Why Boring Bookkeeping May Be One of the Best Things You Can Do for Your Business — and Your Next Mortgage
If you own a business, here's a question that may make you a little uncomfortable:
Do you really know what your numbers are telling you?
Not how much money is sitting in your checking account today.
Not how much revenue you brought in last month.
Do you know what your business is actually earning, where the money is going, what expenses are quietly eating into your profits—and what those numbers might look like to a mortgage lender?
On this episode of Between Two Doors, I sat down with Kasi Taylor, founder of Boring Bookkeeping, to talk about something that may not sound exciting but can have an enormous impact on entrepreneurs, Realtors and self-employed homebuyers:
Clean, organized books.
And as Kasi likes to say, bookkeeping really should be boring.
“If it fills you with anxiety, or there's something exciting happening in your books, it means something's not aligning.”
That's a pretty good definition of successful bookkeeping.
From Teacher to Entrepreneur to “The Boring Bookkeeper”
Kasi didn't begin her career in accounting.
She spent eight years teaching fourth grade. After having her second child, she began looking for a career that would give her more time with her family and less stress in the evenings.
She left teaching and opened a home daycare.
That's where an unexpected career transformation began.
Running her own business taught Kasi that entrepreneurship isn't simply about collecting payments from customers. There are expenses to track, receipts to save, taxes to prepare for and financial decisions to make.
She discovered something else along the way:
She actually enjoyed organizing the numbers.
The same qualities she had used as a teacher—organization, problem-solving and helping people succeed—translated beautifully into bookkeeping.
Eventually, Kasi operated the daycare and bookkeeping businesses simultaneously before transitioning into Boring Bookkeeping full time.
Her experience also taught her one of the most important lessons she now shares with new entrepreneurs:
Separate Your Business and Personal Finances From Day One
If Kasi could go back and tell herself one thing when she started her first business, it would be simple:
Separate the money immediately.
Open a dedicated business bank account.
Use business accounts for business expenses.
Use personal accounts for personal expenses.
And start tracking expenses and receipts as you go.
The IRS similarly advises business owners to maintain records that clearly show income and expenses, and personal expenses generally should not be included as business expenses.
The goal isn't perfection.
The goal is consistency.
Waiting until tax season and attempting to reconstruct an entire year's worth of transactions from memory is much harder than spending a little time keeping things organized throughout the year.
Your Bank Balance Isn't Your Profit
This may be one of the most important points Kasi made during our conversation.
The amount of money sitting in your bank account doesn't necessarily tell you whether your business is profitable.
You could have cash in the bank while simultaneously having outstanding liabilities, upcoming payroll, unpaid bills or other obligations.
Profit and cash flow are related, but they're not the same thing. Profit measures revenue minus expenses over a period, while cash flow tracks the actual movement of cash into and out of the business.
That's why business owners need to understand reports such as:
Profit and Loss Statements
Balance Sheets
Cash Flow
Accounts Receivable
Outstanding invoices
Recurring expenses
As Kasi explained, the real benefit is seeing the full view of the company, rather than making financial decisions based solely on today's bank balance.
The Subscription Problem
Here's something nearly every entrepreneur can probably relate to.
You sign up for a piece of software.
Then another.
Then another.
Eventually, you're paying for services you've forgotten you even have.
Kasi said one thing she looks for is software costs that gradually increase over time.
A $10 or $20 increase may not attract attention when you're looking at an individual bank transaction. But when your books are reviewed over several months, patterns become much easier to identify.
The same applies to payment processing.
A business might generate impressive sales numbers while losing more than expected to merchant and processing fees.
Good bookkeeping can help you ask:
What am I paying for—and am I actually getting enough value from it?
A Bookkeeping Error That Could Have Been Very Expensive
Kasi shared an example that illustrates why accurate books matter.
A client preparing to file taxes looked at QuickBooks and thought their sales had somehow doubled.
They hadn't.
The accounting system was recording an invoice as one sale and then recording the corresponding bank deposit as another sale instead of properly matching the two.
The result?
The books appeared to show roughly twice the actual revenue.
Fortunately, the error was caught and cleaned up.
That's an extreme example, but it demonstrates something important:
Software is a tool. It doesn't eliminate the need to understand whether the information going into it is being categorized correctly.
When Should You Hire a Bookkeeper?
Kasi doesn't believe there's one magic revenue number.
Instead, she recommends looking at your time.
If bookkeeping is taking you away from the activities that actually generate revenue, it may be time to delegate it.
A brand-new entrepreneur with only a couple of clients might not need monthly bookkeeping yet. Kasi suggested that quarterly reviews, initial setup assistance or training may be enough in the beginning.
But once you're managing employees, 1099 contractors, invoices, payroll and increasingly complicated expenses, the equation changes.
At some point, your time may simply be worth more elsewhere.
Realtors: Do You Know What Each Listing Is Actually Costing You?
This part of our conversation should get the attention of real estate professionals.
Realtors can spend considerable money marketing a listing before ever receiving a commission.
Photography.
Signs.
Marketing materials.
Advertising.
Open houses.
Client acquisition.
Technology.
And numerous other costs.
Kasi suggested tracking those expenses closely enough to understand what you're spending in connection with individual transactions.
Imagine selling a property and celebrating the commission—but never calculating how much you spent acquiring the client and marketing the property.
Revenue isn't the same as profit.
For Realtors operating as independent businesses, knowing those numbers can help answer a much more important question:
Which parts of my business are actually making me money?
And remember: whether a particular expense qualifies for a tax deduction depends on the facts and applicable tax rules. The IRS generally requires deductible business expenses to be ordinary and necessary, so discuss specific deductions with a qualified tax professional.
Why Clean Books Matter When You Want to Buy a Home
This is where Kasi's world and mine intersect.
I'm a mortgage lender, and self-employed borrowers are a significant part of what I do.
Someone may have built a successful company, earned good money and decided they're finally ready to purchase a home.
Then we start documenting income.
For self-employed borrowers, lenders aren't simply interested in how much money came through the business. They may need to analyze tax returns, business income, expenses, liabilities and the financial strength of the business.
Fannie Mae's guidance, for example, specifically requires analysis of self-employed income and the business's ability to continue generating sufficient income.
Clean books don't automatically guarantee mortgage approval.
But organized financial records can make understanding and documenting the business much easier.
As Kasi put it:
“If your books are messy, it's gonna delay everything.”
That's exactly what I see from the lending side.
One Business Debt Detail That Can Make a Big Difference
During the podcast, I discussed a scenario I frequently encounter: a business debt that appears on the borrower's personal credit report but is actually being paid by the business.
This can matter.
Under current Fannie Mae guidance, certain business debts in the borrower's name don't have to be included in the borrower's personal debt-to-income ratio when specific requirements are met. Among other things, the lender needs acceptable evidence that the business has been paying the obligation—such as 12 months of canceled company checks—and the payment must be appropriately considered in the business cash-flow analysis.
That can potentially be significant when qualifying for a mortgage.
The exact treatment depends on the loan program, documentation and individual circumstances, which is why planning before you start house hunting can be so valuable.
The Tax Strategy vs. Mortgage Qualification Conversation
Another important topic Kasi raised is something self-employed borrowers should understand well before applying for a mortgage.
Business owners naturally want to take legitimate deductions and manage their tax liability.
But mortgage qualifying income and taxable income are closely connected for many self-employed borrowers.
Kasi explained it well: if the goal is simply to make the business appear as though it has little or no profit, that may create challenges when it's time to demonstrate income for financing.
This doesn't mean skipping legitimate deductions.
It means your CPA, bookkeeper and mortgage professional should understand your goals before major financial decisions are made.
If buying a home is on your two-year horizon, tell your financial professionals.
Planning is much easier than trying to repair the numbers after tax returns have already been filed.
Your Credit Card Due Date Isn't the Only Date That Matters
We also talked about something I discuss frequently with mortgage clients: credit utilization.
You can pay your credit card bill in full every month and still have a high balance reported to the credit bureaus.
Why?
Because issuers generally report account information monthly, often around the statement closing date. Experian notes that paying down balances before the statement closes can reduce the utilization appearing on your credit report.
That doesn't mean everyone should manipulate their balances or obsess over a particular percentage.
But if you're preparing for a mortgage, understanding when balances are reported can be useful because revolving credit utilization can influence your credit scores.
A mortgage professional can help you evaluate your individual credit profile before you start moving money around or closing accounts.
Bookkeeper vs. Accountant vs. CPA
Kasi gave one of my favorite analogies of the episode.
Think about building a house.
The bookkeeper builds the foundation.
The books are organized and categorized so the underlying information is accurate.
The accountant begins building the walls.
They can analyze the financial information and help interpret what the numbers mean.
The CPA puts the house together.
A CPA can address tax filings, compliance and tax strategy within the scope of their professional services.
Different professionals may offer overlapping services, but Kasi's point is important:
Everything works better when the foundation is solid.
Kasi's Best Advice for an Overwhelmed Business Owner
Near the end of our conversation, I asked Kasi what she would tell someone who's overwhelmed by their business finances.
Her answer was refreshingly simple:
You don't have to do everything yourself.
Maybe you need a bookkeeper.
Maybe you need training.
Maybe you simply need someone to help you establish a system.
But ignoring the numbers generally doesn't make them disappear.
Start somewhere.
Separate the accounts.
Track the expenses.
Review the books regularly.
And ask for help when you need it.
As Kasi said earlier in our conversation:
“Something done imperfectly is better than trying to be perfect right up at the beginning.”
For entrepreneurs, Realtors and self-employed homebuyers, that's a pretty good place to start.
Connect With Kasi Taylor — Boring Bookkeeping
Website: http://www.boringbookkeeping.com
Email: info@boringbookkeeping.com
Facebook: https://www.facebook.com/BoringBookkeeping
LinkedIn: https://www.linkedin.com/in/boring-bookkeeping/
If your books aren't boring yet, Kasi may be able to help you get them there.
About Between Two Doors
Between Two Doors is a podcast where I talk with Realtors about their journey, aiming to connect home buyers and sellers with agents on a more personal level. I ask "right brain" questions that go beyond transactions, focusing on the experiences, values, and passions that make these professionals great at what they do.
Listen to more episodes at: https://www.betweentwodoors.com
Sponsored by:
Premier Lending, Inc.
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