Financially Adjusted

#49: 4 OF THE SMARTEST FINANCIAL MOVES TO MAKE IN YOUR CHIROPRACTIC BUSINESS

• Leslie Roth • Episode 49

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In this episode of the Financially Adjusted podcast, Leslie shares 4 of the smartest financial moves every chiropractic business owner should be making right now. These are actionable, practical strategies to help reduce stress, increase clarity, and get your business finances in check. You’ll learn how to avoid the chaos of commingled funds, why analyzing your financials monthly is non-negotiable, the benefits to organizing receipts and tax documents digitally, and why creating a budget that actually works for your business goals is so important.

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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Welcome back to the Financially Adjusted podcast. If we haven't met and you're new to the podcast, I am Leslie Roth and I specialize in helping chiropractors understand and manage the money in their practice. If you need to start at the basics and you need simple actionable steps to manage your business finances. I am your gal. I am so glad that you're here with me today.

With this podcast I'm bringing you all kinds of helpful knowledge and actionable tips every other Thursday so be sure to subscribe wherever you're listening so that you don't miss those. I’m also providing bookkeeping services for chiropractors through my bookkeeping business Leading Ledger Bookkeeping, feel free to reach out via leadingledgerbookkeeping.com. I'll link that in the show notes but if you are in need of bookkeeping help or you need to outsource your bookkeeping or switch, We can have a chat about that. Spots are of course limited and I don't always take on new clients but I am at the moment. So, if you need some help reach out.

In today's podcast episode I lay out four of the smartest financial moves you should be making in order to manage your business finances the right way.

These are things that, if you implement them, I promise you will not regret it because it's going to make your life and business less stressful and run more smoothly. Let's get right into it.

The first of the four smartest financial moves is keeping business and personal finances separate. This is huge and if you take nothing else from this episode, remember this. Your business money is not your personal money. Period. They must be separate.

When you combine your business and personal finances, it's what's called commingling funds. And this is bad for a number of reasons. But mainly, it makes your bookkeeping messy and unprofessional and then at tax time or throughout the year when your bookkeeping is being done, it's a lot harder and more complicated and time consuming to sift through all of the personal transactions and the business transactions and figure out which was which.

And a huge negative with that also is it's less efficient. So, when your bookkeeping is being done and you’re using a cloud based software, for instance, there is the opportunity to set up rules or automations when it comes to categorizing your transactions. And when you're doing this it just makes things a lot more efficient. It helps when you have recurring transactions to be able to set up these rules that automatically categorize things appropriately.

Well, when you commingle your business and your personal funds a lot, that becomes something that you can't use to your advantage because when there's personal transactions, you can't really set up these rules because you have to go in and click each individual transaction. Make sure it's not personal. Make sure it's actually business and differentiate with each transaction. So, it's very tedious and it's very time consuming and inefficient. So, if someone is doing your bookkeeping for you they will likely be charging you a lot more money if you constantly commingle your funds because it's a lot more time-consuming and tedious and inefficient.

If you're doing your own bookkeeping it makes it a lot more complicated and time-consuming to deal with. So, that's just more time that you're spending doing admin stuff or more likely you're going to fall behind because it is just a huge mess and there's a lot more transactions.

And, like I mentioned, you can't set up rules and automate to make things more efficient for you.

And another huge issue with commingling your funds and not keeping them separate is that you pierce the corporate veil, so to speak. So, you may have heard this before but I am not a legal person but legally speaking, it's going to take away your protections. So, you can speak with a legal adviser about this and your tax adviser about this but you have set up an LLC most likely or an s corporation so that you can protect yourself legally so that your personal assets aren't at stake if you would happen to get sued via your business, Well when you commingle your funds, you pierce that corporate veil or that shield that's set up there for legal protection and it makes it so that you put your personal assets at risk. And again, I'm not a legal professional but this is something that I know to be true, and I know can really mess you up as far as your legal protections so it's a really big deal when it comes to protecting yourself and your assets.

It's also just considered very unprofessional so if you are looking to, let's say, get a loan or sell your someday, if you have messy books and you have personal transactions business transactions all mixed together, it's going to present as very unprofessional.

And you also will have a very difficult time if you say get audited, by the IRS it’s going to be that much more messy and complicated.

The IRS would be weeding through all of your transactions in the case of an audit. So, you would have to deal with explaining things in more depth and tediously sorting through things a lot more.

So, how you can remedy this and make sure that you are keeping everything separate is making sure that you have a dedicated business bank account which you likely do already. But then the key is to make sure you're paying yourself separately so you're if you're S-Corporation, you're paying yourself as a W2 employee and you're also taking distributions. If you're just an LLC you are just taking draws as your form of pay. You want to set it up so that you're paying yourself a specific amount ahead of time you're paying that out of the business and then all of your personal transactions are flowing through your personal accounts. You're not buying your groceries with your business credit card or debit card. You're buying your groceries with your personal debit card or credit card and you're using the money that you've taken from your business and deposited as your owners pay.

So, pay yourself that set amount instead of just pulling money out when you feel like it or making your personal transactions flow through your business accounts and then keep those personal accounts separate….

Don't be buying business stuff through your personal account so it goes both ways. And if this is every once in a while, let's say you're out and you forget business card your personal card and you have to and it's just an every once in a while thing. That's not such big deal at all but it's when it's a regular occurrence that it's a real problem.

So, remember, clear separation means cleaner bookkeeping, efficiency when it comes to managing your money, a more professional business overall so you look good to investors or somebody you're trying to sell to. It's easier for your tax professional to understand what's going on in your bookkeeping and if you would ever happen to get audited, it's much less of a nightmare when you keep things separate.

Okay, moving on to the second smartest financial move that you can make in your chiropractic practice. Analyzing expenses and financial reports monthly.

Remember what you don't track you can't improve and what you don't review you're probably wasting money on. So, all of those unnecessary expenses like subscriptions you forgot about, or over ordering on office supplies if you have like an automated set up for ordering, things like that are going to be wasted money if you're not tracking those.

There's all kinds of benefits to analyzing your expenses on a regular monthly basis. You are making sure that you get all the deductions that you can In your business and you're making sure you didn't miss something like you know if you did happen to buy something with your personal card that was a business expense you make sure that you get that deduction and you categorize that properly or if you did purchase something with your business account that was personal, you make sure you categorize that correctly If you're staying on top of your expense tracking and your bookkeeping monthly.

You can't just wing it with your finances and when you check out and you don't look at those reports on a monthly basis analyzing expenses on a monthly basis, things are going to slip through the cracks inevitably.

So, checking your reports only every once in a while or once a year, it would be like the equivalent of just a patient coming in and getting adjusted once a year or maybe every six months or every couple of months and then expecting to see results. It's the same with your finances. You have to be consistent, and you have to keep your finger on the pulse of your financial health in order to have a healthy practice.

What you want to make sure you're doing is looking at your profit and loss statement and your balance sheet every month and that includes getting accurate reports that are up to date. So, if you currently outsource your bookkeeping or you do it yourself and this isn't happening, you need to look into why and remedy that so that you get accurate reports every single month that you can look at and understand. And if you need to get help when it comes to understanding what your financial reports are telling you and how to understand them, you can go back to episodes eleven and twelve. I go into depth about how to understand what's on your report and explain how to navigate those.

So, I'll link those up in the show notes. You also want to compare your expenses and your numbers from month to month and see how you're trending and see also if you're overspending. And a great way to do this on a monthly basis to see if you're overspending is to run a profit and loss statement so that your percentage of each expense shows up in comparison to your revenues and you’re seeing how heavily you've spent in that category each month.

When you do this and you look at that percentage versus just the dollar amount, It'll be a lot clearer as to what you're overspending on. And I do have a sample chiropractic profit and loss statement that you can grab It's free and it will show you what some good benchmarks are for spending in different categories for chiropractors.  And that can really help guide you with your own bookkeeping so if you do outsource your bookkeeping ask your bookkeeper if they can give you a profit and loss like this where it shows the percentages in comparison to revenue because it will really highlight and make it clear what you're overspending on.

And this usually tends to be advertising and marketing, payroll tends to be a higher line item that you need to keep an eye on, any subscriptions, supplies. So, just compare month to month how you're spending and then it'll be a lot clearer when something goes up and you're overspending in a certain category.

So, definitely make sure you're getting those financial check-ins monthly. It keeps things lean, profitable, and you keep your finger on the pulse of your business and you know how healthy you are.

Alright, the third financial move that you can make to be smart in your business is to save receipts and important business documents digitally. Get organized. This is one of the biggest things you can do in your business that will help you gain clarity. When things are disorganized and chaotic, you feel disorganized and chaotic mentally and it's hard to understand what's going on in your business, especially when it comes to important tax documents, important receipts. Many receipts get lost in the shuffle so if you're not staying on top on this and saving them frequently, there's a good chance you're not going to go back months and months and save all of your receipts. Or you might not remember what you paid money for. You might not remember what a meal was for, and you might have forgotten what that business expense is. So, by staying on top of it you make sure you get the deduction, and you can explain it in the case of an audit.

Really a lost receipt is a lost deduction, so you want to stay on top of this to make sure that you're not losing out any deductions. I have a great organizational guide for you that's free and I will link that in the show notes.

It's all about getting organized and how you can get organized financially in your business. But most things are digitized these days so it's important to have a central location where you store all of your digital receipts and documents. And if you have paper ones, you can digitize them pretty easily with an app on your phone. If you have QuickBooks Online, they have a great app where you can snap receipts, and then it saves them within your system.

But I like to make sure that I save things digitally as well as the paper copy. Because if you do this come tax season whether it's your business documents or tax documents or receipts, when it comes time to send all of that over to either your bookkeeper or your tax professional or both, you know exactly where things are, and it causes you to have more peace and just feel more at ease about your business. You're not scrambling feeling like you're out of control.

It'll save you a lot of time and a lot of headaches. And the people that work with you will appreciate that and you'll be able to communicate more effectively with those outsourced professionals.

Now for saving a lot of documents, if you want a free resource, digitally you ca n just use Google Drive, but Dropbox is another one that you can use and I know HubDoc is one that you can use. A lot of people say good things about that but there's a lot of options out there. Google Drive is easy and it's free so you can definitely use that.

And when you are setting up an organizational system online, make sure that you have clear years and folders under those years with months broken out and you can easily just go find something when you need to,  that it's not scattered and disorganized. But definitely grab that free resource I mentioned because it'll guide you and show you all the different ways that you can get organized in your business.

Moving on to the last Smart Financial move that you can make in your business and that is creating a money allocation plan. Otherwise known as a budget. But I like to call it a money allocation plan, or your business map, because it truly guides you in your business. This is one of the biggest things that you can do for your personal finances and your business finances.

You need to first decide on goals like what savings goals do you have. Do you have a goal to purchase equipment or in your personal life do you have a goal to save a certain amount, or do you have a house project going?

Identify the short-term and long-term goals in your life and your business, and then have a money allocation plan for your business and your personal finances so that you know exactly where you want to direct your funds to go.

And then the key is not just creating it but also sticking to it. Making money is one thing. Keeping it and using it wisely and directing it to the right places is a whole other thing. And that is truly what moves the needle and helps you to align your money with your goals.

Without a clear plan, your money tends to just disappear into this abyss or into the ether. So, you need a strategy, and you need to tell your money where to go so it doesn't just disappear on you.

And when it comes to creating your money allocation plan, I have a lot of resources. I'll link those up in the show notes, but I have budgeting tutorial, I have a budgeting episode… actually a few budgeting episodes that I will link up for you.

If you're totally new to it, it can take a little bit time upfront because you're, for the first time, sitting down and really going over all of your expenses all of your income and figuring out a plan. But then moving forward you'll get used to it and it can be a copy and paste situation as far as getting it down digitally or on paper.

So, I suggest either using a spreadsheet or using the EveryDollar app or some other budgeting app. There's a lot of options out there, but I prefer EveryDollar. It's the Ramsey Solutions organization that puts it out but it's free. You can do the paid version where you link up your bank account, but the free version is awesome. You can use it for personal and for business. Even though it's intended to be for personal use, you can just plug in your business categories and it's super easy and I do have a tutorial showing you how to use that budgeting app so I'll link that up.

But the key is just having a plan for your money and being proactive with your money. It's fantastic if you're looking at your reports every month and you're looking at your expenses every month, but that's looking in the rearview mirror. You're looking at what already happened in your business. When you have a money allocation plan, you're being proactive and you're deciding ahead of time what's going to happen with your money. So, you're the one that's in the driver's seat with your money when you're doing that and when you're deciding what you're going to do with the margin you have, or what's left over after all of your bills have come out, you can put that money into a lot of different categories.

The one non-negotiable category that you're allocating money to every single month on your net profit is your taxes. So, you always want to be saving for taxes and that should be 25 to 30% of your net profit. So, what's left over after you've paid your expenses in your business. So, you'll find that on your profit and loss statement at the bottom. But that is a non-negotiable. You always want to save for taxes every single month, so you have that set aside and ready to go.

And then the other bucket, so to speak, that you can allocate your money towards are you know anything you want to reinvest in in your business. So, you can just save in a general account for reinvestment or maybe you have a specific piece of equipment you're saving for. So, you want to save a certain amount every month or maybe you're looking to save and build an emergency fund personally or in your business, whatever your personal goals are you need to assess what those are figure out how much in distributions or draws you want to take from the business so that you can decide how much allocate personally and to keep in the business. So, figure out what your goals are personally, and business goals. Figure out how much you're allocating to each.

So, it's going to take you getting really clear on your goals first and then getting really clear on how much money you're allocating towards those goals.

So, a money allocation plan or your business map is going to lead you toward financial clarity, financial confidence, and you're going to see over time how much you're aligning your money with your goals and how much you can really move the needle on your goals when you get real serious about being proactive.

So, I'm just going to sum up everything we talked about today - all of the four smart financial moves that you can make.

One was separate business and personal finances.

Two is reviewing financial reports and tracking expenses monthly.

Three - get digitally organized in one central location with receipts and business documents so that you can have peace of mind and have an easy time locating where everything is.

Four is creating that money allocation plan otherwise known as a budget and actually sticking to it based on what your goals are.

I know that finances can feel very overwhelming but small consistent actions can lead to massive improvements over time. Start with one of these smart financial moves and work on it. Your future self will definitely thank you.

If you found this episode helpful, I'd love for you to review it and share it with a friend.

It is not easy running a business and managing the financial side of it. Plugging into education is huge so props to you for being here. You've got this. I am cheering you on and remember, imperfect action is better than none at all and will always bring you clarity.

If you want to keep plugging into your education, make sure you subscribe to the podcast, go back and listen to all my other podcasts and grab ny free resources at financiallyadjusted.com.

Thanks for hanging out with me today and I will talk to you soon. Have a great day!

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