Tax Matters Specialty Group Podcast with Gary Weiss—Abby Higginson

Gary Weiss, CPA and host, interviews Abby Higginson, founder of VH Works, Personalized Bookkeeping & Accounting Services

About Abby Higginson
About Gary Weiss
About Echelon Business Development Network

Transcript

Gary Weiss: 0:16

Welcome to the Echelon Tax Matters specialty group podcast. I'm your host Gary Weis CPA. This podcast is designed to cover a wide range of topics. It is not a podcast designed just for tax professionals. It's a podcast designed for those impacted by the complex, lengthy and confusing tax laws. Taxes of all kinds are part of our everyday life. And this podcast is a way to bring you relevant, easy-to-understand, and very reliable topics to help you make informed decisions when you begin the journey through the mystic labyrinth of rules and regulations. future topics will include labor law, sales, tax, employment law, and all sorts of cool stuff. Just in case you really want to know I am a licensed CPA in California since 1996. And I practice in Woodland Hills with my partner, Quinton staples. I specialize in tax resolution services, hence my tagline: I fight the fascist state of California and the evil empire known as the IRS. So let's get right down to the Khyber rifles here and get started. Our guest today is Abby Higgenson. She's a specialist she'll tell you what she does. So with no further ado, Abby,

Abby Higginson: 1:37

Hi, Gary. My name is Abby Higginson. I am introduce yourself and let us know what you do. president and CEO of V.H. Works Inc. And we are a bookkeeping company. We specialize in small to medium-sized businesses, primarily sole proprietorships. No.

Gary Weiss: 1:54

Okay, great. Don't worry. Okay, so let's start out with a little bit of background. You didn't- you weren't born a So you sort of became one over time. So how did bookkeeper, I assume? you get there? A little bit about your education, and what got you to that place.

Abby Higginson: 2:08

I was actually an English major way back when, and I spent my formative years working in magazine publishing. Through changes in the publishing industry, I kind of fell out of it. And I was looking for another career path. And I was helping out a friend with her books. And I thought this is pretty interesting. And there's actually a lot of similarity between working on books with numbers and books with words. So I took an interest in it, I got a part b with another bookkeeping company and picked up a little bit more. And then I started taking classes. And then I started taking more classes. And then I started going out on my own and getting clients and then I got more clients and I took more classes. And I actually ended up just a few years ago, finishing UCLA certification for accounting and actually sat for one of the CPA exams. And I did fail by one point. But at that point, the pandemic hit, and my bookkeeping clients actually needed a lot more of my time because things started getting very complicated, especially with them wanting to apply for PPP loans and additional bookkeeping services needed. And at that point, I realized, you know what, this is what I really want to do. I really want to work more closely with clients, I don't want to sit in an office and do taxes once a year. That's not my thing. I enjoy the relationship. I enjoy seeing how their businesses are going. I enjoy talking to them and discussing their problems and their issues and helping them.

Gary Weiss: 3:56

That sounds great. So let me ask this. So as a bookkeeper, a lot of people perceive the bookkeeper as the person who sits in the back, you know, which was once a storage room that has been converted and you you don't ever talk to anybody, but that's not real realistic. The bookkeeper plays an integral part in most businesses. So when you do that, how do you interact with the client and what do you tell them initially, say, Hey, why what and they asked you, I don't need a bookkeeper. I've got you know, I'm doing on an Excel or I'm doing it you know, I'm doing it in some form bookkeeping, and I have no idea what I'm doing, but I'm good with it. So what is it the value that you bring to them?

Abby Higginson: 4:38

I bring a knowledge of QuickBooks and a good working knowledge of accounting and a little more specialty information that they may not have. Some, actually a lot of my clients started off doing their own books, and it just got to be overwhelming or or they had a question, they ran into a problem, they asked me for help. And then they realized, wow, you know, I don't really need to do this all the time, I think I'm just gonna hire someone to do this for me. But but there are still people who enjoy doing their own books, and that's fine. We also service as you know, once in a while they'll run into a problem, they'll have a question, they reach out. And we're able to help them because a lot of times their CPA does not have a knowledge of QuickBooks, they can say, oh, debit this and credit that. And well, how does that translate into a QuickBooks entry and they have no idea. And so we help on a lot of different levels.

Gary Weiss: 5:43

So in the financial preparation to ultimately leading to a tax return, we have the owner, the bookkeeper and the CPA. So what's the difference between what'd you do for the client other than prepare the tax turn, everybody understands that, but as a bookkeeper, what is the value you bring that the CPA does not?

Abby Higginson: 6:05

I see it as a relationship. For example, let's say you're in the hospital. For surgery, you're there for a couple of days, you have an extensive surgery, the surgeon pops in to do the surgery maybe once or twice during your stay. But the nurses are there all the time, they check your vitals, they make sure you're okay, they change your your bandages. And that is sort of the relationship that I have with my clients. We're there all the time. We're looking at their books, we see their daily transactions, we see their receipts, we- we see their purchase this, we can flag possible fraud. And we also work closely with their CPA, and that's the CPA who pops in maybe once a year, does the taxes answers a question here there does some planning, and then runs off again. But we're the ones who have the daily relationship with client and we also have the relationship with the CPA!

Gary Weiss: 7:06

Right, I just want to talk about- so talk about your relationship with the CPA, and the value that what you give the CPA that ultimately benefits the client?

Abby Higginson: 7:17

Well, we can give the CPA a clean set of books, everything is properly categorized. If the CPA has a certain way of doing things, and actually all CPAs are slightly different. CPA may say we want to try to work on this expense.

Gary Weiss: 7:40

Okay, so let me let me help you. So everyone understands as a CPA, when I'm going to do a tax return, I get what I do is I normally call the bookkeeper say please send me the books. And a lot of times, all I'll say is please send me the P&L and the balance sheet. That's the profit and loss statement for those who don't know what that means. And that's what I'm going to prepare the tax return. So if I see categories like miscellaneous, ask your accountant, you know, undeposited funds, you know, CPAs, go, oh, this is a bad set of books, there's things missing, and then they have to get involved. And all of a sudden, the cost to prepare that tax return goes way up. So you become a, you know, if you do a competent bookkeeper, will help keep that cost down. So your relationship with the CPA is just as important as it is with your client, correct?

Abby Higginson: 8:31

Oh, absolutely. And a lot of times, many CPA offices just don't have the bandwidth to deal with that kind of mess cleanup, especially if it's tax season, and they're stretched to the limits. They need, because I've worked on that. And too, I've worked with CPAs. And you get a set of books, it's like, Oh, my God, this is gonna take hours and hours and hours of cleanup. And we just don't have time. So we just put them on the extension and push them off to a later date. But still, it's a lot of work to pull those together. And that's definitely an aspect that we help with. We can also help in a client who is not sure about something like I bought a computer. I don't know, am I is it an asset? Is it an expense? Do I want to depreciate it? Do I want to write it off this year? And in some cases, we can help with that or we'll reach out to the CPA and see how they would like to handle the purchase.

Gary Weiss: 9:30

Okay, so one of the things you mentioned earlier was something called QuickBooks, the evil program that everybody has to use, but everybody hates. So explain to us there are two versions of QuickBooks. There's a desktop version, and there's a version called QuickBooks Online, which is becoming more and more popular. What's the difference in which one do you like and why?

Abby Higginson: 9:52

I'm a traditionalist. I prefer QuickBooks Desktop. It's what I learned on I feel it's more robust. It's more accounting friendly. QuickBooks Online seems to have been designed more for the layperson which in some ways makes it more difficult to work with. So you have to have a thorough understanding of the back end of it, it's really easy to get yourself into trouble with QuickBooks. And that's where we come in to do a lot of cleanup. Because it's a double entry bookkeeping, but you don't always see the other entry, you're just clicking. And you don't know where it goes. But hey, it's gone somewhere. So it's all good. But then when you pull financials, then you as you said, Gary, there's stuff all over the place. There's"miscellaneous," there's "ask my accountant," there's here"this and that," and they're like, well, I don't know. I don't remember putting it there. Well, no, you don't QuickBooks did it automatically for you, but you didn't understand it.

Gary Weiss: 10:53

So that's some, you know, that misusing QuickBooks or not understanding it can lead to problems. So do you have some stories of where, you know, people have used QuickBooks, and it's gotten them into trouble or caused them problems with their accountant, which led to a tax return that had to be prepared and amended or audited? You know, that type of thing?

Abby Higginson: 11:14

Oh, absolutely. I had a client to went from desktop to online. And he set up bank feeds, which the transactions from the bank and credit cards automatically feed into QuickBooks Online, you go through and it lists all the transactions, and you can categorize them right there and click accept, reject, modify, whatever. But what he did not realize was that QuickBooks makes suggestions of what they think it might be, actually what it thinks it might be. And he just thought, Oh, that's great, accept, accept, accept, and he clicked on everything. And then when he pulled the financials, I was just like, Oh, my God, what did you do? And he's like, Oh, this is a great program. I did all this. It was so easy. They're absolutely right anyone can do it! Like no. So I had to unwind every everything almost and recategorize it so tip for anyone, don't just click accept look at it thoroughly. It's so easy to get into trouble. And you can spend hours of time trying to unwind those transactions.

Gary Weiss: 12:35

Yeah, as a CPA, one of the things I find when I work with bookkeepers, it- we there are certain accounts that you look to see, they're really easy to look at and see if they're, if they're correct, like, I look at Rent Expense. And if there are more than 12 entries in rent expense, I have an issue. You know, there's one rent, you pay rent each month, there should be 12 entries, I opened it up. And there's 40 entries, because they flushed other things through there, they do that. And that's what causes accountants CPAs to go cuckoo for Cocoa Puffs, because when they get that financial, they want to sit down and do the tax return, they open it up, they print out the p&l and none of it makes sense. And for those who don't understand the p&l and the bank balance sheet, aren't the are parts of a set of financial statements. And the balance sheet just holds your assets and liabilities. And the profit and loss is exactly what that is. And that bottom line, that one number, net profit flows through the balance sheet. So these two have to work in harmony. So a lot of times, you're all working from the p&l, and nobody looks at the balance sheet. Then the accountant opens it up and just looks at the balance sheet. And there's you know, negative cash, there's, you know, negative Accounts Payable is you know, negative receivables, nothing makes sense. Which means is something else is wrong someplace. So that's we so then we go back to the bookkeeper like you and say, what's going on? And what do you do with that when we do that?

Abby Higginson: 14:04

Well, in QuickBooks, when you pull up the financials, you can click on any of those lines, and it'll pull up the detail. And that's where I'll start. I'll click on that and I'll look through the detail. And I'll usually a quick perusal will see exactly where you went wrong. And if it's individuals, I'll fix them from that. And if it's a group of things, you can go in the accountants tab and do a group select and edit that from that end of it. But that's where I would start.

Gary Weiss: 14:42

Now, that's a good point because, again, when when we're preparing a tax return, we have limited time, right? And we get when we see that balance sheets way out of whack. We know something's wrong someplace else. So that's, you know, that's what we look forward to you and we call we don't want to deal with the client, we want to deal with the bookkeeper. Because the bookkeeper understands if I say, hey, this account has a negative balance, what does it mean? You understand that, but I say that to the client, I might as well be speaking Greek. So that's really important. So let's just change the direction at the moment. So you've worked with a lot of clients over the years. Can you tell us without mentioning the client, specifically, some interesting clients that you've worked with in the different types of industries?

Abby Higginson: 15:24

I've worked with musicians in the music industry. I've worked in with people in the entertainment industry. And these are all sole proprietors. There are individuals who contract. I've worked with a lot much larger companies, I wouldn't say huge companies, but large enough that definitely a challenge with Home Services. I've worked with people in custom publishing, I've worked with actually a couple of custom publishing people. But yeah, mostly sole proprietors. And they have their own business.

Gary Weiss: 16:08

What what are the challenges you find with musicians, for example, which makes them different than somebody in a different industry? What do you find? Because musicians if you're in Southern California, every accountant has a musician as a client? I guarantee we've got about 10 of them. 12 of them? I don't know. But it's everybody has one. So what are the challenges you find that are unique to musicians?

Abby Higginson: 16:30

Egos and Receipts

Gary Weiss: 16:34

Yes, we all understand. And odd receipts from strange places.

Abby Higginson: 16:38

Yeah, they're really bad at keeping receipts. They travel a lot. Sometimes they're hard to get a hold of. They're- they- well, actually, this applies pretty much to a lot of sole proprietorships where they mix personal and business finances together. And it takes a lot of backtracking was as a personal expense was as a business expense. I see you went to Las Vegas, was this for business, or did you go to have fun? And it's a lot of work to track them down and get them to sit long enough to answer those questions. But again, that's not specific to musicians, they just tend to travel more than than regular people.

Gary Weiss: 17:18

But as a CPA, that's what we want from you as the bookkeeper, we want you to do that we want you to spend the time at that level of minutia. So we don't. So otherwise, you know, a $5,000 tax return will become $10,000 tax return. So that's one of the reasons we rely upon bookkeepers. So but each bookkeeper has challenges, you know, in different industries, you know, musicians definitely they don't keep receipts for anything but either do contractors do you do contracting?

Abby Higginson: 17:45

I have not. I have not. Independent contractors! Not building I'm assuming you mean building contractors?

Gary Weiss: 17:51

Yeah that type. You know, those are those are people also that for some reason, they keep receipts, but they're in a box someplace in the backroom and they don't record anything. So what let's start with that you so you get a new client, you onboard a new client, you go into his office, and he hands you the proverbial shoebox worth the receipts. What do you say? How do you start? Where do you begin with a new client? Tell us how you onboard a new client?

Abby Higginson: 18:15

Well, first, I take a look at what kind of bookkeeping they've been doing. And I say QuickBooks because that's my specialty. But there are other bookkeeping software's out there. But most people use QuickBooks. And I will start off by taking a look at those books. And looking at the financials for the past two, three years and see where they're at. I like to see what categories they're using, what accounts they're using, the level of transactions that they have per month, how many bank accounts savings accounts, credit cards? Are they using anything for personal expenses? Are they are they mixing? If they have different companies because some some of my clients actually have a couple of different things that they're tracking for for taxes. Like for example, one was a musician but he also had an Airbnb. And he also was taking care of an elderly parent. So he was keeping per his CPA receipts for different categories. I was booking the expenses just for the Airbnb and the receipts for the Airbnb and collecting expenses for that he would spend on his his elderly parent, also booking the income and receipts for his day job.

Gary Weiss: 19:40

So you're basically organizing his life on paper.

Abby Higginson: 19:43

Exactly.

Gary Weiss: 19:44

That's really important. So and when you do when you onboard clients or you've had clients for a while, what do you find are your biggest challenges with the clients?

Abby Higginson: 19:58

The biggest challenge, and this is probably what most people have is communication. I wouldn't say it's a problem. I do have very good relationships with my clients. But you know, they get busy, I get busy, and sometimes I'll reach out to them and some prefer texts and prefer email, I will email or call with question. And they'll take a couple of days to get back to me. Well, by then I'll have more questions. So timeliness is always a factor. If I say, Hey, I'm seeing some expenses pop up on your credit card in Cancun? Are you in Cancun? Or is this fraud? I don't want to wait three days for him to get back to me and say, oh, yeah, I took a vacation with my, my spouse. That that would be a problem. And that that does happen. Because they're busy. I understand that. Yeah. very timely.

Gary Weiss: 20:53

I have a client that the they travel, him and his wife, and all of a sudden I get a call from the credit card company wanting to confirm, you know, were you in New York on this day. And that's transaction one, then were you in another state the next day. And you know, to them, it doesn't make sense. But to a musician who's moving around, that makes a lot of sense. That's one of the big advantages of having a bookkeeper, which, in some ways, is not just bookkeeping, you're doing business management services, you're helping them to, you know, navigate, you're freeing them, essentially, you're freeing them away from having to do the paperwork and stuff that they're not really core competency at, and gives you to do that. That's your core competency. So as you do that, what you know, again, is clients, you know, tell you stuff, you know, we all know, clients may not always be truthful in what they tell you. What, what have you found as a way of sort of filtering through that?

Abby Higginson: 21:53

Oh, wow. After I've spent a few years working with a client, I kind of know, I have a good idea of what they're doing and what they're not doing. If they're, you know, they just bought a new computer. And now they're all sudden, they're buying two more computers? And like, Are you sure this isn't for your kid? You know, is this really for your business? But a lot of times, I'll understand the business, the nature of the business. I'll understand like, okay, he does need three monitors and three separate computers, or I'll know. Yeah, I don't think so. And in which case, I'll talk to him and ask again, and then I'll have it on email. Whereas, like, if the CPA comes back and says, Is this real expense legit? And like, Yeah, I have it this is- I'll forward the emails. Hey, look, this is what he says. This is what he claims. You know? And thats mom.

Gary Weiss: 22:50

Yeah, absolutely. So one of the things I know as a CPA, one of the things I always encourage clients who have bookkeepers, and I always encourage clients to have bookkeepers, because I tell them, the money that you save, you know, the time and money that you would save, doing things, not doing yourself things yourself, you'll be out there, you can make that money someplace else. And you'll pay the bookkeeper, far less time. I have one client is an electrician who wants to do his own books. So he's out 12 hours, 14 hours a day. He says, Well, I'll come home and I'll do it at night. I go, No, you won't. That's not going to happen. You're not going to come home after a 14 hour day, and sit down and start putting stuff in QuickBooks or Excel. So I said that there's value in having, you know, and having a bookkeeper. But one of the most important things I find is the relationship I have with a bookkeeper. You know, I always encourage the bookkeeper to call the accountant. If you have don't exclude them, don't wait for the accountant to show up once a year, like you said, Pop in and do the tax return. It's it doesn't make sense. So when you work with accountants, how do you find that relationship?

Abby Higginson: 23:54

I have a pretty good relationship with most of my clients' accountants, there was only one that I never was able to get a hold of, and completely wanted nothing to do with me. The rest I have very good working relationships with and I do speak with them throughout the year and they'll contact me because a lot of times they can't get a hold of their client and they'll reach out to me and say, Hey, I'm still waiting for their personal taxes. And even if I don't do their personal taxes, or work with their personal expenses, I'll be the liaison between the two and help with that. I will reach out a lot of times if the clients made a large purchase or a lease to the CPA and ask how they would like that handled if they want a new account set up if they want to put it under an old account. Of course we work closely with you know your journal entries. Any other questions CPAs. Have they'll come to me first before they'll go to the client.

Gary Weiss: 24:57

That's the big advantage. It's easier for CPAs to talk to somebody who understands the books, then talk with the client and say you have you're putting things in this account, and they're gonna go, what account? What are you talking about? So it's all good. So this time of year, which is right now it's December. And we're doing a lot of tax projections and tax planning for year end payroll and, and those type of things. This is where having a bookkeeper is real important, right? So for tax projections tells how you do that for the client.

Abby Higginson: 25:28

With tax projections, I'll pull the financials year to date, and just make sure they're clean, which I do pretty much quarterly anyway. So there's not too much going on that needs to be fixed at that point. And then I'll project out income and expenses through the rest of the year. At that point, the CPA will talk to the client about what they're looking at. And I have one client right now who's in that position right now as a CPA. And of course, there's still fluctuation, because he's going to use that number to decide whether or not to give his employees your own bonuses, and if so, how much. I have another client who's a pretty large client, but she's on a fiscal year. So

Gary Weiss: 26:14

Wait, hold on, you just lost everybody with a fiscal year is that is that like a, you know, a Bud Light Year or a light year or something like that? What's the fiscal year? So real quickly, just, we got to stay away from those technical terms. And so nobody's gonna understand that. So explain what a fiscal year is?

Abby Higginson: 26:29

Well, most people understand a tax year to end on a calendar year, where is that it ends on December 31, of any given year. But other companies and governments for example, they work off of fiscal year, which means their tax year end ends on another date other than December 31, in this case, my client's fiscal year and is on September 30. So it's a third quarter year end. So we already did her financials. So she's good to go. But there's still other reporting that she'll need to do. For example, 1099s are still based on a calendar year.

Gary Weiss: 27:10

Let's wait, let's talk about that. That's a good one. Because it's time to year, you know, people are thinking you're in, I'm going to pay people. I have a client that one of his favorite things to do is he cuts all his vendors, he cuts the check on December 31, waits till 430, runs to the runs to the post office and puts them in the mail at five o'clock on December 31. So they don't get them till the next year. That always creates a problem. But 1099s are very important. The IRS and the Franchise Tax Board are starting to really crack down on these. So can you explain who gets a 1099? What is a 1099? You know, and how they're prepared.

Abby Higginson: 27:49

1099s are for independent contractors. If you're a small business and you subcontract some work out to somebody else, or you have a consultant. Lawyer, especially they even though they're corporations, they still need to 1099. But again, these are smaller people we're not talking about, you're not going to send a 1099 to Walmart, for example. And these are small, privately owned people.

Gary Weiss: 28:24

Yeah, basically, if you have a social security number, and you did work for somebody, you're gonna get a 1099, right? Because if you don't, from an audit perspective, which I do those from an audit perspective, if an IRS auditor looks at your books, and sees a whole bunch of names, and say, What are these, these are for services, and you show it you show them a receipt and they go great. Where's the 1099? Because if it's greater than$600, right, you have to issue the 1099. So that's really important that you know, the bookkeepers also understand those 1099s must be issued. Otherwise, potentially, under an audit, the IRS could disallow the expense, even though you have the receipt and everything, it can be disallowed. So we know those have to be prepared. What about payroll? Do you do payroll and how do you deal with payroll like ADP paychecks and that type of thing?

Abby Higginson: 29:12

I do do payroll for a few clients, including my own company, of course, and I work with paychecks I work with Heartland payroll, I work with QuickBooks payroll, I have done ADP, but I don't particularly like them. All the systems are very different. But if you are going to use a payroll company, or even if you do your own payroll, definitely go through a company. There are some companies who will guarantee their filing their quarterly filings, their annual filings, their payer pay their payroll taxes, and that's what you want. You don't want to go with some cheap Fly By Night company who says that they're paying off your taxes and they're actually not because you will be held liable for it With fees and penalties on top of it, but yes, I do do work with many different payroll companies.

Gary Weiss: 30:09

Because a lot of times this time of year, we're doing that that bonus check for the owner the year end. And that needs to be done correctly. So we rely upon the bookkeeper to communicate with the payroll company, because trying to get the owner to communicate with the payroll company is not always successful. So it's real important that we do that. So, in the closing moments here, yes, we have to finally stop. I know you're all thrilled that we're having this wonderful conversation, but we're going to have to bring it to an end. Closing thoughts or recommendations, advice you can give to potential business owners or people who don't use bookkeepers?

Abby Higginson: 30:47

For people who don't use bookkeepers. If you're using QuickBooks, I would say, be very mindful of the entries that you make. Think carefully before you accept any transaction. If you're using feeds. If you're in doubt, Google it. Intuit has pretty robust answer forums for most questions. There are bookkeeping firms such as mine, that if you have, if you need set up help, some advice reach out, you know, we can charge an hourly fee, get you back on the right track answer questions when you have it, but then let you run along with it.

Gary Weiss: 31:29

Do you have a website?

Abby Higginson: 31:30

I do? It's www.vhworksinc.com

Gary Weiss: 31:35

Spell that out so people can hear it?

Abby Higginson: 31:37

V H W O R K S I N C .com.

Gary Weiss: 31:41

Excellent. So that's how they reach you if they have any questions. They have all the information about you on your website.

Abby Higginson: 31:45

Yep.

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