This week, Wade and guest Amanda Darr talk about the benefits of checking your bank account daily. Find out why staying on top of those transactions can provide awareness, encouragement, and important insights to the health of your company.
Topics we cover in this episode include:
- Acting more quickly in cases of fraud
- How Wade’s thoughts on checking your bank account daily have changed
- You can course correct early on when you notice things getting off track
- Solutions for managing transactions in multiple banks and accounts
Visit the episode page at https://CarpenterCPAs.com/balances for more details and a transcript of the show.Find all episodes and related links at ContractorSuccessForum.com.
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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com
Amanda Darr | https://amandadarr.com
[00:00:00] Wade Carpenter: Welcome to the Contractor Success Forum. Today we are talking about why you should check your bank account every single day, and why I’ve changed my advice on this over the last few years.
I’m Wade Carpenter with Carpenter and Company CPAs, and who is here with me to do that? Normally we would have Stephen Brown with McDaniel Whitley Bonding and insurance agency, but unfortunately he couldn’t be with us today, and I am privileged to have back with us. Amanda Darr of Amanda Darr Designs.
Amanda, thank you for jumping in to help us. How are you today?
[00:00:36] Amanda Darr: I am great. Thanks for having me again. It’s good to be back and I’m excited to hear about this topic and how you’ve changed your thoughts on it. So should be a good one.
[00:00:45] Wade Carpenter: Okay. I know I’m gonna talk about a few things that, we’re gonna talk about the old analogy of if you’re trying to lose weight, maybe you shouldn’t step on the scales every day.
And I also want to talk about what I used to tell contractors, is don’t watch your cash every day, because they got the wrong impression. I felt you should be looking at your accounting system.
When I jumped into Profit First, then when you set it up properly I changed my tune. I think that we should be. We’ll get into some of the details on this a little later, but I’ve also seen a ton of fraud in the last few years with contractors, and we’re gonna talk about the businesses do not have the same protections that consumers, individuals have with as far as like bank fraud. And I wanna spend some time talking about that. So does that work?
[00:01:40] Amanda Darr: That works.
You can act more quickly in cases of fraud
[00:01:40] Wade Carpenter: Well, if it’s Okay, let’s jump into the fraud part to start with.
[00:01:44] Amanda Darr: Yeah, let’s start with that. I’m curious to hear more about the differences between the consumer protection rules and business and why that makes it so much more important to, to keep an eye on things.
[00:01:55] Wade Carpenter: Right. A little background, my wife is actually in banking compliance. We’ve done some episodes on this where I’ve seen so much bank fraud with my contractors in the last few years and I’ve heard some horror stories from my contractors.
And believe it or not, it doesn’t matter how much money you’ve got with a bank or how big a client you are. Maybe if you’re big enough, they will care, but you could very well lose some money. And it all falls to what your agreement is with the bank.
With an individual, there are some protections under several different regulations, as well as a uniform commercial code where, you have generally speaking, up to 30 days.
My wife cautioned me not to get into the details of all this and you probably don’t wanna hear all the details. But if you have a fraudulent ACH or a check or something like that, then you know, you’ve generally got maybe 30 days to go back and co make that right, or the bank has to make that right.
When you’re talking about a business, the rules are very different depending on, and she was explaining what, whether you fall under fed rules as well as if you’ve got a business account under a credit union. But suffice it to say if you don’t report a fraudulent ACH or a fraudulent check or wire, like within one day, you’re very likely to lose that.
[00:03:23] Amanda Darr: Wow, one day.
[00:03:24] Wade Carpenter: One day.
And again, that I started asking these questions after I saw some of my contractors getting hit with this. And the banks don’t talk about it, but they do put that in their agreements. And again, because the rules are so convoluted, you really need to go take a look at what your bank has rules on that.
But, so that’s one of the major factors in talking about. Looking at it every single day because, you could very well lose it. And unfortunately, again, when the banks clear these things so much faster now, they can’t get it back from the bank it came from. So that’s the main problem.
[00:04:03] Amanda Darr: I see.
[00:04:04] Wade Carpenter: So without going into more boring detail, does that sort of make sense?
[00:04:09] Amanda Darr: That makes a lot of sense. So yeah, the kind of main takeaways there are, be aware maybe of what your agreement and what the rules are with your bank and also it’s very important to catch any issues early. Are there any other best practices for mitigating financial losses around that?
[00:04:25] Wade Carpenter: Well, again, number one, if you question a transaction, report it immediately. Call somebody, contact them. That’s the only way you’re gonna protect yourself.
But again, I’ve heard some horror stories in the last few years and I know one particular one for eight or $10,000 where they knew exactly who intercepted the money went to. It was like a hair salon or something. It had nothing to do with construction in like Virginia or something like that. And the contractor was in Georgia.
And it was amazing to me that they knew exactly who got it, but that hair salon or whatever, whether it was a nail salon or something, they said that they were due that money, so there was nothing they could do.
And I think they were trying to get lawyers and, the law enforcement involved, but essentially I think they gave up and had to eat that eight, $10,000. And I, there’s several other situations where I’ve heard stuff like that.
How Wade’s thoughts on checking your bank account daily have changed and why
[00:05:26] Wade Carpenter: I guess changing the subject I guess we talked about what I used to tell contractors, right?
I always used to feel that people would, run their business by what’s in their bank account, especially contractors. And it’s so easy to, just it’s human nature. If you’ve got a ton of money in your bank account, you feel good. If it’s slim pickings, there’s not much in there, you feel like the world’s coming to an end We talk about it with Profit First that people tend to overspend when you’ve got a ton of money in there and they keep one bank account and not to go into too much detail, in Profit First, we play this little M&M game.
And the point of it is psychologically, we treat money very differently when we have a lot of it versus a little bit. And part of the benefit of Profit First is we’re going to put it in these little buckets and we carve it down and we only have like, for our operating expense, X amount to spend in that.
And we see a smaller amount, then we’re less likely to, overspend that. But we also don’t have this huge balance thinking, Hey, I can go buy that brand new truck.
[00:06:36] Amanda Darr: Yep.
[00:06:37] Wade Carpenter: So again, doing this, it’s all in how you set up your bank accounts. It’s more along the lines of where we put our money and if you treat it properly, I think that it’s not a bad thing to check your bank balance every day. I think in fact, I advise it because of the fraud issues. But it’s tough to do. And I’m gonna talk about that in a little bit.
You can course correct early on when you notice things getting off track
[00:07:00] Wade Carpenter: But I relate this to the analogy of trying to, we said, stepping on the scale every day. If you’re, the whole analogy is don’t do that because you’re gonna get discouraged because one day you’ll go up and one day you may go down a little bit and then you eventually get discouraged.
[00:07:18] Amanda Darr: Right.
[00:07:19] Wade Carpenter: And so there’s pros and cons to that. I actually have been trying to lose some weight lately, and I actually step on the scale every day and I kind of disagree with that logic because if I’m watching where I am and things start to go off track, if my weight suddenly shoots up, it’s like, hey, you gotta, do something. Where, you gotta put some controls on it or something like that.
And I go back and forth where, you’re worried about getting discouraged with it, but also hey, you kinda got some self-control in there, like, hey, if you start hitting the next 10 or something like that, the number goes up. Hey, maybe it’s time to do something.
Versus you get on a scale every 30 days or something like that, you don’t know how you were doing until– that’s the same thing I say about contractors with job costing. It’s if you don’t know where you are, And then you all of a sudden look up and then, Hey you, it’s just we made a big mistake and now how do we correct it?
It’s gotta be a lot more drastic correction,
[00:08:21] Amanda Darr: Exactly.
[00:08:22] Wade Carpenter: so
[00:08:24] Amanda Darr: Notice just small changes going off track. You can course correct more easily in the moment.
[00:08:30] Wade Carpenter: Right. But again, you know, obviously, there are all kind of things to think about with checking your banks.
Obviously if you overdrew your account and you saw that, you could go ahead and possibly make some adjustments. But a lot of times they will post those things overnight and if you cover it by the end of the day, then there’s not a overdraft fee, those kind of things.
So I think it needs to be a balanced mindset. And again, I felt like in the past, contractors would run their business by what’s in their bank account, and if they don’t have any controls like Profit First they made the wrong decisions. And I still believe that looking at your bank, your cash basis is the way to manage your day to day and your, you know, week to week and month to month.
If you start looking at the financials, that’s how you steer the long term course of your business, if that makes any sense.
[00:09:27] Amanda Darr: It does. And with the Profit First method did, does Profit First recommend checking those bank account balances that frequently and how does it work with all of the different bank accounts? Do you recommend checking all of them, or?
[00:09:42] Wade Carpenter: Number one, I guess if it’s in the same bank, that’s another point I’m gonna come to. But if it’s in the same bank, it’s easy to check. And if you got one screen, Profit First advises you to have at least two banks for some of that, which I’ll get into.
I think from Profit First and Mike Michalowicz’s standpoint, a lot of business owners will check their bank every day. They’ll log in. They made it very easy with these phone apps, but they’re not necessarily checking to see these transactions. They’re just saying, hey, what’s in my bank account? And they, so they’re not really looking for these fraud things. Does that make sense?
[00:10:21] Amanda Darr: Yeah, they might notice some big shift, but if it’s something smaller they won’t see it on the transaction level necessarily.
Solutions for managing transactions in multiple banks and accounts
[00:10:28] Wade Carpenter: So about a year ago I started watching mine and started playing with the technology a little bit because, I, especially after I saw some of that with my client, I figured I’d better be looking at my banks every single day.
But I had it actually spread across three different banks and having to log into three different banks was a pain.
[00:10:49] Amanda Darr: Right.
[00:10:50] Wade Carpenter: So what I had set up is some, playing with technology, there’s ways to pull the bank balance from different sources, but it was hard to get it in one place. And I’ve been playing with the technology for a while as well as these things like Zapier or whatever.
And, I do actually get a report every single morning that’s texted to me and emailed to me that, hey, these are the bank balances in this bank and this bank and this bank, as well as here’s the transaction for the last three days. So I can, take a quick look at that and get a quick daily snapshot of where I am on that.
And it’s something I’ve been working on and I’ve expanded on a little bit to where, now I start looking at certain things like receivables and, what’s the monthly revenue and those kind of things. But that’s something that I’ve really enjoyed doing and I’ve started turning this into a service.
Because I know contractors, they have a lot of money that comes in and goes out really quickly. And this is something, just for the fraud reason obviously, but I believe they really should be looking at their bank every single day just for the transactions, but also this daily health snapshot of what you’re doing as well as if you can get it into this one dashboard where, hey, here’s my flash report and this is where we are.
And if you can see some of these other KPIs in one place it’s been a game changer for me, but I hope that makes some sense.
[00:12:25] Amanda Darr: That makes a lot of sense, and it sounds like a tool that could be incredibly useful for these contractors who are, on the go, they don’t necessarily have time to sit down at a computer every day and open up all these different accounts and look at them individually. So I could see how that would be very helpful.
[00:12:40] Wade Carpenter: But again, I feel like there’s contractors out there that, if they are playing with one bank account and they’re managing the way I was describing before, that may not be the right way to do it.
But also, from my standpoint, when I started doing Profit First, and I’ve seen this with several contractors that we’ve implemented on, where we talk about just even if we’re putting like 1% in the Profit and you start seeing that Profit grow, it’s encouraging. As you start seeing money grow in your tax account and you start having money in your owner’s comp account where you can start paying yourself.
Because that’s, I say it all the time, too many contractors tell me all the time that their receptionist takes home more money than they do. And I believe getting some clarity around your cashflow is a huge game changer. At least it was for me and I’ve seen a couple of contractors that when we put these kind of controls in place, it’s made a huge difference in their, not only their cash flow, what they can take home, but I also, and I believe this myself because I’ve experienced it, when you feel like you’re winning you want that feeling to go on, so it spurs you on to try to achieve more.
Again, I don’t mean to launch into other things we talk about on this podcast all the time about, hey, we start chasing this top line and maybe, maybe that’s the right thing for a contractor, maybe not if you’re not chasing margin. In my case, more top line translates to more Profit because I’ve covered my overhead.
Too many contractors, their revenue will go up, but they also, their overhead will go up with it because they start thinking, hey, I have this money and I’m doing, I don’t know, 10 million a year or whatever the number jumps to. They feel like they have the money, but it never seems to materialize for themselves.
Does that make any sense?
[00:14:35] Amanda Darr: Makes a lot of sense. So yeah, if you just look at that one overall number, it can be quite deceiving because your expenses are going up too. But if you have that all allocated out using the Profit First method and you’re keeping an eye on it, not only looking for potential problems or fraud, but also celebrating those wins and seeing that growth over time, you overall just have a much clearer picture of the financial health of your company and make sure that it’s going in the right direction.
[00:15:02] Wade Carpenter: Going back to things like the analogy of stepping on the scale every day. Do you have any thoughts on that?
[00:15:08] Amanda Darr: Yeah, I’ve always heard that, that debate. But I do think it makes sense to me If you’re only looking at your weight every 30 days it’s gonna be really hard to, first of all the number might change way more drastically, and that can be extremely discouraging if it’s going in the wrong direction.
But also you’re gonna have a really hard time pinpointing what went wrong or getting a more clear picture of the last 30 days. Whereas if you’re checking in daily, you understand what’s going on and you have, you’re empowered to make those changes, to get things moving in the right direction. And it sounds like it’s a great analogy with the financial health of your company as well, especially for contractors who do have so much moving in and out that could be missed in the overall picture. So it makes a lot of sense to me.
[00:15:53] Wade Carpenter: Okay.
[00:15:53] Amanda Darr: If they have a tool that helps them look at it every day without spending tons of time or effort.
[00:15:59] Wade Carpenter: Yeah, I mean we are gonna be rolling that out. That’s really not the point of today. But we are actually kind rolling that out in the next month or so.
[00:16:08] Amanda Darr: Cool.
[00:16:09] Wade Carpenter: Because I truly believe you should be looking at it. And as well as my problem was, hey, I don’t wanna log into two or three or, different places.
I didn’t really even mention credit cards. ’cause credit cards can be a crutch for any business owner, but contractors. So that’s another piece that I brought into mind is hey, here’s my cash, but here’s also my credit card balance. It’s where I’m balancing that kind of stuff out.
I feel like it’s helped me. And for contractor work, cash is king. I think it’s something that I believe people should be doing is checking every day, one way or another.
How to start building a daily habit of checking your bank accounts
[00:16:43] Amanda Darr: Yeah. Makes sense. Do you have any tips for somebody who maybe isn’t doing that at all or is maybe hasn’t implemented Profit First of how to get started with making that more of a habit every day or anything like that? Any stories you’ve seen?
[00:16:58] Wade Carpenter: So I would say number one there, a lot of contractors are still very old school on a lot of these things. And some of ’em don’t trust the banks and the, that kind of stuff. But don’t be afraid to go ahead and sign up for the online banking where you can at least take a look at it and get in there pretty quickly on your phone, if you don’t do something.
From a Profit First standpoint, I would say, I do believe in the system. I truly believe in it ‘because I lived it and it made a big difference in my business as well as, as well as the contractors I’ve helped implement it on. It’s been rewarding to me after, 30 something years in this business of to be able to help contractors get control of their cash.
And I don’t know, the older I get, I suppose that’s, it’s a lot more rewarding than giving somebody their tax return or something like that. And, making sure that they pay the least tax possible. And that’s still a goal, but shouldn’t always be the goal. Should be, maybe you should take something home at the end of the day.
[00:18:00] Amanda Darr: Absolutely. It’s a great goal.
[00:18:03] Wade Carpenter: But I guess final thought, just stay vigilant one way or another. ‘ cause it can get away from any hurry.
[00:18:10] Amanda Darr: Yeah, I can imagine if you’re not checking in fairly frequently, that it can almost feel like you just don’t even have control over those numbers or the cash flow. Whereas if you start making it a habit to check in every day, you can be empowered to have some more control over that, which is a great thing.
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