Episode Transcription

23: Don't Become a Statistic By Winging It- with Malisa Clarence

 All right. Welcome to another episode of Classroom to Business. Today I am super excited because I have another guest to come and talk to us, and another non-teacher guest, but a guest that I think we all need to hear from. So today I've got Melissa Clarence from the Ask Hub. Melissa has been a bookkeeper for 21 years helping small businesses.

With their books and basically there's nothing pretty much that she hasn't seen. Malisa is actually the person who, if you guys have been following along, helped me realize. That my a t O portal had been hacked. I had no idea, absolutely no idea. My accountant hadn't even gotten in touch with me, so this is how magical Melissa is.

I think she's totally amazing, and I thought it was such a great idea to get her onto the podcast, to get her sharing with us. The importance of understanding our financials and what to focus on. So welcome to Classroom to Business Business. Thank you for being here, Melissa. Wow. Thank you for that amazing introduction.

I feel very bad that I picked up that error for you, but I also feel very good at the same time. But yeah, basically I've been doing bookkeeping for a long time. I'm a mum with three kids, so I've, I've got the whole juggle going with business and family and yeah, I, I'm, I'm excited to share some of my little tips with your listeners because it is, The part of business that people don't really want to think about, but it's one of the most important parts of your business that you do need to think about?

Yeah, I think you just hit the nail on the head. So many ladies that I work with are, they're amazing at what they do. Like they are educators. They all come from different backgrounds and have different amounts of experience, but the one thing that they have in common is that they love working with their students and helping.

The problem with that is, They tend to focus on that and not so much the business side of their business. And that's the whole reason that I'm here. But one of the key parts of business is making money. Mm-hmm. And I think that we just focus on, okay, I've gotta get more students, I've gotta get more students to make money.

But there's so much more to it. It's actually understanding the numbers. So, I guess from your point of view, you know, you've worked with a lot of small businesses. What would be some of the key things that stand out that you would suggest my listeners to really sort of focus in on or hone in on when they're looking at their financials and their business?

Well, the first thing in a, a startup phase cycle of a business. Is trying to work out how to generate enough income to make the business viable, because at the end of the day, no one wants to work for free. So you've got to set a goal in your head within that first couple of years of business as to what you want to earn.

And then you work backwards and you break it down to. How many students that takes what, you know, the, your sort of income model. So the first thing is to set an income goal because without a goal in terms of your income, how do you know what you should be doing? Should you have 10 students, 15, 20, that sort of thing.

And that's really set to your family's budget. So the same thing happened to me about 10 years ago. I decided to change from a sole trader into a company. And when I did that, I needed to work out what sort of a wage to pay myself, and I had no idea because as a sole trader, you kind of just draw the money out of your bank account and you go to your account and at the end of the year and you sort of, it all comes out in the wash, but it's a different situation when you turn into a company.

And so I had to sit down and basically do my family budget and say, well, how much money do I need? Because that's the starting point. And that's the minimum viable product basically of what you are going to create in your business. And everything else after that is like the sweetener. So I would suggest if you're not sure about these goal setting things, and I'm sure that you've gone through it in your program, but the starting point is to know how much money you need to earn from this business, and then how many students that you need to get to that income point.

I think that's exactly right. I just did an episode on pivoting from one-on-ones to groups because it's a mistake and you are nodding cuz you probably see this all the time. It's a mistake that lots of tutors make in that they only work one-on-one with students. Now I get that some people only want to work with one-on-one or, or want to work one-on-one in those situations, but it really limits.

Their ability to make revenue and you know, like you, you know, you are a mom. I'm a mom. Most of the ladies I'm working with are parents and we have a limited amount of time. So I'm sort of starting to try and talk to my ladies about looking at your margins. Yes. And the actual profits that you're making.

So do you find that a lot in the position that you are in, that people are just looking at the money they're making rather than the actual profits? Yeah, I think it's, it's a massive trap for small business owners that they run their business from their bank account. So they look at their bank balance and they general and they, they think about their business ideas and decisions from what money's in the bank, which is such a hard thing to do because there's things in your bank account that don't belong to you.

So there's obviously tax money that you need to pay if you are in a situation where you're paying yourself a wage. There's superannuation that's sitting in your bank account. So it's a real problem to run and to make business decisions based on the value of the money that's sitting in your bank account because it's actually not realistic.

You need to understand what was the income that you generated, less the expenditure. Now no business has zero expenses even. As a business where you're just literally selling your time, which is probably that one-on-one tutoring scenario that you were talking about. People often think, oh, there's no costs involved in me running this business cuz it's just me.

But if you think about it from a business perspective, there is costs because, you know, maybe you've got a work from home office, so there's potentially no rent or. You know, you've got internet, you've got phone, you've got advertising budget. There's, there's so many little bits and pieces that you have to pay for to be able to operate.

And after those expenses are paid, that's what your profit is, not the actual money that's coming into the bank account, which is the terminology for that is turnover. A lot of people have probably heard that and not understood it, but turnover is just the money that you generate before your account for any of the expenses that you are.

Then. Spending on your business? Yeah. Okay. And that's, that's where it comes back to, like you said, the, the hourly rate or that one-on-one fee that we charge has to be more to cover our expenses. And I think. A lot of ladies look at their tutoring business and they think I'll just bring staff in to help me work with more students because my wait list is growing.

But they're not actually looking at, okay, well I'm charging $90 an hour. I'm paying my staff member 60, $65 an hour, plus I've gotta pay super. And now there's not much left in there. And I think that that's, Is such a common mistake that so many, I mean, I made that mistake too, a hundred percent made that mistake in my business.

I just thought, I'll get more staff to help me grow. But it actually was the more beneficial move was for me to look at my services and see which service was providing more revenue, and it was small groups or the school readiness or the homework club and things like that where I could get. Three or four students paying $60 for that one session, giving me 240 ish as opposed to one student paying 90.

The other thing that a lot of ladies that I work with do is, and then I'm, I say this, there's so much love but I feel like they make things harder for themselves because my question to a lot of the ladies that I work with is, do you have. Any sort of, you know, accounting software or program that you use, and a lot of them say, oh no, I've just got a spreadsheet, or My husband made me a spreadsheet, or, or something like that.

What are your thoughts on managing finances in that way? Well, I think I'll take you on a little journey of history and my history as 21 years doing bookkeeping. So when I first started out, I worked in an accounting firm and it was pre G S T. So that gives your listeners an idea of how old I am anyway these small businesses used to come into the accounting firm at the end of the financial year with a box full of receipts.

And they'd give it to the accountant. And my job in the accounting firm was to sort through those receipts and collate the information to be able to pro produce the tax return. Now, when the G S T started in Australia, it required a quarterly reporting cycle because you had to tell the, the a t o how much g s TD collected and paid.

And I knew back then the box of receipts had to go out the window. So it started to get replaced by more. Spreadsheet type software. Still very basic in its in its information. MYOB was, you know, the, the software of the day back then. So we progressed from a shoebox to a set of spreadsheets, and I think what Zero and other online software has tried to do is move us out of that shoebox type.

Scenario and try and automate as much stuff as possible because at the end of the day, nobody that's listening to this podcast wants to be a bookkeeper. They want to be a tutor and they wanna work with their students, and so, The, the problem that I find when I'm trying to help my small businesses out is that there's no love for bookkeeping.

And, and I get that it's a really, really boring part of your job. But it's such an important function. So by utilizing software, software like Zero. You can harness the power of automation so that you don't have to do this as a drudgery job. It's really, it becomes more of a, you should look at your profit and loss every month and get excited about how much money you're making, so it draws you into wanting to look at your numbers rather than going, oh my gosh, I've gotta sit there at nine o'clock at night once I've put the kids into bed and start typing all of these numbers in.

And no one wants to do that. I totally agree. So whilst spreadsheets will do the job, They're very manual and they also are not exciting. And you can make mistakes. You can miss out on income. You can miss out on expenses, and your accountant doesn't like them either because it's such a manual process for them to have to produce a tax return based on your spreadsheet.

So I obviously work a lot in Xero with my small businesses. I cannot Talk about it favorably enough because of the automation and, and that's really like even in the small, early days of your business where you think, oh, I don't have that many transactions. I'll just start off with this other, you know, man, more manual system.

If you start off in zero from the beginning, then you've got the numbers from the beginning all the way through your business journey. And sometimes it's really cool to go back and have a look at what you were doing three years ago. And I do it myself in my own bookkeeping business. And I look at my profit and loss, and I look at my turnover from, say, six years ago.

And I actually can pat myself on the back a little bit and go, you know what, Melissa, you've actually done pretty well in the last six years. And, and I think that's really important to keep that continuity of software for those reasons as well as the automation and making your accounts really easy.

Yeah, I, I totally agree. A lot of the time people will say, I'm just starting out, so, you know, I don't wanna get anything yet until I'm making more money. But I do remember when I started my first tutoring business, it was the MYOB time, and I had, you know, MYOB then and the accountant put me onto it straightaway, even though I had no money coming in.

But it was exactly like you said. It was so exciting that I can look back at that and that is the basis of how I know what I was doing. So, you know, I'm talking to ladies about building and starting and growing their businesses now. That's, they're my, you know, statistics and data that I go back and look at and I say, whoa, this is sort of how much I was spending on this.

This is how much I was making in 12 months and 18 months and whatever. But even now, and we just did a quarterly planning session with the members inside of my tutoring, growth membership, and I got everybody to pull up their profit and loss, you know, for the quarter just gone compared to that same quarter of the previous year.

So that they can see I'm growing or Oh crap, I've spent way too much compared to this time last year. But you're right, it's exciting and you know, business can get hard sometimes and lonely and having that, you know, we grow and we don't realize that we're growing, so we, we start it is that whole, this is whole other tension, but what is success?

You know, it's different to everyone. And when we set a goal for ourselves and we get to that goal, we don't necessarily celebrate it. We just set the next goal and the next goal. And so as we're going along, we're actually improving and growing and, and creating more profits. But we don't necessarily realize that until we stop and look back at where we've come from.

And I love that, you know? Yeah. Teachers as in the classroom, we have a bit of a gripe with collecting data because it's something that we are pushed to do. However, this sort of data collection, I just think it's invaluable and I, I think it's inspiring and encouraging. And like you said, your accountant doesn't love those spreadsheets.

No, sorry. No. And look, I mean, you've gotta do the data collection anyway. I hear what you're saying about the data collection in classroom. I have Two school aged children and one at university. So I get that. I feel your pain there. You have to do this. Like you cannot be in business without the tax office having a hand in what you're doing.

So you already have to do it. You might as well do it well so that you can use it to your advantage and, and for your own business growth. Because the other problem that I see in small business is that they don't have a plan. They don't know where they're going. They're just turning up every day and they're just going through their e emails or the to-do list or, you know, whatever the things are that they've put in their head that is gonna make them achieve something that day.

But if you want business growth, and you probably went through this in your, in your growth session, You have to have a roadmap to get there. Mm-hmm. And you need historical data to produce the roadmap going forward. And so all around, not only is compliance necessary, you know, to do your BS and tax returns and whatever, but you actually just need it so that you, you can make decisions about what you want your business to be.

Yeah. So true. And, and you're right. We, we talk about it all of the time. If you are trying to get somewhere, you need to know the steps to get there. Yeah. I mean, not many people just sort of wake up one day and just have something really successful, just, you know, like magical unicorn. So there are those sorts of success stories that people have just kind of fallen along and, and just become successful almost despite themselves.

But it doesn't generally happen. The statistics of small business in Australia are that about 75 to 80% of small businesses fail in the first five years. So you know, whilst the first two to three years, everything might. You know, be going along. Okay. Even if you don't have a plan in place, it's crunch time in years four and five.

And if you haven't got those systems set up to begin with, that's why those businesses fall over in years four and five. Yeah, that's, there's only so long you can wing it for, right? There's only so long that you can go along with your, your blinkers on just focusing on students and. And profits. Mm-hmm.

What are some of the other mistakes that you see a lot of business owners making and, and I mean you work with a, have and do work with a variety of businesses. So what, what are some of the main mistakes that you see standing out? I think that if we go back to in, in using software and, and, and let's just talk about Xero cuz it's the one that I use the most, a lot of people Price sensitive in the early parts of their business.

And I get that, you know, that you've got other expenses that you need, you need to draw a wage, those sorts of things. So oftentimes they'll go and set up zero themselves and they'll bumble along with it, and then they'll get to the end of the financial year and, and then, you know, invite their accountant into the file.

And it's an absolute disaster because they just didn't spend that one or two hours at the beginning on a little bit of money to set their file up correctly and to get some decent training. So that's one problem that I've discovered. And, you know, I blame Xero as much for that as anything else because all of their advertising is always around how easy it is to use.

And yeah, it's so easy for small business and I totally agree that it really is, but it needs to be set up correctly in the first instance. So, If you are if you are using Xero already or any of the other softwares and you kind of bumbled along and you just set it up yourself, I would recommend that you get somebody to review it.

Just get people to check over the settings. I did a, a file review just yesterday actually, and the lady had done a really good job. I have to congratulate her. She was really, really switched on except that there was one tiny little thing that she'd set up incorrectly in her payroll. Which would have over accrued holidays for her 25 different staff.

So that one small error would've ultimately cost her business a lot of money because it was accruing her out her holiday pay incorrectly. So there are little traps in the zero file that just, you know, you need to sort of be on top of. So that's definitely one of them. Number two is I think we've already covered it, but it's basically ignoring your bookkeeping and hoping that one day you'll be inspired to sit there for five hours and do some data entry.

And no one's ever gonna be inspired. That's never gonna happen. Let's, that's never gonna happen. Never gonna happen. You know, my message around small business bookkeeping is exactly the same as my husband's message at the gym. He's a personal trainer, is consistency. If you are consistent with it, and I know that it's not fun, and I know that you don't wanna do it, but I tell you what, if you do it more consistently than once a quarter when you're sitting there on a Sunday and it's a beautiful day and you'd rather be outside, but you are locked into your office because you've got a deadline of your B or you know, you for whatever reason you have to get it done you'll wish that you had that consistency.

So, Often touch points on your bookkeeping is better than once. Every now and then, even though you don't have high volumes of transactions. Just because I know what people's minds are like. And it's the same with me when it comes to doing any type of social media posting for my bookkeeping business.

I really hate it. I hate I thought of it. I don't know what to write. I'm very like logical brain. So the airy, fairy, fluffy kind of stuff, it doesn't come easy to me. So I, I, that kind of stuff for me and that creative field is like pulling out my molars. And I know that bookkeeping is the same for people that have creative, like, that are in the creative space or even just, you know, loving their own businesses and not necessarily the business side.

So if I can just say the more consistent that you are with your accounts, the better off that you're gonna be in the long run. Yeah, we set up a in my tutoring business and I even do it now, although I've switched to Thursday, which messes with my head. I had finance Friday, so every Friday I'd sit down and reconcile and go through and look at my numbers and then the last Friday of every month, review my month and all those sorts of things.

And so I just set a challenge for a group of my ladies to start finance Friday and they did. And it's been amazing. Like, cuz like you said, I wanted them to learn from my mistakes. I said, I ha exactly what you said at the start, A shoebox full of receipts and the end of the financial year would come, or, you know, the end of the quarter.

And I was like, oh my gosh, I've got so much reconciling through. And so first I had to sort out the receipts into the months, then I had to end everything and reconcile everything and, and blah blah. It was like days worth of work. And exactly like you said, if I hadn't just spent 10 minutes every Friday sitting down to reconcile, I would not have had that problem.

And I think it took me until the point where I was paying my daughter to help me sort out my receipts. I was like, there must be an easy way of doing this. Yeah. And so then I started Finance Fridays and it has changed my life. I highly recommend it. So yes, I. Totally can agree that. Yeah. Yeah. Look, I mean, it's, it's just I go to the gym and I really don't like it, but I go one because my husband runs it and two, cause I know it's good for me and I just turn up, I just get myself to the door cuz I know once I'm in the door that I can't leave for the next 45 minutes because there's other people that have seen me and I just can't turn around and go back.

So, so consistency makes it easier for me if I miss a couple of weeks. Going back to the gym is very, very difficult. It's the same with your bookkeeping. Even in a small business, things will happen in your bank accounts and in your financial life that just trip you over. And if you don't get on top of them straight away, then you know further down the line, you totally forget about it.

I mean, I've got clients that generate lots and lots of money and they're invoicing. You know, they could be sending out 50, 60, $70,000 worth of invoices. If there's something wrong with one of those payments and I ask a question three months later, they often can't remember. And these are big amounts of money, so it doesn't matter if we're dealing with small amounts or big amounts.

It's like once you've moved on from that month, you generally don't remember and you've got other things going on in your life. If anybody else's brain is like mine, it's like having 55 tabs opening Google. So if you ask me a question about that $10 at a weird name shop mm-hmm. If I didn't know about it.

Back then, I certainly can't remember it now. So that's another reason why you should just keep on top of things. A lot of businesses that you buy from, especially if you're buying like tutoring supplies from like a $2 shop or something like that, they have weird business names. And so often when you're going back historically, you can't remember what that shop was and maybe you don't get that deduction because you can't prove that that was a business expense.

So there are little Trip ups along the way, and that's another reason, just to stay consistent with it. Yeah, I've, I have definitely been in that situation where I've got charges to my bank account and I'm just like, what the heck is that? And then I'm like, right, I'm gonna be really vigilant. I'm going to, you know, I've got found this app where I take a photo of my receipt straight away.

That did not happen, because let's face it, once you've paid for something, you just wanna shove it in your bag and get out of there. But, The only thing that has helped, just like you said, is having that consistency of that little bit each week. And by the way, I am actually going to take what you said, because I do not like the gym either, but I think I'm actually gonna aim that I, I'm going to aim and say I just need to get to the door.

And then maybe I'll, if you get yourself to the door, it's this weird thing if I get myself to the door, even when I walk in the door, I still don't wanna be there. And then when I find out what the workout is, I definitely don't wanna do the workout. But then people have seen me, so I, unless I have like injured myself, I can't leave the gym without embarrassment.

So I just have to push through. I love it. I love it.

Are there any other practical tips, I guess, or little piece of pieces of advice that you could share with our listeners to take home today? And start, you know, putting into practice within their own business? Obviously, you've given us a few already and I think every, every week you just being consistent with, with your finances and, and having that software, something like zero.

Is there anything else that you would like to share with us that, that might be useful? I think if I can wave my little banner here, I, I think a lot of the problems in small business bookkeeping is they mostly your accounts are, are regular, you know, income comes in, you're spending the same money at the same places, but every now and then, something different will happen in your business world.

And I find small businesses don't really know where to go to ask what the question is and, and to seek that really quick answer. So there's a few options. Firstly, there is your accountant, if you've got a really good one. So you'll put in a phone call to the accountant. They're really busy at the moment.

It seems like the whole accounting industry is understaffed, so you might get a response within one to two weeks from them because you're probably small fry compared to some of the other stuff that they're doing and, and, you know, not really super important to call you back. Number two is you'll go to a Facebook group and you'll ask the question and get 17,000 different answers, but you can't be sure if any of them are actually correct.

So I created a product based on all of these questions, and I know what small businesses really struggle with. And, and that's my business called Ask Hub. And basically I'm just here to answer those questions. So I think if you can afford to outsource your bookkeeping, or if you can afford to pay for a bookkeeper, that's a goal that you should be looking to attain because at some point in your business life, you don't want to be doing this anymore because you should be concentrating on generating revenue.

But in the early days, you, you do need to do it because cashflow is king. And you don't wanna be spending it on, you know, outsourcing to a bookkeeper straightaway. Because I also think that you should learn about your accounts as well. It's a a hundred percent. I was just gonna say that you need to learn too.

I think I really, I am all about outsourcing. Totally love it. And delegating, but I think when we're starting out, our finances especially are so important to learn about. So I think Exactly. Yeah. So what you said. So basically I've just created this product here, which is a support mechanism for people that are starting out in business, that are learning how to do their own bookkeeping and keeping on track of their finances, because sometimes you just need that like really quick answer.

Yeah, and then you continue on your bookkeeping journey. And I think that's also another roadblock that people find is that they get some transactions in their accounts and they dunno what to do with them. And so they go, oh my God, I just, I'll just leave the whole thing. Then instead of just going, I'll just leave those two transactions and move on with the rest of them.

It's kind of like if it, if you're struggling with your bookkeeping anyway, any type of impediment is gonna stop you from doing it. So ask the questions at the time that it happens. Get that resolved really quickly, move forward, keep consistently reconciling your accounts. And you know, as as business gets going, you can use that data, as we said earlier, to really drive the business growth.

And eventually you will outsource your bookkeeping, hopefully, cuz your business is doing really well. But you know what to look for in your accounts by then. So yes, you can outsource it, but you should still definitely keep on top of, you know, knowing your own numbers as well, because, Outsourcing it and then just closing your eyes is also not the answer.

Yeah, totally. A hundred percent. Thank you. Now, awesome tips. Very practical advice and something that everyone can do, and like you said, in the startup days, it's a more affordable option. Then a lot of people actually jump straight to trying to find an accountant and I, I do agree. Have an accountant that's important.

But if I'm being so honest, you have been so much more helpful than most accountants I've ever worked with, and it has been exactly what you said. I've got questions and you can answer 'em for me, and I think that. In the early days of business, that's what's important and I'm really excited for, you know, if we've got tutoring, growth membership, ladies listening I am super excited to let you know that Melissa is coming into our group and going to be answering our questions for us.

So that's a little bit of a bonus for us there. Sneaky little  announcement. But thank you so much for giving us your time today. It's been really lovely to chat to you. Where can listeners learn more about the Ask Hub or you if they're wanting to work with you or, or use your services? Yep. So ask hub.com.au is our website and you'll find all the information on our services there.

We are also on Instagram and Facebook as Ask Hub A s K H U B. So check us out on either your socials or jump onto the website and if you wanted to just have a chat and, and talk about where you're at in your business and whether or not the program would help you, then there's a contact form on our website and we'd be more than happy to get in contact and have a chat with you.

Wonderful. I think there'll be lots of people who are. Checking you out and definitely require your services. Thank you so much for your time today. Really, really appreciate it, and it's been well. Thank you for having me. Really great to you know, get some insight from an actual professional in the industry with as much as, as experience as you do.

So thank you very much and we will be very excited to have you inside the tutoring growth membership soon. All right. Thanks everyone. Bye.