Sometimes when I’m talking to my clients, I can’t help but think of Lady Gaga.
No, it’s not because I have “The Shallows” stuck in my head. And no one has worn a meat dress into my office … yet.
The reason I think of Lady Gaga is because her financial journey mirrors so many of you.
Sound surprising?
Let me prove it.
Here are five essential bookkeeping tips that can make you successful whether you’re running a naturopathic clinic or embarking on a journey towards pop superstardom.
What you can Learn from Lady Gaga’s Financial Journey
Lady Gaga is one of the biggest names in music.
The “Star is Born” actor won nine Grammy Awards and sold more than 11 million albums.
You’d never think someone that successful would have financial troubles.
I’m sure she thought the same thing.
But in 2011, after a two-year long world tour, Lady Gaga discovered she was bankrupt.
In an interview with the Financial Times, Gaga said:
“I remember I called everybody and said, ‘Why is everyone saying I have no money? This is ridiculous, I have five No. 1 singles.’ And they said, ‘Well, you’re $3 million in debt.’”
$3 million?
It’s one thing to lose all your money. It’s another to have it happen without knowing. Especially when you have no backup plan.
For Lady Gaga, it’s probably easy to make more money and get out of debt.
But unless you have a number one single that I don’t know about, it’s going to be a lot more difficult for you.
Small business owners need to be smart with their finances to avoid debt. They also need a plan in place to rescue them if they do fall into trouble.
The key lesson from Lady Gaga’s story is that debt can happen to anyone.
That’s why it’s so important to know your numbers.
You need to understand what cash flow is and develop effective money management skills.
To help, I compiled a list of five essential bookkeeping tips. If you want to avoid bankruptcy and debt you need to:
- Separate your business and personal finances
- Schedule regular checkups
- Know your tax deadlines
- Automate your systems when possible
- Plan for the unexpected
1. Separate Your Business and Personal Finances
When Lady Gaga realized she had amassed a huge amount of debt, she couldn’t believe it. $3m is a lot of money. But how did she not notice?
The problem is she wasn’t keeping track of her assets. That would mean there’s no way she could tell if something was wrong.
Don’t let that be you.
That’s why it’s important to separate your business and personal finances first. They should never mix.
Not only does this protect your naturopathic clinic. It protects your personal assets as well.
Here’s a few of the other main benefits:
- It makes managing your invoices and financial statements quicker
- You become more intentional about paying yourself a proper salary
- You get a better idea of what your business expenses are
- Become more intentional about preparing for tax season
- Build your business credit score (in case you need a business loan)
Get peace of mind knowing what your numbers are
Once you’ve created different accounts (maybe use different banks), then make sure you’re also using different credit cards as well.
Remember that it’s important you pay attention and pay off your credit cards as soon as you can.
2. Schedule Regular Checkups
In her song, Money Honey, Lady Gaga wrote/ sings:
“I enjoy the gifts and the trips to the islands,
It’s good to live expensive.”
And there’s nothing wrong with that. I’m sure we’d all like to be vacationing on an island somewhere right about now.
I’m a big believer in the “work to live, don’t live to work” mentality.
If that’s a priority for you, then do it right. Budget for it.
Make sure you’re keeping tabs on your accounts regularly to avoid spending money you don’t have.
As a business owner, you should know what your biggest running costs are. Are you overstaffed? Is your rent too expensive? Did you overspend on marketing?
Be intentional about where your money is going and you won’t have to worry.
Split your revenue into smaller accounts straight away. This makes them easier to manage.
Here are the basic Profit First accounts we use at Every Single Bean:
- Income = Your total revenue
- Profit = 10% of your total revenue
- Owner’s Pay = Your salary
- Taxes = Payment for the government (See the next section for more details)
- Operating Expenses = Day-to-day running expenses
In order for this to work you need to keep your bills organized and pay them on time. Do this every two weeks.
Now you can track your money at a quick glance while making profit a habit.
3. Tax Deadlines
Nobody likes taxes.
In fact, whenever it’s time to do her taxes Lady Gaga said she likes to enjoy a drink or two while she does it.
But taxes don’t have to be that stressful.
Here are some important things you should know about taxes.
First, the national tax deadline is April 15 (except for Texas).
Second, you need to know what kind of business you filed as. Are you listed as an LLC or C-corp? Each one pays taxes differently, so make sure you know your reporting requirements.
Third, you should know how you classified your employees. That will determine how you report their wage and compensation to the IRS. Most likely, they’re W-2s.
Finally, make a list of your reimbursable expenses.
You can always give Every Single Bean a call to be confident you’re setting aside the right amount of money. And we’ll make sure you have the right system in place for your naturopathic clinic.
4. Cloud-based Accounting
You’re a business owner. So it’s normal for you to have a million things on your mind.
You don’t have time to worry about spreadsheets, statements and invoices.
Cloud-based accounting frees you up to focus on other important things. It automates a lot of the simple tasks and calculates your numbers for you.
It’s easy, quick and brings all your sales invoices, bills or business expenses into one location.
Save time and maximize your returns by investing in the right technology.
If you’re looking for the best program available there are a few different options. But we chose Quickbooks.
It’s one of the most popular services and it’s easy to learn even if you are new to cloud-based accounting.
5. Plan for the Unexpected
I always tell my clients that it’s important you build up enough capital for emergencies.
Maybe you suddenly have a huge amount of debt to pay off like Lady Gaga.
I know that sounds unlikely. But it does happen. More often than you think.
You might experience something like a couple of slow months (or a global pandemic).
Having an emergency fund gives you enough resources to figure things out and pivot your business strategy without dipping into your savings.
The businesses that succeed are the ones that prepare well.
In the previous sections we talked about the need to separate your business and personal finances. This is one of the areas it comes into play. Having a month of revenue saved up protects you from paying out of pocket.
Once you choose your money management plan, it’s time to start saving. That’s how you protect yourself from the unexpected.
The Mistake most Naturopathic Doctors make with their Finance
Here’s the deal.
If you’re a naturopathic doctor who owns your own practice — you have two jobs.
Adding CFO to that workload is going to make it harder not easier.
That’s the mistake most naturopathic doctors make.
They try to do it all themselves.
Now I don’t claim to know Lady Gaga personally.
But I’ve been in this business for about 20 years now.
And I’m willing to bet that she didn’t figure out how to pay off her enormous debt by herself. She had help.
So if you’re looking to protect your practice better with a stronger financial strategy, then let’s get in touch.
Otherwise subscribe for more free bookkeeping tips and you can implement on your own.
Just remember, the key to good bookkeeping is knowing your numbers. That’s how you end up with real financial growth and protection.