Jenny (00:29)
If the word accounting immediately makes your shoulders tense up, trust me, you are not alone. I hate math, I hated numbers. All throughout high school, math was my worst subject and I did literally every single thing I possibly could in college to avoid taking math classes. so accounting, which I mean, just the word is like immediately boring and like makes me zone out. ⁓
I totally get it if that's also you, but if that is you, this episode is going to help you a lot. Because most flower farmers didn't start farming because they love accounting and numbers and finance and spreadsheets. But avoiding your numbers doesn't make them go away. It just makes running your business harder than it needs to be. And so today's episode is not about turning you into an accountant.
It's about helping you understand just enough of your numbers to make better decisions, feel more in control, and to actually know whether your flower farm is working or not. So I'm gonna walk you through the most basic accounting concepts that every flower farmer should understand with no jargon, no like software demonstrations, like just the essentials because...
One thing that I know I've made this mistake before and I know I see other people making it a lot too is that they think they need to be an expert in every single facet of business. And so they go down this like rabbit hole of becoming like an expert accountant and doing all of their books themselves and like learning in depth about like chart of accounts and how to do all these fancy things and QuickBooks
or they go the other extreme and just ignore it completely. And so I want to offer a very approachable middle ground today.
Jenny (02:16)
Real quick, if you've got 17 tabs open in your brain right now, just trying to figure out your next move, please do yourself a favor and close them and go grab your personalized profit roadmap instead. It's just a short assessment that will tell you what stage your farm is in and what actually deserves your attention right now to move forward quickly. Because more information isn't usually the answer.
focusing on the real problem that's holding you back is. It's free, it's fast, and it's probably more helpful than scrolling Instagram for another hour. So go grab it at trademarkfarmer.com forward slash roadmap. That's trademarkfarmer.com forward slash roadmap. You can also grab this link in the show notes.
Jenny (03:03)
So my first point is that accounting doesn't have to be this complicated thing, but it is something you need to know just enough to be dangerous with in order to have a profitable and sustainable business. And all accounting is, is just knowing money in versus money out.
At its core, accounting is way simpler than people make it. Like you don't need complex reports, you don't need to understand like all the ins and outs of accounting. Like if you do, great, but you don't need it. You just need to understand three basic things. Revenue, expenses, and profit. That's it. Okay, revenue, all it is is money coming into the business.
Expenses is money going out of the business and profit for the sake of this conversation is what's left over after expenses. If you take focused flower farming or six-figure flower farming with me, you'll learn more about profit. But for this conversation, it's just simply what's left after you spend expenses. It's not what is in your bank account.
So these are the only three things you need to understand revenue, expenses, and profit. That's it. Everything else builds on this and where people get tripped up is over complicating this before they even start. Okay.
If you can track money in and money out, you're already doing accounting. And if you're not doing that yet, don't worry, we're gonna talk about that next. But it's important to understand it's just money in, money out. And profit is not what is in your bank account, okay? It's what's left at the end of the year after expenses. So let's say over a course of one year, you earn for, we're just gonna use easy numbers here, you earn $100,000.
You sell flowers and you earn $100,000. But you spent $50,000 on paying employees, your lease, your insurances, growing supplies, seeds, all that stuff. So that means your revenue is $100,000, your expenses were $50,000, and what's left over is $50,000 in profit, okay? Easy, simple, we're just gonna start with that. Clarity starts with simplicity here. Now if you...
are not able to track money in, money out, it's very simple. All you need to get started with this is a separate business bank account. So if you do one thing after this episode, which you haven't done yet, is make sure you open a business bank account. The cleanest way to just start doing accounting is to separate your business and personal money.
So that means any income you get from selling flowers or products or whatever, your services, goes into this one business bank account. And anything you spend money on for the business, so seeds, supplies, insurance, all that stuff that comes out of the same account. No fancy systems required, okay? This is super simple because all you need are your bank statements to see
What is money in? What is money out? What came into the business and what did you spend money on? Now you can make this simpler by hooking this up to like a budgeting software, like Every Dollar or Mint Financial. I think those are two ones you could probably use. And it will tell you, like you can put rules in there where you just open an app and it's like, you spent X amount of dollars on supplies. You spent X amount of dollars on labor and so on and so forth.
So super, super simple, okay? That separate bank account creates instant clarity and it is absolutely essential. It's like the first step to having a real business. And it just makes taxes and bookkeeping and decision-making easier. So this is step one, especially in year one, okay? Now, of course, there's also accounting software. You may have heard of Intuit, like QuickBooks or Xero. There's several different accounting softwares out there.
But honestly, if you're just getting started, like I wouldn't rush into it. Just having that business bank account where all the money flows in and out of the business through that one account is probably enough when you're very, very first getting started. And if you're like getting a little bit more experience, your business is actually turning into a real business. Yes, accounting software is necessary and helpful, but in year one, it's really not the most important thing. What matters more?
is consistency, clean money flow, like separating your business money from personal money and not avoiding your numbers, like actually looking at them. You can start with really simple tracking and layer in software later when the business justifies it. So I wouldn't let that software be the barrier to starting with accounting. Start simple, then upgrade later because the systems you have should support your business, not overwhelm it.
That's true at every stage, and every stage of business will require kind of like a different level of accounting, but you can simply start with this and then look at accounting software later. When you finally do get accounting software, I recommend hiring an accountant or a CPA or somebody to help you get it set up. I did this. When I first started my business, I did not know one single thing about accounting.
I did not even really know what revenue and profit meant. And maybe you're there too, or just past that stage, or maybe you're way more advanced than that. But I didn't know a single thing. And my sister-in-law is a finance, like, I don't really know what her job is, but she works in finance. As you can see, I'm very well educated on this. But I reached out to her and was like,
I don't know what I'm doing Steph, like, can you help me out here? And she sat me down and she walked me through, like, she taught me what revenue expenses and profit meant. She told me what a chart of accounts was and like how to set it up into my accounting software. She gave me the basics. And then I hired an accountant to sit down with me and make sure like it was set up with my business bank account. Okay. I paid him to teach me how to reconcile my bank account in my software every month. And I was like,
I literally talk to me like I'm a third grader because that is my level of knowledge and they got me started on the right foot. And obviously there's courses you can take out there, there's YouTube videos, there's tons of free information and paid courses as well. But like I took it one step at a time and learned it in stages. And so that's what I also recommend for you.
Now in a minute, we're going to talk about hiring a bookkeeper and like hiring people to help you out with this, but I want to talk about the basics first because I do think it's important to know just enough to be dangerous. So if something's wrong, you have enough knowledge to see like, Hmm, this doesn't seem right. I think this needs to be fixed. And I have a couple of stories on like how that has saved my bacon a couple of times, but besides just having one, just a single.
business bank account to start off with, maybe as you get more advanced, you'll probably have more business bank accounts, but starting with that one first, then rolling into accounting software, okay, and then understanding what basic financial statements tell you. And I would say probably the most important one is something called a profit and loss statement. And this is also referred to sometimes as a P &L, so P &L, profit and loss, yeah, it's just a simple abbreviation.
So if there's any like report or like financial statement you should care about, this is the one. A profit and loss statement essentially just is a report that you can generate either automatically through your accounting software or simply through the information you have through your business bank account statements. And it shows you how much you made, how much you spent and whether you actually made money.
That's all it does. It shows you your profits and or your losses. So how much money you made, how much you spent and whether you actually made money. This is essentially like a scoreboard for your business. And a lot of farmers avoid it because they don't know how to read it or they don't know how to put it together. But it's really important to have this. This is just like the overall scoreboard. Like did your business earn a profit this year or not? So this tells you if your business model works.
It may also tell you more about like what stage of your business you are in. It helps you spot problems early on as well. Ideally, and with most profit and loss statements, it also tells you where you spent your money. So under that category of how much you spent, it should categorize how much money you spent on supplies, how much money you spent on labor, how much money you spent...
with your insurances and all that other good stuff, marketing, website, yada yada. And this is a really great tool to look at just to spot like, wow, I actually spent like $3,000 on my website last year and I didn't actually make any money through my website last year. I made all my money just by going to the farmer's market. Like that may spark a hint or an idea in you like I could probably have.
a cheaper website to maintain if I'm not actually making sales through there. So those kinds of things. That's how you get this information is through looking at your P and L or profit and lost statement.
It doesn't have to be perfect at first. It just needs to give you awareness as to what is happening in your business financially. Again, this is all it is is money in, money out. That's all you need to worry about at first. Now, hiring someone to help you with this,
doesn't mean checking out completely. Like I definitely recommend, if you can, hire a bookkeeper to help you. I didn't have a bookkeeper for many, many, years and I regret it. The moment I hired one, I was like, why didn't I do this sooner? It is an expense. So probably in the very, very beginning, you probably don't need it. But as you get a few years into it and you have more varied expenses,
and you need more insight into what's happening in the financials of your business, I really do recommend outsourcing this to a bookkeeper. But it has to make sense, okay? If numbers and accounting is not your zone of genius, somebody else, this is what they live and breathe all day and they can help you make sense of the numbers and organize everything and make it make sense more often for you. But before you go and hire out a bookkeeper,
to actually keep your books every single month. And basically what they will do is look at your money in, look at your money out, reconcile it every month. And all that means is making sure that your records match your bank account. So like, did the money you think came in actually come in? Did the money you think went out actually went out? That's all they do. It catches mistakes early, builds trust in your numbers, and they just make sure everything is accurate, right?
But before you hire somebody to help you do that every month, you have to know enough to be dangerous. You need to understand the basics. You have to know what your accounts are. What are all the things you spend money on and things that make money in your business? You have to understand how you want your money categorized and really understand what that reconciliation process means. And this will come one step at a time.
as you start looking at your numbers in and of that bank account and as you start experimenting with that accounting software. And again, if you can afford to hire somebody to help you, just highly recommend that. But delegation works here when you can still kind of read the map. And I'll give you an example of this. Like I said, I did my own accounting for the first, I don't know, too many years of my business. I don't even know how many, probably like seven.
years in my business or something like that, far too long in my opinion, looking back. But the first bookkeeper I hired made a massive mistake. Like they were great and they were great people to work with and they did a great job most of the time. But I kept an eye on my business bank account and I compared it at the end of the year against what they had in my books.
And it was just sort of like as an insurance policy, like I'm just going to double check to make sure this is all right. And they had put down somewhere that I had made an extra $30,000 that year. And then I had actually made. And at first I was like, wow, I did amazing with my business this year. This is incredible. And then I started looking at it and I was like, you know, this doesn't seem right. So I started, you know, diving into it, looking at the numbers and I realized that there were
several months of the year when every sales transaction had been duplicated. And now I have no idea how this happened. I have no idea how they didn't catch it because they were supposedly reconciling my bank accounts. But I discovered this and I was like, hey, bookkeepers, you guys made a big mistake. You got to fix this. And so yes, I had somebody else, you know, they're no longer with me. That sounds like they died or something.
We are no longer with that company because they made that big mistake. But now I do have a great bookkeeper who doesn't really make mistakes like that. I know just enough to know if something is off because if I hadn't realized that I would have had to pay income tax on all that extra money that I didn't actually earn. So it would have cost me way more and I wouldn't have been as profitable. Like also it basically was like lying on my financial statements. So not good either.
And so all this to say, you just need to know just enough to be dangerous so you can find big mistakes when they happen or see when something is off before you start delegating this out to somebody, you know, when you don't know anything. And so this is probably just my opinion, but you're here to listen to my opinion. So that's what it is. takeaway here. You don't need to do everything yourself forever, but you do need to understand basic accounting and this protects you.
as a business owner. So you don't need to love accounting, you don't need to be perfect at it, but you do need enough understanding to run your farm like a real business. So here is my action item for you for this episode. Open or review your separate business bank account if you don't have one already. And if you do have one, print out your statements and look at last month's money in, money out. If you want, look at all of last season if you want to. And ask yourself like,
Did this business actually make money and where can I make improvements? This awareness alone puts you ahead of most people, especially when you're just starting out in business. So this is why I also don't believe most farmers need more accounting skills or finance skills or spreadsheets. You just need clear focus on what is going to move the business forward and financial clarity at certain stages of business is what is going to unlock that for you.
So if you want help finding out what matters most in your business right now, our personalized profit roadmap that I made does exactly that for you. So this is how it works. You tell us a little bit of information about your business and we will show you your exact current stage of business, your.
business bottlenecks and what to focus on right now to unlock that next level of business for you and what is okay to kind of ignore or not work on or not worry about fixing right now. You can find this at trademarkfarmer.com forward slash roadmap. That's R-O-A-D-M-A-P. I'll say it again, trademarkfarmer.com forward slash roadmap, or you can find a link to it in this episode's show notes. Highly recommend doing that. It'll give you so much clarity.
on what to focus on right now in your business. And that is it for today. So I hope this gave you a little bit of permission to look at your numbers with not so much pressure and just focus on money in, money out of your business. And I hope this helped. Thanks for listening to another episode of the Six Figure Farming Podcast.
Jenny (20:09)
Real quick, if you've got 17 tabs open in your brain right now, just trying to figure out your next move, please do yourself a favor and close them and go grab your personalized profit roadmap instead. It's just a short assessment that will tell you what stage your farm is in and what actually deserves your attention right now to move forward quickly. Because more information isn't usually the answer.
focusing on the real problem that's holding you back is. It's free, it's fast, and it's probably more helpful than scrolling Instagram for another hour. So go grab it at trademarkfarmer.com forward slash roadmap. That's trademarkfarmer.com forward slash roadmap. You can also grab this link in the show notes.
Jenny (20:56)
Don't forget, we publish new episodes every Monday. So I'll see you next week, same time, same place.
