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Selling the Couch - Melvin Varghese, PhD 18th February 2021
267: Bookkeeping Things To Consider When Transitioning From Solo to Group Practice With Michael Spencer, BS, MA

267: Bookkeeping Things To Consider When Transitioning From Solo to Group Practice With Michael Spencer, BS, MA

As a business owner, if you’re baffled by the world of bookkeeping, then today’s show will be helpful to you. Maybe you’re a solo practitioner considering starting a group practice, or perhaps you want to learn more about efficient financial systems and processes. Join us!

Our Featured Guest

Michael Spencer

Michael Spencer has an interesting career background as a CPA who became a licensed clinician in private practice. Recently, she started a bookkeeping practice to serve helpers and healers in the healthcare profession. Michael has a gentle presence that brings comfort and safety, and she brings a unique perspective as a therapist with an accounting background.

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You’ll Learn:


●     How Michael transitioned from being a CPA to becoming a LPC, then went on to coaching before starting a bookkeeping business on the side

●     What’s involved in bookkeeping, which means tracking and recording all the financial transactions in a business

●     How to understand your “numbers” and what they mean for your business

●     Three financial tips in considering starting a group practice:

●     Take an honest but gentle assessment of your current bookkeeping system, relationship with finances, and business goals.

●    Have a bookkeeping system and some sort of payroll system or service.

●     Create monthly or weekly bookkeeping rituals to stay up-to-date and reliable.

●     Why bookkeeping will become overwhelming and challenging if you try to “do it all” when you don’t enjoy it

●     The importance of realizing where our strengths and weaknesses are found as business owners

●     The need to develop and expand our business that meets needs and serves the world

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TRANSCRIPT

Melvin:

Hey, Michael, welcome back to Selling the Couch.

Michael:

Oh, thank you so much, Melvin. It's great to be here.

Melvin:

I'm just one grateful for our friendship and two just for the privilege and honor to be able to see the ways that you have both grown as a person and as a business owner. You and I have gotten to know each other through the health casters community, and then through our mastermind community as well. And so I'm just so grateful for you.

Michael:

Yeah, thank you. And I'm really grateful for you, too. You've been a real constant over the past couple years as I've gone through all sorts of different changes professionally, so I really appreciate you.

Melvin:

You're so welcome. For folks that don't know you, you are a therapist, but you had a career prior to that. What was that career?

Michael:

Yeah. So right out of college, I was in accounting and auditing. I was a certified public accountant. My license is currently on inactive status. But I did hold that license from 2001 to 2008; and I did auditing of nonprofit organizations and governments, as well as some small business bookkeeping.

Melvin:

Nice. And then what happened in 2008?

Michael:

I guess it was a little bit earlier than that my license was still active and in 2006, 2007, I was just kind of becoming unfulfilled with that work. It wasn't really speaking to my soul and so I decided to go back to school for my Master's in mental health counseling. And I pursued that career, I loved that career, I was a licensed professional counselor and that license right now is also an on inactive status. And so I'm not currently practicing in the field.

And what happened there was I was doing a lot of trauma therapy, and eventually just became kind of burnout. And so then I transitioned into doing some coaching and really loved that as well. And then this year, no, we're in 2021. No in 2020, at the beginning of 2020, I started doing some bookkeeping, to supplement my income, and I had been doing bookkeeping for my husband's business for about seven years, and then I was also doing bookkeeping, for my own counseling and coaching practices.

So I was never totally out of the accounting realm. And in 2020, I just started doing this side work and it started growing without a whole lot of work and effort on my part. I just sent a couple emails out to family and friends and said, “Hey, I'm going to start doing some more bookkeeping and clients have been coming.” And then a few months ago, I decided, you know, I really want to see about focusing in on serving therapists and coaches and helping professionals in private practice, because I know these worlds, I know these folks, and I know that there's a lot of need for support with the money side of things and the financial tracking of things and it has been fantastic so far.

Melvin:

Yeah, I feel like you are so uniquely qualified because you have the mental health experience. So like you said the verbiage, the struggles, all of those different things, the roadblocks, but then you have the CPA side of you. So you're very, like, it's an amazing skill. I just wanted to tell you to be able to, like, navigate both of those worlds the way you do.

Michael:

Thank you, I really enjoy it and it's been really gratifying to be able to talk especially with the folks who are in the therapy realm and hearing them say, “Thank you for not judging me and I feel safe asking you questions. There are folks out there who have questions about their bookkeeping and about their finances, and who don't feel like they have a safe place to go to ask those questions because they feel like well, I should know that, I'm in business.

And so when we feel inept, and yet we don't feel like we have a safe place to go to ask questions and build skills and confidence, it can be a dangerous place in terms of dealing with one's bookkeeping, because then it tends to be something that gets put off and put on the backburner.

Melvin:

Yeah, that makes a lot of sense. I wanted to ask you, and maybe I didn't want to make assumptions when we were talking. But I know that even the word bookkeeping, like I wasn't that familiar with it until a couple of days ago. So what exactly is bookkeeping?

Michael:

Yeah, the way I think of it is simply tracking and recording all of the financial track transactions that happen in a business. And so a lot of times, these are the things that and with -- so there are a couple of different ways of doing bookkeeping, and you can do it on the cash basis or the accrual basis and I'm not going to go too far into that.

Most small businesses are on the cash basis, which just means that income is recorded whenever cash is received and expenses are recorded whenever that cash leaves the bank account, or the check is written. And so it's a matter of taking all of that information, all of those payments that are going out and the income that's coming in, and putting it into a system where you can actually make use of that data.

So you can produce a financial statement. It's often called an income statement or a profit and loss, to be able to see the revenue that's coming in, the expenses that are going out, and then we've talked about the bottom line; what's left?

Melvin:

Yeah, absolutely and again, I feel like having a bookkeeper, for me has been one of the best things I've done for my business. And I think for me, it has been being able to make business decisions based on numbers based or like for example, really practical thing; I've been wanting to improve my video quality for a long time, and so I watch a lot of YouTube videos, and all this kind of stuff on lighting and stuff like that.

And there's this light that, a lot of YouTubers recommend, this light is almost like $1,000, just for the light plus the setup, right? And so, I think if I didn't have a bookkeeper, if I didn't know my numbers, I could just be like, “Oh, I'll just charge it, whatever.”

But why I was able to do is I was able to set aside a little bit of money over the span of multiple months. One, I'd like to do that, because it makes me sure like, okay, this is something I really want; is this a need versus something like a nice to have kind of thing. And then I think, but I don't know, it just gave me I think clarity and a peace of mind because then I was able to say, you know what, I have the money and I've saved up for this. And now I can purchase this and not go into debt in order to do it.

Michael:

Absolutely right. So you can have a sense of what you want to invest in and why and then to really understand your cash flows and this is something that in 2021 really wanting to develop in my business is to be able to help more with that advising side of things. It's like, okay, let's get your numbers in a good place. Let's make sure you're doing your reconciliations on a monthly basis. And for the clients that I'm working with, I take care of that and then let's get more clear about what these numbers mean for your business.

Melvin:

Yeah, absolutely, I wanted to shift a little bit and go into the meat of what we're going to talk about, which is this; I think we titled it the three bookkeeping things to have in place before transitioning from a solo to a group practice and I know when we've talked, when we have spoken about half of your client, current client, group practice owners, and then you have a decent number of solo practitioners. So you're kind of in both worlds. You understand both. How does this sound if we kind of dive into three of those tips?

Michael:

Yeah, that sounds wonderful. And just to clarify, so I have three folks who have group private practices, and then three folks who are in different industries, so they're not necessarily solo therapists.

Melvin:

Got it. So you're very vast person I think in the group space, but you're definitely vast when it comes to solo folks that are in different industries, the unique challenges that they have.

Michael:

Yeah, absolutely.

Melvin:

Got it. Okay. So what’s that first sort of tip that you would share? What's a bookkeeping thing that someone should have in place, if they're wanting, thinking about their insular practice now, but thinking about a good practice?

Michael:

The first thing that I was considering, as we were talking about this topic isn't necessarily something to have in place. But it's something to do. And so it's giving yourself a genuine, honest, and it can be gentle assessment of your current bookkeeping, your relationship with your business finances, and even what your financial and business goals are.

So this is an opportunity to really get clear and honest about how you feel about doing your monthly bookkeeping. Are you doing it? Is this something that you put off until the end of the year? Are you a person who's saying, “Well, Gosh, I have money in the bank. So I must be doing okay.” But you don't really have the ability to read a financial statement and understand that, are you a person who's saying, I've got these huge goals? But I don't really know if financially I can afford to do this.

In order to create that foundation for a healthy business growing forward, because when we're talking about moving to a group practice, we're talking about expanding, growing, scaling, and it's really important to have that sense of, do I enjoy doing this? Is this the bookkeeping, something that I can do going forward? Is it something that I should consider outsourcing? Just because it's important, especially as we're growing to make sure that we're not holding on to tasks in our business, that we're really not having the aptitude to do.

Melvin:

Yeah, aptitude, and I would even say, like, passion, or is this like, am I the best person to be doing this? Especially I would think, I am not a group practice owner, but with STC, I have five independent contractors that do all sorts of different things from editing to websites and all this stuff, and bookkeeping. And it’s a genuine question that I had to ask myself, like I can do this, but is this the best use of my time? And am I passionate about it? Like, does this take me away from where I should be focusing? And I think that's a great question to ask.

I think especially with, and I'm curious to hear your experience with this. But I'm sure with group practice owners, especially somebody who's going from solo to group. There's that scalability component, right? So in some ways, I feel like if you sort of set up these systems, for example, with bookkeeping, and maybe when you're solo, you're the only person in the business, obviously. But now you really got to think about, okay, if I hire two, one person or two people, what's my system? How are they getting paid? Like, all of that kind of stuff, right? How are we accounting for revenue? I think that's what you're saying. Make sure what those systems are.

Michael:

Yeah, having those systems in place and recognizing that as a solo practitioner, you may have been able to get away with a less robust system, you may have been able to track things on spreadsheets, or maybe not even really track them at all and just see, because your costs are probably fairly stable month to month with this type of business.

You've got rent, if you have an in person space, you've got your practice management system, and email system and all of that those things are going to stay relatively stable. So once you start to realize, okay, I need to make this amount of money to pay my bills. This is how much I pay myself every month. You might not even be compiling a financial statement until it's tax time.

In my opinion, as a bookkeeper, I don't think that's ideal, and one can probably get away with that. As we're growing, to move into a group practice where you're going to get busier, you're going to have more responsibilities, and then there are people counting on you.

As you're on employing people and providing the space for them to be able to make income to support themselves and their families, it's really important to have these systems in place to be able to track that, because as you add people too, if you have an in person space, you've got to be thinking about where am I going to put them? Do I need to pay more rent? Are other costs going to go up every time I add another employee to my practice? And so it's necessary to be able to lean into those numbers every month and to be able to see, okay, how is my business growing? Where is it flat? 

Even just being able to make sure that you're not missing anything. The last thing you want to have happen as you are growing is, “Oh, I didn't put a payment into my system and now I overdo my checking account.”

Melvin:

Yeah, this reminds me of that James, clear quote, which is, one of my most favorites is that we rise and fall to the level of our systems. And it's so true. It's so true. I think when you go from a solo to having other people. What would you say is kind of the second tip that one should consider when it comes to bookkeeping, especially as they transition or thinking about transitioning from a solo to a group practice?

Michael:

I feel like some of these things that I'm sharing are quite basic. And so there are some people who are listening who are like, “Yeah, I got this in place.” And for the folks who I was describing earlier, who have kind of been getting by, the next thing to have in place is a bookkeeping system, and some sort of payroll system or payroll service to be moving from the spreadsheets or I haven't really been using a system to really be getting a system in place that you can rely on. 

And so that might be a QuickBooks Online that might be FreshBooks, or wave. QuickBooks is the one that I'm most familiar with. And for a payroll system, it might be something like Gusto, or you can run payroll within QuickBooks, or maybe it's even a local payroll service in your area. But having a way to capture all of that data and easily produce the financial statements so that you've got that information for, like you were talking about Melvin, I want to make a purchase. Okay, let me both look at the historical data, and also use this system as a way of budgeting so that you know and you feel really comfortable and confident about the financial decisions that you're making.

Melvin:

That makes sense. I wanted to ask you again, sometimes I ask really basic questions, because one; I want to learn and I know sometimes folks listening they might get confused. What is a payroll system and I guess even what is payroll?

Michael:

Sure. So when you hire employees, you are required as an employer to set a way of paying them and then you also have to make sure that their payroll withholdings are getting submitted to the correct tax entity. So we all know about our Federal Income Taxes that we have to make sure we file and pay by April 15. And one of the ways that we pay those is through payroll tax withholdings. So each time you get paid, if you are what we call a W2 employee, you can see your gross pay, and then there's going to be federal taxes withheld on that that gets submitted to the IRS. 

There's also going to be state taxes withheld. Some states do a state unemployment tax. And then some states do local tax. So you're making sure that all those withholdings get taken care of for your employees and paid to the correct taxing entities, and then as an employer, you also have to pay the employers part of social security and Medicare for your employees, as well as workers comp. And I may be forgetting I'm not a payroll tax expert, which is why it's important to have a payroll service and some bookkeepers will run payroll for you and others will sub it out to another organization like Gusto or QuickBooks, or a local service. Does that answer your question?

Melvin:

Yeah, it does. It definitely does. I just wanted to clarify what those words because sometimes, I think sometimes we throw words out there just in general in groups or whatever, I didn't oh, there's always that person like oh, I wonder what that is, but then they don't ask. And I'd rather folks listen to this and get that clarity. 

Michael:

Yeah, I feel that way too. And so the payroll service is the organization that is taking care of making sure to someone in your organization, either your bookkeeper or yourself, or an admin person is going to say, “Okay, these are the hours or these are the amounts that we're going to pay these employees.” So you convey that to the payroll company. And then they take care of doing the payroll checks or direct deposits and making sure that everything that needs to happen with those payroll taxes, and those payroll tax filings are happening, and they're happening on time, because there are also payroll tax returns that need to be filed with the IRS and state and local as well.

Melvin:

Got it. What would you say is like a third tip?

Michael:

Let me see, I just wanted to the one thing I wanted to say about a bookkeeping system too Melvin is getting a bookkeeping system. And if you're choosing to do this on your own, making sure that you feel confident and how to use it. So for a lot of folks, they feel like oh, QuickBooks is really easy. And people will say, like, “Oh, you just get QuickBooks and just do your bookkeeping in there.” QuickBooks is a really robust and nuanced system that is very easy to make errors in if you don't know exactly what you're looking at. 

And so it's important, if you do choose to do it on your own, maybe do a little bit of training. QuickBooks has a lot of free trainings and things or look at some YouTube videos and make sure that you're getting really clear so that the information that you're putting in is actually going to provide the accurate output that you want to need for your business.

Melvin: 

Yeah, I mean, to your point, like QuickBooks, for example, they actually have a whole certification program that I know that you've gone through in order to even get like QuickBooks certified. I think all of these bookkeeping systems are, they have their own nuances. And yeah, for those of you guys are wondering and curious, I use QuickBooks as well, on mine, but don't ask me where I go and do this? Because I have no idea because I decided, it made sense for me to outsource this.

Michael:

I was going to jump into the third point, if that works.

Melvin:

Yeah, sounds good jump in.

Michael:

So the third thing I would say, if you're choosing to do this on your own, is creating monthly and maybe weekly, depending on the rhythms of your business, monthly or weekly bookkeeping rituals. And so these are the practices that you need to do on a regular basis to keep your bookkeeping accurate and up to date and really reliable. And so this can mean making time to enter and code your transactions, it can mean uploading receipts that support those transactions. 

So if you've paid your professional liability insurance, you can put the invoice that goes along with that, you can put that right into your system, I think most systems these days, probably have ways to upload those receipts and that support so that everything's in one place, and then doing your monthly reconciliations. So this means just like, you've probably reconciled your personal checking account. And so it just means that making sure that everything that is in your bookkeeping system matches what has transpired in the bank or on your credit card statements, and making sure that that ending balance comes out to the exact amount on the statement, and if it doesn't, that you know what those reconciling items are.

Melvin:

Got it. So I think what you're saying is, these rituals are one, it's like really important to do them, like almost schedule them like weekly or monthly, because, I mean, honestly, this was one of the major reasons that I decided to hire a bookkeeper, because I was initially doing this weekly, and then it turned to like every other week, and then it turned to once a month and then like couple months would go through and then I would get really overwhelmed because I'd be like, “Oh my gosh, this is way too much.”

Looking back I'm glad I outsourced this because back when I did, how you articulated earlier, like I was small enough where I could get by but now, like, if I didn't have somebody helping me with this, like, oh my gosh, I think I would be so stressed and overwhelmed.

Michael:

Yeah, and I think what you're describing with, it's kind of a slippery slope. Where if you start to get behind, and then it turns into a couple weeks behind, and then a month behind, and then two months behind and a quarter behind. And if you already don't enjoy the work of the bookkeeping, that's just going to cause more anxiety and overwhelm and make it even more challenging to do.

Melvin: 

Yeah, absolutely, I think related to this, like one of my mantras has been, does this tasks bring like ease and flow to my life in business? And, yeah, for me, at least bookkeeping, I love numbers, I love personal finance, all that stuff, but man, like diving into those numbers and having to manage that, like, oh, it gives me a headache.

Michael:

Well, it's really interesting, and this is the beautiful thing about the differences in people, for me, I find it very grounding, whether it's my personal stuff, or working on someone else's books, sitting down and looking at those transactions and making all of this work and making sense of the numbers, it is definitely a grounding experience for me.

Melvin:

Yeah, absolutely, and I think that's a really good point, like we're all gifted in different ways. We all have different strengths. And I think one of the, like, most important lessons as business owners that we can learn is like, realizing what our strengths are, but I think more importantly, humbly, realizing where our shortcomings are and having the humility to say like, “Hey, maybe I need help with this.”

Michael:

Absolutely. Because it doesn't make sense that we would be able to do it all. And I think, especially as solo practitioners, and I've been there, building a website, I'm not a web designer, doing my bookkeeping. Unfortunately, for me, I had that bookkeeping background, so that worked okay for me, and to wear all of those hats, like, there's no reason that we should be able to do all of those things well and so for me, when folks come to me and say, “Hey, can you help?” 

I'm really glad to be able to offer my services so that I can take that off of their plate, or at least, fill in some of those gaps so that they can feel like they're running a more efficient business and then doing the things where their strengths really lie.

Melvin:

Yeah. Awesome. Michael, I wanted to just summarize, so like those three tips. So the first one is, if you were listening and you're thinking about your solo practice or you're thinking about going into group practice, here are the three bookkeeping things. So number one is a genuine and honest assessment of your current bookkeeping and relationship with your business finances. 

Number two is a bookkeeping system and a payroll system and service. Number three is weekly, or monthly bookkeeping rituals. Michael, any other sort of offhand things or anything that you can think of that would be helpful?

Michael:

I think I just want to say, to all the therapists and counselors out there who are considering expanding their practices, that I hope you're able to do that and develop and expand these businesses that are really serving the world and I am in deep appreciation of the work that you each do.

Melvin: 

Yeah, absolutely. I mean, it's not easy work, particularly heading in the year like last year and even this year. We're in the midst of a pandemic. I think one of the biggest takeaways that I'm having from our conversation is, all of us are gifted in different ways. We're meant to serve the world in different ways. And I think one of the best ways that we can serve is to figure out those systems and processes and all of those things in our business so that we can be present with the people that we're meant to serve and not overwhelmed by some of these other things.

Michael:

Yeah. I love how you said that.

Melvin: 

Michael, where can we learn more about you and the services that you provide?

Michael:

Well, the name of my business is Michael Spencer Bookkeeping and my website is mspencerbooks.com

Melvin:

Perfect. And I will definitely link to that on the show notes page which you guys can find over at sellingthecouch.com/session267. Michael, thank you again for doing this and have a great rest of your day. 

Michael:

Thanks so much Melvin.

Melvin:

Bye.

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Hi. I'm Melvin. I'm a psychologist (PhD), entrepreneur, and online creator living in Philadelphia, PA.

In 2014, I began to think about how to use the therapy skills we learn in grad school, and in our clinical work into different realms (e.g., podcasting, consulting, online course creation, etc).

This allows us to serve others on larger scales while diversifying our income beyond 1 to 1 work.

I make podcasts and videos about business, tech, productivity, and lessons I'm learning from becoming the CEO of a lean, mean 5 person 100% remote team (we're not really mean..it just rhymed =P).