EP 28 - Jerimiah Kovacs - 3 Phases of Book Keeping and 3 Ways to Approach Sales Tax
| Awesomers Origin - We'll talk to an Awesomer about where they came from, the triumphs and tribulations they have faced and how they are doing today. An Awesomer Origin story is the chance to hear the backstory about the journey our guest took on their road to become awesomer. These stories are incredibly varied and the takeaway is that awesomers come in all shapes, sizes, backgrounds, creeds, colors and every other variation possible. On your awesomer road you will face adversity. That’s just part of life. The question as always is how YOU choose to deal with it.|
|Jeremiah Kovacs is the founder of MuseMinded, one of the first and only firms to specialize 100% in accounting for Amazon-centric sellers. Since 2014, he and his team have worked with hundreds of sellers to automate and outsource their financial systems, helping them to leverage their time and energy to 10x their business and build toward successful 7-figure exits.|
The magic of accounting is all about taking data and turning it into valuable information.
On today’s Awesomers Authority episode, Steve Simonson introduces us to Jeremiah Kovacs, Founder of MuseMinded. He and his team have worked with hundreds of Amazon Marketplace sellers to automate and outsource their financial systems. Here are some key points on today’s episode:
What MuseMinded is and how it helps Amazon marketplace sellers.
The three phases of bookkeeping - data capture, data categorization and data presentation.
The importance of having a solid financial system.
And the three ways to approach sales tax and more.
So subscribe to the Awesomers podcast and learn more about having an efficient and scalable accounting system.
Welcome to the Awesomers.com podcast. If you love to learn and if you're motivated to expand your mind and heck if you desire to break through those traditional paradigms and find your own version of success, you are in the right place. Awesomers around the world are on a journey to improve their lives and the lives of those around them. We believe in paying it forward and we fundamentally try to live up to the great Zig Ziglar quote where he said, "You can have everything in your life you want if you help enough other people get what they want." It doesn't matter where you came from. It only matters where you're going. My name is Steve Simonson and I hope that you will join me on this Awesomer journey.
If you're launching a new product manufactured in China, you will need professional high-resolution Amazon ready photographs. Because Symo Global has a team of professionals in China, you will oftentimes receive your listing photographs before your product even leaves the country. This streamlined process will save you the time money and energy needed to concentrate on marketing and other creative content strategies before your item is in stock and ready for sale. Visit SymoGlobal.com to learn more. Because a picture should be worth one thousand keywords. You're listening to the Awesomers podcast.
1:16 (Steve introduces today’s guest, Jeremiah Kovacs, Founder of MuseMinded.)
Steve: You're listening to the Awesomers.com podcast and this is episode number 28. So all you have to do is go to Awesomers.com/28 to see all the show notes and details that's Awesomers.com/28. Now today my special guest is Jeremiah Kovacs who's the Founder of MuseMinded. Jeremiah is a really good example of somebody who is kind of born out of this Amazon related ecosystem because his firm specializes a hundred percent in accounting for Amazon centric firms since 2014. He and his team have worked with hundreds of Amazon Marketplace sellers to automate and outsource their financial systems helping them leverage their own time and energy to 10x their business and build towards successful seven-figure exits by leveraging the things that they're instead of the things that maybe we don't like to do. And we've talked in today's episode about just exactly how people treat finance often as an afterthought. We talked about the idea that it's a core function that needs to be done in your business to to do scorekeeping. Yet so many of us procrastinate it or try to do it in the worst way possible either ourselves god forbid or we hire resources that aren't really specialized, don't really understand. And today I think we're gonna have a great conversation about how we can solve that particular problem. Okay Awesomers. Welcome back here we are again today Steve Simonson, I'm your host and today we're talking with Jeremiah Kovacs. How are you Jeremiah?
Jeremiah: I'm doing great. I'm doing really great, Steve.
Steve: Good. Did I pronounce your last name right?
Jeremiah: Yes, it's phonetic Kovacs.
Steve: Okay good because I've got a history of mispronouncing names and I like to just come clean when I mess it up. So luckily you've got one that seems pretty straightforward to me. So thank you for that. So listen everybody, Jeremiah is joining us today and he comes from kind of a company called MuseMinded which is formalized how to put your Amazon business into a proper accounting flow. And Jeremiah maybe you could fill in some blanks from there.
Jeremiah: Yes, sure. So maybe a little bit of backstory back. So I was a four year accounting grad doing freelance bookkeeping and I ended up sort of falling into this space by accident. So I had a mentor of mine who ran a larger accounting firm for large E-commerce businesses and he essentially was kind of teaching me his method and sending smaller medium-sized businesses that weren't quite ready for his premium offering. And so I was kind of getting them on a system that aligned with his process. And so the idea was sort of like the symbiotic deal where as they grew up and outgrew me I'd send them over to him. And that's how I got my start and E-commerce and I decided I'm just gonna focus on here. I got a good thing going and that about six months I started to realize that all my best fastest growing clients were really focused on Amazon as a platform. And so I decided to focus on Amazon as a platform and really niche down our firm to focus on I would call like Amazon centric sellers were 70, 80, 90 percent of their sales are on Amazon. I mean so yes we spent the last I don't know about three and a half years now, sort of perfecting a service delivery system to be quality and efficient and really scalable. So we hope sellers get automated accounting systems going, getting books that are walking water tight and solid and then tailored to your business. So yes and now actually we do income tax and clients and kind of help people sort through this mess, that is sales tax right now.
Steve: Boy that's definitely a messy topic that we're certainly going to come to and we're also going to frame up what I think is the typical problem entrepreneurs face when it comes to bookkeeping. I'm going to do that right after this break.
Catalyst88 was developed to help entrepreneurs achieve their short and long term goals in E-commerce markets by utilizing the power of shared entrepreneurial wisdom. Entrepreneurship is nothing if not lessons to be learned; learn from others, learn from us. I guarantee that we will learn from you. Visit catalyst88.com because your success is our success. Hey Gideon. You're listening to the Awesomers podcast.
5:58 (Steve and Jeremiah discuss more about entrepreneurship and accounting.)
Steve: Okay guys we're back again and I want to ask Jeremiah a couple questions and one of them is to to see if he agrees with my general experience. He doesn't have to agree by the way, there's no bets on the table here but one of the things I think is that entrepreneurs procrastinate or they simply won't do their accounting because they don't like it or they don't understand, is that fair to say?
Jeremiah: Well, I mean I can't tell you how many times I hear like finance accounting just tends to be the least favorite thing to do for business owner. So yes hundred percent. And I think that leads to a few different... they don't do it, they craft innate on it or they do it poorly or it takes them forever to do it. Just cuz it's not there their core strength.
Steve: Yes, so all of these problems and Jeremiah did a good job of summarizing either you don't do it at all which is not an option. Even the folks that are saying well fine I'm filing my taxes and I'm putting together whatever shoebox of receipts in, however that looks to an account I can't imagine. And they're doing whatever they have to do for the minimum compliance that they think is going to get them by but they really have no idea how their business is performing. That's a terrible strategy by the way, not a strategy actually. The second problem I think you kind of alluded to in there. Is this idea that they did it but they did a pretty bad job at it because they're not good at it and they also hate it and therefore it took a lot of their time. So it's just a ton of pain and when you talk about the pain train pulling out of the station. For me I hate accounting, let me just be full disclosure. I hate accounting but I hate the doing part of the accounting, where as Jeremiah went to school for this. He probably likes accounting is that reasonable to assume Jeremiah?
Jeremiah: I have to be transparent, I for me getting to accounting was a strategic thing. I'm actually, I self-identify as an entrepreneur and I went, I got accounting. I went to accounting to get a hard skill. If I ever need to fall back on and little did I knew I was gonna start an accounting firm but actually right now I love the architect in the accounting and then I know I have a team that kind of runs the day-to-day. But as an entrepreneur the monotony of accounting tends to grate at me a little but I love to solve the hard problems for sure.
Steve: And for those keeping score at home, having a hard skill to fall back on that's a very accounting thing to do by the way. So you definitely have a good mix and Jeremiah that's the mix we need right? We need somebody who has the entrepreneurial drive and appreciates the fact that many of us entrepreneurs are nutty crazy and we don't bother following a lot of processes or procedures which is to our own detriment. By the way I'm not endorsing that as a lifestyle choice we need that balance of the numbers and I always break it down to I call it a scorecard right. If you ask a business person hey have you checked out your P&L this month or what's your cash flow statement look like or how's the balance sheet changes month over month? Their eyes start glazing over and they start giving you the look like they don't know if they want to punch you or if they should just slink away from the conversation. But if you ask him hey how's the scorecard going and the scorecard is like our sales were up eight percent month-over-month forty percent year-over-year that gets people excited and I wonder how the disconnect happened between this concept of scorekeeping which is great and monotony of accounting. Any feedback on that?
Jeremiah: Yes. I really actually kind of think it's a little bit of a social myth that we sort of sociate. Accounting is boring numbers, we associate numbers as being a personality type and at the end of the day. I think people just sort of when you see a massive spreadsheet of numbers you can sort of like I think your eyes glaze over and then you I don't know like fall into a common myth that this is just a white noise and I think at the end of the day people just need a little bit of knowledge, a little bit of understanding how to structure and frame things and then it becomes useful that way. Like for example, like with a scorecard what winning means like scoring is a prerequisite to figuring out how you're gonna win and I think in the same way accounting starts with in a vacuum. Accounting is just numbers but when you have an idea of what it means to win in business and what you're actually going for, you have a vision. I think that's where the numbers and the keeping score starts to make a lot more sense.
Steve: Well and this is really where the magic of accounting takes over because you could take data and turn it into information and I'm not a robot so I don't really care for data. But I love information, I definitely love information that gives me the pulse of my business and despite my own animosity towards accounting. Just a process like I can't do it. It's not my skill set. I love once. I learned how to read a balance sheet once I learned how to interpret a cash flow statement and understand a P&L and the changes are worth. Now it's something that is actually very gratifying to be able to see because it is the scorecard. We can see information about our business on these financial documents and the absence of that information is absolutely unacceptable there's nobody who is going to be able to put together a big successful long term sustainable company without keeping score. That's just the basic facts you agree with that premise?
Jeremiah: Yes, I mean just from so many angles. One you need as you said not data but information to make smarter decisions. If you ever want to bring on investors or sell your business. You're gonna need solid financials. It's just a part of running a business and reaching your long-term goals.
Steve: It's just a prerequisite like yes, they're the ante to play the game of business is to keep track of your numbers period right? And so anybody who's not that's unacceptable anybody, who's suffering through it themselves because they think that they need to beat themselves down. They really are doing themselves a disservice and then of course any variation in between not doing it and doing it poorly. All that can be solved by just putting in a systemic solution and this is one of the things that I really appreciate about. How you've built your company is you built a system that other businesses can plug into to solve their own gap. They have a system gap in accounting and you guys just fill in that little gap tell us about. How you fit in with with companies like a typical Amazon seller.
Jeremiah: Sure, so there's really the solution. There's really three phases to to it. So the first is data capture, the second is data categorization and then it's data presentation. So those three parts really make up bookkeeping and getting solid numbers as a whole. So what we've done and I'd love to dig into each of those areas a little bit more but what we've done is created a done-for-you service subscription where we take our niche expertise and we figure out what's the most efficient way to capture all of your data into an accounting system right? And then we've built these processes over time where we already recognize 80 to 90 percent of the transactions that most Amazon businesses see because we see them every single day. And then we know there's just one of types of adjustments and entries that have to be made with products based business and we've seen those a million times. So we have templates for how to do those entries and then lastly we built some reporting around the profit and loss statement where you can start to track in a retail business. You're not in the business of making sales, you're actually in the business of making margins. So if you have a million dollar business but it costs you a million dollars to create those items and sell them, you don't have a million dollar business. You have a zero dollar business. So one of the really key reports that we try to help our customers understand is we break down all their revenues and expenses as a percentage of their revenue. So they can start to see where their margin, is leaving the business? And then they can start to optimize those different areas. So really got a capture, a categorization and presentation. Those are really three core components of the process and of course we built a process system so you don't have to go it alone.
Steve: So yes, I love that summary and too often entrepreneurs are lonely and isolated enough as it is. Especially in this world where many people are working remotely and maybe they're traveling, maybe they're at their home whatever it is but they're already feeling alone and isolated. And then they just have this persistent fear in the back of their mind like oh I got to get this thing done I got to get this thing done and then they procrastinate because it's either unattractive for them to dive into it or maybe they're not prepared. Whatever the reasons are, people procrastinate this stuff and my plea to Awesomers out there is to stop procrastinating and just buckle down and decide that you have to have the solution. There's actually a legal requirement to file income tax. It’s based on real income and that's there's nobody getting around that. So that's a prerequisite that we all live with and to get that why not have the best information possible that helps you run your business and that is something that I think Jeremiah and the team are delivering. And for my own part by the way, my favorite version of a P&L is when you show the percentages of against revenue and you also do some sort of comparison or comps as we call them right? It could be month-over-month comp, it could be year-over-year comp, they could be quarter-over-quarter comp, whatever is relevant to your business but to be able to see gosh my margin was whatever 40 percent this quarter and last quarter it was 46 percent where'd the money go? And then you start asking questions and you start diving in like a detective which it by the way is far more engaging and fun. When you're looking for your money and whether it's a positive story or negative story it's far more engaging than trying to assemble the actual P&L yourself. This is why using an outside provider makes so much sense to me Jeremiah do you agree with that general premise that if people take this this burden off of them then they can focus on the investigation of why things are happening instead of the how to assemble the reports?
Jeremiah: No doubt. Honestly, sometimes when you spend so much time creating the report you end up getting lost in the weeds and sometimes it's almost nice to just open up a report with a fresh set of eyes and say okay this is what's happening here. This is what's happening in there so know without a doubt and I'd say like at the end of the day. What is the value of your time worth and I know at the end of the day I think most of the customers we work with tend to be marketers. Their core competency and the core value that they bring to their business in the world is that they help develop and sell products and at the end of the day putting your books together. It's not generating revenue, it's not necessarily generating revenue. It's still accounting can still be a profit center if it's helping you recover money. It's not doesn't have to just be an expense. But I'm with you, the development of that is for most people sign up core carbon C. And actually one of the things that I've noticed too is the one of the reasons I think a lot of our customers into procrastinating in this areas, they just don't have. They've not mapped this corner of their business to their calendar and so they don't have a set point in time that they know they need to just think about the financial corner of their business. I'm like for a while I was like the mechanic whose car was broken down. I didn't have a timer. I was just diving into my own financials and so I what I ended up doing was I say Tom financial Fridays is what I call it. So my every Friday morning is when I open up the financials and I dig through all my numbers and I get stuff, yes I just get those insights and I take care of what I need to take care of. Because if you don't do that what ends up happening is you fight fires, you get notices in the mail here like you hit deadlines and ends up be creating stress and pain and yes the common entrepreneurs get.
Steve: It really is. The whole reactive versus proactive mentality because entrepreneurs often do not find this as a core strength as Jeremiah alluded to earlier. It gets back burner or none burner in many cases. But I would go so far as to say even those entrepreneurs that I know that come from a financial background it's you should be focusing on marketing. You should be focusing on growing your company because this type of stuff especially using a well-defined system like Jeremiah and his team have. They're gonna be able to do it faster and better than you probably anyway and ultimately at lower cost. And this is the point Jeremiah made earlier about what's your cost per hour, what's your worth per hour and should you be wasting time on this whether you're good at it or not whether you like it or not and my argument is you shouldn't be. And really in every company we've ever had, we always put together a good financial team because we needed to have those numbers. We had to keep score and I'll give you one example. So what happens in my experience I'd love to get Jeremiah's feedback on this as I make the point is, we found something on the spreadsheet where the the P&L and we said we don't understand why this number so high, that the product number two, the margin something wasn't right and so we started diving in. And we ask yourselves oh wait a minute what about samples? What about the free giveaways or whatever the case may be in your business. Where are those getting booked and then we realize oh wait a minute those are just offsetting in the gross margin. We got to break those out and so we learn to develop the P&L to a level that showed what each of these marketing functions were. Whether it's a part of giveaway or sample, whatever you want to call it and we ended up being able to isolate and define 50,000 pounds of costs each month that were formerly baked into other line items. So this is a fairly large business. So you can lose 50,000 pounds in some line items pretty easy but once we identified those line items, we were able to isolate it and ultimately eliminating it saving that company over 600,000 pounds that's pounds European, a UK sterling. And that is that's probably close to a million dollars of value for that company but it's all because we were able to start asking the questions and then diving in. And we had each of those financials on a set date. I highly recommend I don't know if you guys do this Jeremiah, I'd love to hear if you do but having a kind of a standard drop-dead date for financials being delivered each month. How do you guys handle that stuff?
Jeremiah: Yes, so for us it's the seventh business day and usually the reason we could do it sooner the challenges with Amazon, the payouts, the way to bi-weekly payout, to play out a lot of times. It's harder to get but you might have a payout that crosses over a month and it takes a little time for those hormones. So yes, by seven business days usually…
Steve: Seven business day is great by the way. For everybody keeping score at home that is very very good. Often we've had companies that will put the tan through the 15th out there even for our own purposes. So there's time to bring in the data and reconcile and so forth. So 7th business day very aggressive good job.
Jeremiah: I want you back up to about saving money. This is a really interesting concept that was handed down to me, was that we're always so focused on the top line of just cranking out more sales but the reality is one dollar of sales isn't often work one dollar of expenses. And I mean is for every dollar of expenses that you save that generally equates to two or three dollars of sales. So for example like you might sell a product for $20 but the amount of money that you're gonna make on the bottom line is what maybe five to ten dollars on that product. So if I saved you ten dollars that equates the same amount as if I was just to earn you $20 in sales. So I think it's brilliant, that is you dive down into the corners of your business and you figure out where different things are unoptimized. For example I had a customer that they started looking into their FBA fees and they dug down a little bit deeper and they realized that they were, you know how Amazon does they're, they do wait to mention right like dimension and weight put together and they realize that one of their products was right? On the cusp of a different fee category and so what they found out is if I could cut three ounces off of my product that would take my margin. I would get a whole extra dollar or margin back in the business. So it took a whole dollar off their FBA fees and that ended up equated to like I don't remember the exact number but they were selling ten of thousands of units a year. So that was an extra ten to 20 thousand dollars in profit online profit and based on his net more that was like over $200,000 worth of sales in profit, if that makes sense.
Steve: Totally does. Yes this is a really great lesson and a perfect point to hone in on which is if you don't understand all the things that drive your margin and that includes the Amazon fees. There are countless stories whether it's this 3-ounce example or somebody figuring out gosh if I change my packaging by this half an inch or this inch I'm no longer oversized. There's been so many examples of people being able to just make these modest adjustments but that you don't actually feel the pain until you're looking at on the report. Well I think a lot of Amazon sellers are like, okay I got my pay on it was ten thousand, one hundred thousand or a million or whatever was but they don't actually look at all the breakdown of all the money Amazon's take it out. They just kind of put it out of their mind go, Amazon is gonna get paid what can I do about it and but that's really not the case. When it comes to optimizing your packaging, when it comes to optimizing whether it's the weight of the packaging or the weight of the item all kinds of things you can do. And once the volume is high enough on a specific item that warrants an additional scrutiny when you're first starting out. You don't want to overthink it but as you as you go and as you see the numbers go get higher and accrue you'll just start seeing these line items you're like why am i paying Amazon so much in storage? Why am i paying Amazon so much in whatever the case may be? And what can I do about that if anything sometimes you can't do anything but more often than not there are things that can be done including going back to Amazon and saying hey that was on you owe me money for these returns that didn't happen. You may see a bunch of returns. I happen on your financial statement that you may not have otherwise picked up on because we're just so focused on what's the payout amount I'm kidding. And that's just not nearly the whole story is it? That's there's so much of a breakdown we're gonna take another break guys but when we come back we're going to talk a little bit more about this kind of systemic solution that Jeremiah developed. But we're also going to talk… boy I'm getting choked up even thinking about it we're gonna talk a little bit about sales taxes which is a bloody nightmare and it's not getting easier. It's getting harder. So we're gonna be right back.
Hey Amazon Marketplace professionals! Congratulations on your success today your creativity, strategic vision, problem-solving and discipline have allowed you to build your own E-commerce business. Wouldn't it be great if you had more time to focus on the things that truly drive the sales and growth of your company instead of getting lost in a dozen different services and countless spreadsheets? What if there was one system that connected to your Amazon account that automatically give you the information that you need it to make great decisions and really impact your business. Parsimony ERP can do that. Parsimony is the business operating system for your marketplace business. With Parsimony you get true double entry bookkeeping, easy financial statements, full customer service tools and item-by-item profitability along with project and task management and more features are being added all the time. Learn more at Parsimony.com, that's Parsimony P-A-R-S-I-M-O-N-Y.COM. Parsimony.com, we've got that. You're listening to the Awesomers podcast.
Steve: Okay Awesomers, we're back again. Jeremiah Kovac and Steve Simonson talking about all things accounting and extolling the virtues of keeping score in your business. We hope we're making some believers out of people doesn't matter I think fundamentally to either of us who you pick or how you solve it but you got to get it solved. I think Jeremiah is going to be an extraordinary resource for Awesomers out there. We'll put all in the show notes we'll put in all the links and make sure we get people connected to him and his resources but really you got to make this choice to get get right with the Lord when it comes to your financial statements. Jeremiah what do you think about that?
Jeremiah: One of the questions I love to ask people wouldn't have becoming clients is on a scale of like one to ten, zero being necessary evil or one being necessary evil to ten being a strategic investment. How do you view accounting and I love to see the people that call it tens or that like to tell me what they know. I want to hear but it's so true that often people we sort of have this idea that is it is and that's very evil and I get a lot of ones into some threes, that's good actually answering it. How they truly believe. So at the end of the day, one of the things I'm really passionate about and whether you're working with us or working with someone else it's like how can I help take someone from seeing this part of their business as a necessary evil to as a strategic investment. So how can we leverage it? How can we leverage your time? How can we ledgers your data and information to make better decisions? So that's just what I'm super passionate about and kind of the mission that we're on is to really democratize this. So at the end of the day doing it yourself is not a long-term sustainable solution. It's often necessary in the beginning and actually we have three courses that teach people how to get our system going like step by step video courses because we really want to help people that are just getting started. Get what they need but long term. What we sort of see is like there's this wave of technology automation that's coming in and it's really driving the cost of compliance down in terms of the amount of time it's taking. Service providers like our team to do it and so what we're seeing is like we want to create a scalable system and solution that we can help thousands of sellers for virtually closed yet. We're trying to get the cost down as close to zero as we possibly can over the next few years and the idea is that we want to free up money and your accounting budget so that you can start investing that in forward-looking proactive future oriented growth services and advisory. Whether that's with us or someone else. So I really think there's a it's kind of it. We're at a special place where there's a shift, where just doing your books and just seeing new taxes. It almost in a way is becoming it like a necessary evil and that there's so much more that you could be doing and we're spending so much of our money just in the compliance portion of the accounting that we're leaving a lot of value on the table. So I sort of like our mission and how we're arranging things is we want to be a low-cost provider and build an amazing system and process to help a lot of people at scale for just a few hundred dollars a month, all their books and taxes. And so you can actually see our website. We have all our pricing, it’s out there and really transparent if MuseMinded.com and I don't know if you want to put the empowering plug out here for it. I'm not sure if how many of us.
Jeremiah: Yes, Jeremiah’s new to the Awesomer podcast as we're getting ready to launch here but for everybody's benefit out there I don't do any kind of affiliate stuff myself. I never have. It always keeps me arm's length away from any kind of deals but the empower E-commerce cooperative has a deal with MuseMinded and I will definitely be supporting the empowering co-op. That's one of my missions, is to make sure that this nonprofit member owned cooperative has the access to the coolest of the most unique opportunities that are exist and I think the Jeremiah and his team are definitely one of those for sure. So we'll definitely have any of those links on the show notes page that will be available to everyone and we'll name the episode number and so forth and give the the link at the end of each episode.
Jeremiah: So in terms of like this solution, it's really simple. We create month, two months service subscriptions where you sign on with us. We'll catch you up if we need to catch you up, we get automation in place and then we run it for you month in and month out we do your annual tax returns as part of that subscription cost. So it's really really quite affordable and on top of that since we're experts in this corner. We literally a hundred percent of our client base or Amazon sellers that means there's no hand-holding, there's no learning curve, you'd have to pay us to learn your business and one of the other parts that people don't realize you don't have to worry about expensive mistakes. That you don't realize until year two or three which I see a lot, where they've been doing something all wrong and they realize that wasn't a scalable solution and now their business is growing and now they're gonna have to redesign their entire accounting system. You don't have to worry about any of that with working with the team like ours.
Steve: Yes, so I love a couple things here. First of all again we'll link out to the bookkeeping, the free bookkeeping course these guys offer which they literally take you through every single part of their process and this is them saying hey you guys want to do it yourself, knock yourself out here you go and I think that's great because the education piece and understanding the components and the inputs is an important thing for an entrepreneur really. And so I definitely will recommend a pet especially people who are not comfortable with accounting kind of take a look at that and go through that but long term I would always recommend putting an expert on the team or in this case deploying an expert resource on the team to handle the day-to-day accounting. And I make a couple points about this first of all there's no fortune 500 company, a public company that exists without financials right? Not only do they have to make their financials. They have to represent that, they're true and accurate and they have to file them publicly and this and that. So we have to be sure that we understand that financials are a core part of doing business. I think we've made all the pleas we can to illustrate that fact but fundamentally if you ever want to sell your business which I'm a big fan of entrepreneurs and Awesomers building equity right, they're building wealth then you've got to have your ducks in a row. So many times I see people have built a reasonable scale Amazon business and then they're playing the catch-up game or in the cleanup game on financials and it is a terrible feeling especially if they delayed it as long as the due diligence because the whole deal can hang in the balance. How much better would it be to have a clear and transparent set of books that going back for a long period of time. That is entirely reliable and easy to access. That actually is equity. So on any amount of money that is paid that it is absolutely worth it because you will get the this clear result from it. So I definitely love all the things you guys are doing there. There is typical way that people are bored with you, I mean what happens when they say okay fine I'm tired of being browbeaten by Steve get this thing done, what do they have to do? What is the process like?
Steve: Your question, so for our firm if you go to MuseMinded.com and if you go to MuseMinded.com/proposal, you can request a proposal with us. So we've kind of almost got it down to a science. These different levers in your business and you tell us how many sales channels you have and how many of this and we will be able to generate a custom proposal from me there. So that's one way to kick it off or on that. At that same page you can request a discovery call where if you just not feel like there's enough information on our website to fill in all the gaps, you're not sure where the right fit, I'm happy to hop on a free short conversation, generally 10-20 maybe 30 minutes where I figure out your general business model, answer your questions and from there we kick it off . So it's generally from discovery to proposal. And then we have a completely tailored onboarding process where step by step by step the first 90 days we get you completely integrated into our system and then our system completely integrated into your business.
Steve: Yes I love it. I think the fact is in every category I always recommend experts right. I don't want to be the Facebook Ads expert. There are people out there who are way way better at it and I know a couple things right. I actually know a few things. Google AdWords. I've been around the block, I spent millions of dollars on AdWords, I've been in the thing but there are people who are just world-class experts. So it doesn't matter what functional area of your business you're looking for. I always recommend finding the best experts and when you can get them at such an affordable rate that is so leverageable it just makes all the sense in the world. So Jeremiah, we're definitely going to get some people and encourage them to go to the site and learn a little bit more about this and follow your process. But let's take a minute and talk about that that dirty subject of state sales taxes shall we? We have to deal with because other entrepreneurs out there being they're faced with these issues and they're not clear issues. So I like how you kind of break down the sales tax into three camps of how people attack the problem. Can you give us that breakdown?
Jeremiah: Yes sure. So at the end of the day the sales tax as a process is pretty much stayed the same for a long time. It's wherever you have a requirement you need to go register for a permit and once you register for the permit you can start collecting sales tax from your customers. And then from time to time you'll need to file a report with individuals state and say hey these are the sales I made to customers in your state and here's the tax that I should have collected on those sales and that's simple and easy to understand. That the challenge is for E-commerce sellers is. It's really blurry and a little bit confusing on where they have a requirement and obviously there was a new law that was a new ruling that came out from the Supreme Court where they said, now you no longer have this really clear line in the sand that until you have a physical require presence in our state you don't have to worry about sales tax. Now they're introducing these ideas of economic Nexus. If you have enough sales in a state or volume in a state then you'll have to register. So the reality is that the legality of all that and what's gonna pan out from a legal perspective that's still pretty up in the air. So I think about it from a perspective of there's really three ways to go about it. And I think of they're basically three different options long as spectrum. So the first approach is what I call the by-the-book approach. It's the most conservative approach you're gonna see a lot of accountants and tax people who admittedly have a vested interest in you being more compliant and most amount of compliance as possible they will recommend that you take a conservative approach. And essentially go register in all the states where you may have Nexus or requirement right away and then get going with the compliance in all those states. So that's by the book. I'm just gonna tell do what the tax guy tells me to do and I'm gonna go get registered on the opposite end of that spectrum is what I would call the sort of wait-and-see approach. It's maybe the least conservator I mean the least conserver approach is like not doing any compliance anywhere of course but I'm gonna assume you're gonna start in your home state that's kind of the wait-and-see approach where you start in your home state you get compliant there because that's really standard protocol stuff and wherever else you might have employees or like hard physical assets in a state. That's where you're gonna start and then you're gonna kind of wait and see what pans out outside of your home state in regards to how the sales tax laws are going to come out, pan out. So and then sort of in the middle between those is what I call the stair step approach which is you sort of have a mentality of like a by-the-book approach or you're like I'm concerned I may have liability in all these states but I'm gonna approach it. I'm not going to just go and immediately comply in all those states it. I'm gonna create a plan and in the plan how the way I see a lot of sellers go about. It is they start in their home state and then they monitor their exposure outside their home state and they sort of set a liability threshold. So when the amount of sales tax that you potentially should have collected reaches a certain point in whatever based on your risk tolerance. You can put is at five hundred, a thousand, five thousand, ten thousand more when the amount of sales tax. You may be for example if the amount of sales tax maybe you should have collected in California reaches five thousand dollars that will be my signal to go and start compliance in that state. And what that allows you to do is it allows you to just stare sup your compliance up so that you're not doing too much too soon where your business just can't afford all the additional labor and time of sorting. And let's be honest like when you register for sales tax it can be an arduous process and I think you can attested Steve that states can be very aggressive that when you sign up for sir sales tax they may try to get you for income tax and franchise taxes as well, open up a lot of doors. So I wouldn't even try to approach to open up those doors until you could even think about paying an accountant, three or four or five hundred dollars at least a month to start doing that for you. So that's where you maybe want the middle approaches about having a plan, so that as your business is starting to hit seven figures or eight figures you may be are complying and covering all your bases just in case. So that's kind of the three different approaches and the way I see it is like I just want people to know all their options and the ones that you can take and there's not just one single option for you. Is that clear or should I clarify any more?
Steve: I think that's very good I would give my own kind of brief summary of it in kind of Jeremiah's view of the world there's three ways to go. One is I'm just gonna take the wait-and-see approach and I'm in physically in one of my states or my home state so I'm going to register there because there's no getting around that there and then that's kind of the the most maverick of the approaches and Joker's wild who knows what'll happen. The middle bit is I'm setting a thresholds of pain maybe it's five thousand, maybe it's ten thousand, whatever it is and then based on the potential for the states to come after me. I'm gonna go ahead and file and get going that's you call that the stair step approach. That's the toe in the water, I'm not all in but I'm not all out either. And then of course the most conservative and the one that as you said I think a lot of people will go well I should just do this is this idea that I should just register in all 45 states that collect sales taxes and just get with the program immediately. And I want to say very clearly that neither Jeremiah or I are giving legal advice here, we're just talking about sales taxes as we understand them fair to say Jeremiah? We're not lawyers. So for those if you guys go to Awesomers.com/2 episode or excuse me backslash 3, that's Awesomers.com/3 you'll be able to find the episode we did with Paul Rafelson who is a sales tax expert where we talked about some of the legal merits and some of the legal aspects of this thing again as informational but it really points out a few things. Number one the despite the recent Supreme Court ruling that physical presence is no longer the bright-line indicator, used to be that actually didn't make it more clear as we had hoped it makes. It’s less clear because essentially the Supreme Court now says physical presence doesn't even weigh in to the facts whether or not sales tax is due and burden will become a factor for small businesses and that has yet to be litigated on what the Supreme Court said in the recent kind of change in decision on the quill versus North Dakota of 1992. Is that because the physical presence couldn't be used in the case of Wayfarer which is a multi-billion dollar company? The court was more or less offended and said, “Hey you guys are trying to pull a fast one. You're a multi-billion dollar company don't say that you can't comply with sales tax in a state that's just because you're not physically there that's not a good reason.” What they didn't say and they explicitly left this open was that small businesses have the capacity to be compliant and for those who read the case or listen to the oral arguments or any that, I can tell you firsthand that the state of South Dakota which happened to be the the state oppressing the E-commerce companies in this case at least from my perspective they completely misrepresented how much compliance cost. They more or less said hey you pay tax jar twenty nine bucks a month and you're in business and you don't have to worry about anything. But I want to remind Awesomers and entrepreneurs out there that the minute you file you may have retroactive liability. The states will not generally tell you about this until after the fact and they'll go back as far as eight years by the way. In some cases we've had guys being quacks for eight years worth of back taxes. So be careful that number one. Number two it sets in motion a whole series of events that you may not be prepared for like income taxes in the States as Jeremiah talked about. Now even if Jeremiah's firm is willing to help on that, taxjar does not help with that. And I just like to be very clear about that taxjar helps with the calculation collection and even remittance of the sales tax to a certain degree but they don't do anything but relate to income tax. Do you agree with that assessment Jeremiah?
Jeremiah: At this point, at this moment?
Steve: Yes, now again thanks for dynamic and things change but that's the way the facts are today this idea from the result of this Supreme Court case or overturning the quill decision is essentially that a company with either two hundred thousand dollars a year in sales as the state of South Dakota or no excuse me one hundred thousand in sales or two hundred individual sales whichever comes first there. They are now have the potential to be have this financial Nexus is how you understand as well Jeremiah? The ridiculous part for me if you're selling average Amazon sellers probably average somewhere around $25 times two hundred sales is maybe five thousand bucks. This is yet the state compliance could easily get into the low thousands. The low thousands I'm not gonna say it's gonna take all five thousand but it could easily be a thousand dollars in a state certainly to get set up and to carry that on going. Now maybe it's less in the future but it's not even the state sales taxes that have me so panicked. It's all the cities all the counties, parishes, hollows, all of these various entities are gonna start sending bills and if you don't believe me I already know of a case in point. In the state of Arizona friend of mine registered, she wanted to get right with the state right? So she registered hey I'll collect and remit sales tax well guess what the City of Tempe said well we love this, we now got a report that shows you sold something in the City of Tempe here's our fifty dollar registration fee plus a little override on any revenue you did in in this city of Tempe. Now this means you have to file a report for Tempe, it means you have to pay the fee to Tempe and worst of all it was only one fifteen dollar transaction to the City of Tempe. This is that cascading series of unintended consequences that panics me to no end. That this is why I'm on this rant right now. What's your view of the world? I'm not asking you to the weigh in or judge my comment so much. Do you see this potential avalanche of trouble coming?
Jeremiah: Yes. Arizona is definitely troubling as far as I know Arizona is maybe he's a little unfair to see Arizona's look as because they have had like these different states and counties setup for a while which most states aren't that way. But regardless there's nothing to say they won't in the future and then come and look for retroactive but I mean to me I'm concerned just about the like the materiality of it all like. It just doesn't make sense in that case in point like why would I pay $50 to remove a fifteen dollar liability it's like I'd rather get caught red-handed oh you fifteen dollars you and it's why it's wild like South Dakota. There's what 5,000 dollars in sales will put me if you do 200 transactions that's what I know what like a 6% he hit home sales tax that's what $300 of sales tax that I should have collected. And now I'm gonna have to pay at least that in sales tax compliance each year. It's like when I'm paying more than the tax, I'm actually collecting this wild. So I personally fall somewhere between the wait and see in the stair step that's just like if I had a physical products business today that's kind of where I would land because I might consider doing some bigger states where I'm getting where I have but yes.
Steve: It is tough, listen, there are no clear answers but one thing I can tell you and that we're working on Paul Rafelson and I'm gonna support him and his effort to raise money to go sue basically the state of California or others that are oppressing a marketplace seller. So here's the other fundamental piece of the puzzle that we haven't really talked about and we're not going to dive into it today. We did a little bit on that Awesomer episode number three that's Awesomers.com/3 you can go listen to it but the the fact is the marketplace sellers aren't even the retailer of record that's a fundamental problem under California law. Amazon is a seller of record. All of the legal precedents are already set up in California. California could collect from Amazon they choose not to they're even colluding in some ways according to some of the documents we have with Amazon to put the burden on to marketplace seller so that they have a price advantage. The state is incentivized to do it because they everybody's buckling for hq2 and jobs and this and that and so they instead of them just saying let's just make it simple pay us the money Amazon. They're making it complex and they're pushing the burden on to small businesses that neither can handle the burden or deserve the burden. So I wish Amazon do the right thing. They're not so far, the states are definitely not going to do the right thing, they're in the business of oppression. So the summary I would come back to after all my ranting about this and you could tell I'm a passionate guy about this stuff. I've watched this happen and just for clarity I don't care about sales tax. The customer pays a sales tax that has nothing to do with this ultimately. That's not a burden on us, it's the paperwork, it's the compliance and what I know will happen is that avalanche of unintended States, cities, parishes, all sending bills just a simple registration give me this little Scooby Snack because when you file your state taxes you have to break down the location of where that transaction happens. And a city will go hey gosh we just got a little Scooby Snack on these 10,000 transactions from these E-commerce guys let's send them all a bill for $25 or $50. And now we just got a bunch of new money. So there's so much that's coming on this that I just want people to think about it from the very pragmatic perspective that Jeremiah has already shared. Pick one approach you can go all-in and pay taxes. Today you can figure out a stair-step and mitigate your liabilities and or you can just kind of take the wait and see and maverick it up a little bit. No matter what you decide, it's your choice. You're the one who has to deal with the tummy aches that if you freaked out when you get a letter of threatening notice from California or New York or Washington these states are acting like mobsters honestly. And it's a real embarrassment to see it but who's gonna call them on it that's the question. And one thing I could promise that Paul Rafelson and the online merchants guild and and guys like me, we're gonna try to help them raise money. We want them to be held accountable, we want to bring a litigation that will at least give us a final answer as to this question. So Jeremiah I know I've ranted for the last ten minutes would you care to add anything and I'm not pushing you on the sales tax issue just they care to add anything on this topic?
Jeremiah: No, I at the end of the day, you just need a plan. Anything else with finances as with bookkeeping you need, to have a system like you can't afford to procrastinate, not having an idea of what you're doing and how you want to do it. And I think on this the same way with income tax and you need to have a plan for how you're gonna pay the income tax out the year like how are you gonna siphon that money off? Are you gonna just get surprised by bill at year end? Are you gonna budget for it and at the end of the day with sales tax as well like are you just gonna just lose sleep over this? Are you gonna have a plan? So you don't have to guess what you're gonna do next, you get a plan in place and you work that plan and you set it mentally aside and then you go make money. At the end of the day all the time that you're spending worrying about sales tax, it could have been time you spent growing and connects in your business which at the end of the day it's in the state's best interest is, Oh see how I'm saying is like if they want you to make more sales like why you say, hey how about I put you in the back burner for a little while so I can actually go make some. So at the end of the day I think my big message is to have a point.
Steve: Yes, now I think that's very sage wisdom. Let me ask you this Jeremiah sometimes we'll ask our guests at the end of each episode to pull out their crystal ball and give a view of the future and not related to sales tax specifically but give us your take on the future. Amazon sellers, E-commerce, whatever the case may be.
Jeremiah: Where is the whole industry going? That's a really great question. So I loved future, I love thinking about the future of thing, about technology. I think Amazon has created an amazing moat of power and so I think value in the E-commerce space will continue to accumulate here. I saw just the other day like a market share by online retailer and it was like something 49% of all market shares Amazon's and the neck closest person was eBay at like 7 or 8 percent. So it's like Wayfair which is getting whacked by the Supreme Court. I think they're at 1.7 percent of market share. So even Wayfair as big as they are is just a drop in the bucket compared to Amazon. So anyways I still think E-commerce is gonna accumulate, their powers gonna accumulate there. I was worried for a while that sales tax is gonna knock the little guy out the game and help power accumulate to larger companies that could afford the compliance. I'm still like I'm hopeful particularly by this stuff that you guys have going on that the little guys gonna have a better voice because there's gonna be people standing up for them. So that's great to hear. I think with sales tax I think what we're all sort of crossing our fingers and hoping for is that this weather what likely won't be Amazon but the states wills will start really shifting the burden on to the marketplace facilitators. Like there are in Pennsylvania in Washington.
Steve: And now Minnesota as I understand fact of July 1st.
Jeremiah: That's right when I sold and then just like bringing it home in terms of where I see accounting. I see technology over the next five to ten years coming in and actually like it's actually gonna drive a lot of accountants out of the industry just because technology is going to commoditize their labor. And so I see the cost of compliance like bookkeeping and tax going it to zero or as close to zero as possible and there's gonna be a shift where firms like ours if they're gonna survive they're gonna have to figure out how to add more value besides pushing numbers around and that's what we're hard at work doing.
Steve: Now that's really good. I think very insightful and that's an important point by the way everybody. People talk about technology might displace accountants or technology might displace taxi driver. Uber is already displacing taxi drivers but gosh what would happen if there were autonomous vehicles driving people around. Now that's really gonna displace people but buggy whip guys got displaced too. So let's get with the program that life is about change. People who adapt skills and who adapt to technology and the environment we're in these are the people who are Awesomers, these are the people who prevail in the end and I'm very pleased to watch your progress Jeremiah. I think what you guys is doing is an innovative solution in accounting and I haven't said that very clearly yet in this episode. But I want to say it again, Jeremiah has brought innovation to a very stagnant and generally boring industry and that's something every Awesomer can appreciate and definitely everybody listening to this should take a moment and get to the show notes and and talk about how they can solve this problem long term. So Jeremiah thank you again for joining us any final words of wisdom you care to share?
1:01:00 (Jeremiah shares his final words of wisdom to Awesomers.)
Jeremiah: I'm a good man, I mean thanks so much for having me and check out our site if you think we can help and definitely check out our free course we won't get your numbers in order and look forward having me back in the future.
Steve: No question about that. There's plenty to talk about. Thank you again Jeremiah. Awesomers we will be right back.
Empowery, the name says it all. Connecting E-commerce entrepreneurs with great people, ideas, systems and the services needed to sustain business dynamic into growth. Empowery is a network; a cooperative venture of tools and resources to make you better at what you do. Because we love what you do. We are you. Visit Empowery.com to learn more. You're listening to the Awesomers podcast.
Steve: Boy, Jeremiah is such a great authority, not only do they help you get your house in order when it comes to particularly Amazon centric E-commerce sellers but they do it in such a way that even helps you think about the bigger picture right. Like federal taxes how many places do that, you can have that really understands Amazon selling and has your back on us a federal taxes. Now of course this is USA centric in many ways but if you have a US business a regardless of where you are located then it's an important thing to make sure you understand the tax at the federal level. And then we even discussed as you heard the things of on the state sales tax level which is cumbersome complicated and not getting any easier regardless of how you decide to proceed on that particular special problem if you will. There are lots of ways to solve these things and that's fundamentally the point. You can have a solution to every problem and not let finance become a monster that lives in the closet that you're afraid to open. This is episode number 28 of the Awesomers.com podcast. So to recap you can find all the show notes and details available at Awesomers.com/28, that's Awesomers.com/28. This has been an Awesomers Authority episode, we hope you enjoyed it.
Well, we've done it again everybody. We have another episode of the Awesomers podcast ready for the world. Thank you for joining us and we hope that you've enjoyed our program today. Now is a good time to take a moment to subscribe, like and share this podcast. Heck, you can even leave a review if you wanted. Awesomers around you will appreciate your help. It's only with your participation and sharing that we'll be able to achieve our goals. Our success is literally in your hands. Thank you again for joining us. We are at your service. Find out more about me, Steve Simonson, our guest, team and all the other Awesomers involved at Awesomers.com. Thank you again.