and made more money.

 That’s a really good point. Unfortunately, we should have gone to the beach at that point. And I love those three keys because it sounds really simple the way you put it, and it doesn’t sound like it could be any simpler for us. But if we need help with this, can you help?

I am available in multiple ways, so you can always hire me. You can go to E and M bookkeeping. E and M are my children’s initials and backward. It’s me. I am not the most creative person, so it came from this. But I also have what’s called moneymaking mamas, and it is on Facebook and Instagram with a private group for women-empowered moneymaking mamas, where I give a lot.

Free content to help you do all these things. I also have courses available at Krista McLellan where you can sign up for a membership and access the courses, or you can work with me in A group setting where we go through every month I go live. We talk about one of the parts of the course and answer questions.

I’ll teach for one week, and then a couple of weeks later, I’ll answer questions so you can implement it. Or you can always set up a one-on-one with me, and we can say, okay, where are your pain points? Where are you at? And how can We make the most of this for you for what you need? I have a DIY membership for women who are doing it themselves.

And so instead of having to pay me all the time to help them, we have a monthly meeting where, okay, we answer questions. I want to give you examples of next steps of what you need to do. I usually give homework. We record the session so you have it to review later every month. I’m your accountability accountant, is what it comes down to.

I ensure that you’re staying on track and doing what you need to do so that every month end, you will be year-end ready. You won’t worry about tax season. I love it. Those are so many valuable ways. It sounds like there’s no way that. Anybody cannot work with you if they need help.

You’ve covered every single last little objection I don’t have time. If I don’t have money, could you do this? I don’t have, like, resources or both or whatever. It sounds like you’ve covered all of the bases. That might be your accounting side, but I’m not sure.

I think it comes from. It’s everything I wish I had when I started. I learned some very hard, humbling, expensive. Lessons, and I don’t want someone else to be in that position. So, whether you need some free content, I try to throw it up on Instagram. I have both E&M Bookkeeping on Instagram and money-making mamas.

I have the private group is just for women because women do things a little differently than men’s business. So, I like to cater to women. And when I say money-making mama, it doesn’t mean you have to have human children. Sometimes, you’re a money-making mama with fur babies. Sometimes, you’re just the mama of the business because you’re taking care of everybody else.

And you’re the mama, and they come to you, look to you, and you’re nurturing and putting everyone together. So it’s any woman. It’s being a woman in business, whether it’s your husband’s business that you’re running your own business or a side hustle that you’re doing part-time while working full-time.

It’s a very broad range, so I give all the information I wish I had, whether it’s little bite-sized chunks on social media or in the courses, which, again, I don’t want to sell each course individually because. With a membership, you can now access all the information, and it’s all recorded.

You don’t get access to me directly, but if you want access to me and the group setting, I can answer questions and teach you. We can have those discussions. I like the group program because we meet once a month, and we get to interact where here’s my teaching in-depth, sharing a screen.

And then let’s do some Q and A. Where did you get stuck? What was hard? What are you stumbling on? Some people want the 1 on 1, and that’s okay too. Those are all extremely valuable, and I’m excited that you’ve been here to share this wisdom with us. Where is the best place for people to reach out to you?

I would say on Facebook, Money Making Mamas, or E& M bookkeeping, and I will share the links with you so you can share them with your audience. And if you’re a female, you can join the Empowered Money Making Mamas if you want, if, which I assume with The Determined Mom show, we’re all women.

Check me on social media to see if you connect with me and if I speak your language. And if you want more, you can always reach out through social media. All right. That sounds great to me. Thank you so much, Krista, for being here with us and sharing your amazing expertise, knowledge, and experience through all of the things you’ve been through.

Thank you for having me because women need to know we can do it. We can, we’ve got this. And it’s not that you’re not good with money. It’s that no one showed you how. That’s very powerful and very true. Awesome. Thank you. Thank you.

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