Ep 58: The Only 3 Numbers Your Business Needs To Track

0:12Welcome back to the Launch Box. This week we're joined by the brilliant Rachel Harris. Now she is a finance expert, an entrepreneur and content creator on a mission to make money feel good. Yes, please. She's breaking down the stigma, tackling the emotional side of finances and showing entrepreneurs especially women, that numbers don't have to be scary. Did you know that? So please welcome to the podcast, Rachel Harris. Well, thank you so much for being here. Thank you so much for having me. I am so excited to do this. I say excited, you're normally the person that I dread to talk to. And I'm trying to change that narrative for everybody and for myself too.

0:53um let's start by talking about your journey and what I find really interesting about you is what you want to do and what you are doing is kind of rebranding the accountant stereotype why was that such a passion for you I think sometimes people view the accounting stereotype as I call it the stale pale male you know like brown carpet brown suit I think sometimes that

1:24Rachel Harris: stereotype can happen to you too right and so I found through my career through my training I would introduce myself at weddings or social events or networking events and I would say I'm an accountant and I'd put a full stop on the end and for me the discovery of financial education came through such a place of passion. Like becoming an accountant changed my entire life. I came from a place of scarcity. I was a free school meal kid, a charity shop clothes kid, and it changed my life. And so for me, finance was so magic. It was so magical. Like my life was suddenly full of colour rather than being black and white.

2:06Rachel Harris: And it changed my life. And so I became so passionate about making sure I could bring that magic and that enthusiasm to other people. And it's so nice to see, particularly, you know, with you on socials or appearing on television shows, like it's so nice to see somebody that looks different telling us about finances. And I mean that from a sex perspective. perspective why why do you think social media has sort of helped you change the way that you educate and empower business owners because I think that is something that's so important I think as I said at the start of introducing you when my accountant calls me I kind of dread the phone call and I'm not sure why he's a really nice guy like you know he helps me I've been together for years but I always think it gives me that kind of headmaster feeling like you need to come and see me in the office and I think I've done something wrong and that is kind of that's like a self thing I don't know why I feel like that I don't know why it's it's the thing I don't want to talk about the finances the conversation I put off the finance meeting for my business is the thing that I'm like oh I need to attend it but I'm not sort of present in the room it's something I try to separate myself from but I don't really know why and I think for me that was the whole point like being social first puts a face to it yes I think very often finance can feel quite cold a bit clinical quite separate from who you are in your business finance sits on the side particularly if your brain's not wired that way and I think that's why it is for me like I'm definitely a creative person I lean into that and that is what sort of sets my soul on fire and when it comes to numbers I mean it really really reflects my education maths I wasn't math in in school girl math I'm sure I invented the concept so I think for me I think if your brain isn't wired that way it becomes there's that scarcity around it yeah and being social first putting a bit of personality a bit of humor a bit of one of our core values as a firm is sincere but not serious like a lot of the clients that come to us they don't want it to feel like that either they want it to feel like the spine of their business but built in and we don't have to take ourselves too seriously in the process yeah it's nice it's so it's genuinely so nice to see i want to talk to you about and i don't think this is just female i think it's definitely more common in females but the stigma around talking about finances like it's something that you talk so well about but and i suppose it's making it an approachable topic but why do you think it's is it quite a British thing where you're not supposed to ask somebody what they earn or it feels like a very personal conversation and something that you shouldn't discuss at table or and on Ladies Who Launch we're here to debunk all of that we're like these are the conversations this is your girls to group chat why do you think that finances are such a kind of taboo conversations they're you know it's it's a thing that you don't bring up at a dinner party because it's it's not the right thing to do right it's so funny though because you wouldn't bring it up at dinner party but for me that girls group chat is where i'm saying i've just hit 200k 10k 20k like it is the private celebration but the public modesty and i think it's for sure british full stop on the end of that sentence but also i think very often for women a pillar I think of traditional feminism or being feminine is selflessness like we serve others and I think sometimes money finance is deemed selfish and like the contrast between those things but we see it all of the time and I was just saying before we hit record like I'm saying to my glam lady this morning you need to increase your prices like I've worked out your hourly rate based on how long you've been here today and you can see people's like shoulders dream can we just be around you please but you can see people's shoulders drop and you think no one's ever spoken to you about this have they and and you know we all in some way or another become self-employed to make money but we're all terrified of talking about money and so my job is well I'll go first I'll go first I'll talk about it and maybe you will send this video or ask a friend an uncomfortable question but for so many of us we view money as a bad thing I was raised that people with money were bad yeah and actually what I've learned through my life is money is actually an amplifier of who we are and if you are a good person yeah that's really interesting what do you mean by that like if you're a great person money is great if you're a bad person money is bad yeah and so it's so much more nuanced than that money is a tool for us to turn the volume up on our own values right yeah but you know that makes so much sense and I was raised in a really similar setting to you I kind of you know my mum when I was born she had me in a hostel we were you know I was we grew up on a council estate my mum worked to buy our house off the council I was again charity shop kid I my mum would buy my school shoes and how bad is this she would like hope that something went wrong with my school shoes so she could take them back and give me a new pair for the new term but listen you had to do what you had to do right um and she was the ultimate hustler in that but I think my relationship has always had with money has always I think been fearful of earning it great but losing it is what scares me and I think I will always have that and I've you know I'm in a fortunate position that I've worked since I was 12 and I do have you know way more financial freedom well my mum didn't have any financial freedom right and I'm raising my children in a very different way same values but with a lot more freedom to be able to do you know the things that I want would want to do for them but I think for me it's always I remember my mum saying things like and it's it's retraining your brain like the goal is if you get a house you pay the mortgage off you don't ever use a credit card you only spend what you've got and it wasn't until I kind of asked more questions and I suppose grew a little that actually it's it's better to use other people's money here in this setting and it's not but I think that kind of working class mentality in me there are certain things that I always I just want to be paid up on everything and that makes me feel better and that to me is the goal and that's the freezer freedom but it's kind of retraining them things that are really i suppose ingrained in you right and i think a really big misconception is that financial education financial confidence is a destination that you will arrive at one day and someone will say rochelle you're financially confident full stop yeah it's not a destination it's a tool it's an exercise it's like going to the gym you don't go once and you're done it's a process it's a routine it's you know if you're having a bad day you'll just do like going to the gym is enough if you're having a great day going to the gym and being there for an hour is fantastic and so it is not a destination nobody arrives here yeah and I think more and more I'm seeing and I feel you've definitely seen too this should be on the national curriculum oh my goodness me like Like, I'm so passionate about this.

9:51Like, if I could rewrite some of the lessons that my children, you know, that they sit in. And if I could switch it out with tools that I'm... I remember I was really young when I bought a property. And as I said, you know, I was really lucky. But I didn't come from a background of knowledge, right? I bought an apartment when I was 18. And it's really silly. but I didn't realise when I moved into that apartment that I had to pay for water. It was like, well, water is free, right? Water comes out of the tap. I didn't understand that. And I was 18, right? I'd never been in that position before, but there are so many lessons that I wish were kind of standard practice that would help us in later life, like taxes and everything else in between.

10:37You know, there is, when you take yourself out of that bubble and you don't live under your parents' roof and then you're in the, you know, big wide world, there are so many tools that you need that perhaps you don't learn at school yeah and one of the

10:50Rachel Harris: resources we have a university on demand for our clients and one of the modules is how to talk to children about money because I think sometimes definitely for me I would love to raise my children with financial confidence as someone who came from a place of scarcity it's something that I have very rarely looked back on my life and think I make better decisions because I view money as a finite resource I don't I don't think I do I think that's interesting spoil happy occasions worrying about things that will never happen and you know but I do think that would probably link back to your childhood because I'm I I relate to that like oh I'll probably be working until I'm 101 if I'm alive then because I would always be scared that like well what if and I need to because this is you know I know what it's like to not have it right so then I think that's that's kind of where that that happens that's where as well I think sometimes being a woman that uncomfortableness talking about it comes all of the way back around and then that's when people start saying when are you going to stop yeah you know yeah it's so interesting like we can't talk about money but we also can't have too much or work any harder than other people deem appropriate yeah whereas you're there thinking I've built a multi seven finger business but I still lie awake at night thinking what is it relative I think your worries change but they're of course yes you have a different level of freedom but then like the money worry might be bigger because then you're talking about bigger things and bigger losses and but it's relative right when you move up and down each bracket kind of yeah it's it's a it's a very interesting conversation because i just think you can't shake old habits or an upbringing you know and you just you can't why do you think so many women in business feel kind of i suppose that fear or avoidance when talking about money why do where do you think that obviously for us it's it's a childhood thing maybe that could look like that way for everybody but why do you think in business women aren't necessarily empowered to talk about money and it is so different I think if I imagine my husband going to the pub or playing football with his mates and sharing a financial milestone it would be celebrated of course and I do think for women it's so different and for me I've definitely had to find my girls group chat you know the people that I can share those milestones with the people who have the same attitude towards business and life and money as me and I think sometimes it is about working out where your safe place is to share those things but it's definitely gender driven for sure yeah it's so so interesting I am I want to sort of deep dive into we have such an incredible community on this podcast that we have built over the past year so many women I know feel exactly the same of what we've already touched on but I think so many women we've got that attitude of oh we don't do numbers and I'm guilty like I'm like oh this isn't probably I don't need to sit on that meeting I'll trust somebody else because of which by the way hasn't sort of done me well in certain places in my career because I have been too trusting because I don't know enough but rather than like empowering myself to know I've sort of put the power in somebody else's hands and it's not always worked in my favour um so I want to talk to you about maybe like the practical side of helping women reframe this and I suppose their mindset to the financial side of their business particularly as I said before if you were like that creative brain and you're like no this is my strengths but we do need to be across it we do need to empower ourselves and be financially independent and I think whether you're financially independent you earn your own money like myself so I'm financially independent but in terms of like knowing every strand of what I do and how I could improve that and you know pull strings here and save this there I'm actually not financially independent and I think I need I need to do better that's going to be my new year's resolution that I'm gonna actually do better at I don't taking care of things myself in that space because actually guess what no numbers aren't my thing but I could try to make sure that they are so what do you think the top three things every small business or entrepreneur should track financially?

15:41What would those three things be? Okay.

15:43Rachel Harris: So to double down on what you just said, I think sometimes you don't need to be in the finances day to day if you can have a better return on investment elsewhere. But I think my job is to help to give you the tools to understand if I got in my car and I just saw a dashboard, what are the three numbers that I would need to look at to know this car is safe to drive, I'm healthy and I know where I'm going? And so my job is to give you the tools to create a dashboard with three numbers on. And those three numbers give you the confidence to know where your business is going long term, where you are short term and to look inwards to yourself.

16:22Got it.

16:23Rachel Harris: So I'd say for most small business owners, the first is runway. What I mean by runway is how far ahead. Run away. Run away. Run. There's times where I feel like running away. From my finances. just run away call it a day so the first is your financial runway and that is showing you how far ahead you can go how many steps ahead of you can you take for some businesses that is having an accurate profit and loss so you can look at that moving forward if you have a product-based business that's going to be things like cash flow so runway is trickiest thing right particularly when you're in that startup realm or early business it's the cash flow is a big problem and so that runway is a number in time of how long you have before money runs out and if you do come from a place of scarcity that number is really important because it can help you be like okay six months of terrible things have to happen for everything to go wrong and for the wheels to fall off I'm good for six months so first number is runway second number is pipeline what have you got coming in if you're a service-based business are you quoting 150k of new work every single month in which case I can see how far ahead we are and I can also see what's coming in I'm looking in my rear view mirror and I can see what's behind me again for product-based business what launches have you got coming up what's coming in the first is how far have I got in front of me the second is in my rear view mirror right what's coming in behind me and third I guarantee you've never heard an accountant challenge you on this how's your quality of life wow I think so often we become self-employed to use money to make a change in our lives for me I wanted flexibility when I parent that was my goal I had a mum who gave up her job to have children and I from a very young age was like I will not do that and my ultimate form of privilege in my life is having a choice I just want a choice and so I built a business so big it could run without me so that I could have a choice and so continuously checking in on your quality of life is so deeply important it's the reason we become self-employed but so many people never ask themselves the question and because I think when you're building a business and you're starting a business it feels it doesn't feel it doesn't feel like a priority because it feels like it can't be like you don't think oh but how am I it's kind of you're so you've thrown the kitchen sink at it so you don't think for a second what about my quality of life in this because you kind of just kick everything down the road and you think well do you know what I'm in the trenches here for a year or two and I'll think about that in six months time or I'll think about that in you don't actually think that seems kind of off the table which is so so interesting you say that but then most people would get three years down the line and think I hate this I actually hate it I'm burnt out I'm yeah I'm physically unwell so in terms of like so you're looking ahead you've got the runway you're also looking at the cash flow which is you know where is this going to take me to now like actually realistically the runway looks like this but a lot of that can sometimes be hypothetical right and then the quality of life how do we in a financial perspective how how does that look how do we track our quality of life in a financial sense sure so have you ever seen a wheel of life before no lots of people that have done therapy might have seen a wheel of life so it's a wheel that has eight sections of your life right and we have a process that we take clients through with where i get you to score every single part of your life out of 10 right only one of them is finance others will be personal life hobbies joy creativity and so you score your life so out of 10 yeah relationship joy yeah okay because I think sometimes it's only when you stop you know running a business is great it's the ultimate form of dopamine to me I feel like it's like playing a board game in real life I think oh what happens if I do this what happens if I do that but sometimes you know if you're doing this every 12 months or every six or every three you might get that dopamine but when you sit and look at it you think I'm not sure I've spoken to my partner about anything that's not work in about four months and so you might score that a little bit low then when you do that before making a financial plan reviewing your runway looking at the next 12 months or finalizing your accounts for the last 12 months if you just went straight in and started with the numbers I feel like you're super driven you would say to your accountant can we grow by 20 % next year what happens if we do this can we do that whereas actually if you started building a financial plan with what if I made the same amount of money but I worked 20 % less that would have a hugely profound impact on my quality of life right but it would also mean that when I am at work work is getting the best of me and so it's just a challenge to be consistently scoring the reason we're all here.

21:58Rachel Harris: I feel like we build businesses for tomorrow, you know? Yeah, yeah, yeah. And then how would, if I came to you and I was your client and this wasn't like, I suppose I kind of am your client today. I'm picking your brains, girl. I want to say to you, I want to work 20 % less than I'm working now, but I want my income to look the same. Because working 20 % less would mean that, guess what? tonight I'm not going to miss netball practice and that would mean that actually I'm going to take the children to Legoland at the weekend I don't know this is all hypothetical so how do you how does your math math how do you sort of what I want to happen right now is our listeners say yes that's the position I'm in yeah what do I pull back and how do I do this cool lots of business owners get into the trap of doing everything because it's easier it's quicker they don't document processes a lot of people I actually think it's quite easy to get one business to a million pounds I think it's really hard to get it past that and the wheels not fall off and so once you've built the business your next job is to get the business to run without you not so that you can go on holiday permanently but so that the business firstly is not relying on you because the more you matter, the less your business is worth.

23:19Rachel Harris: 75 % of people build businesses to sell them. If you are the business and the business is you, you can't sell it. So the more you matter, the less your business is worth. But it's about removing yourself so that where you are spending your time creates higher impact, higher return on investment. The culture is better. The team love to work there. And so we do that through a few things. The first is delegating. and I had so many conversations with clients about delegating and the next question I'd get from clients is how do I decide what to delegate and when and so I built a formula and so we created a concept called internal charge out rates which is helping people decide what to outsource in their personal life and their work life because I as the female in my household carry a lot of mental load at home as well and so sometimes I would be really you know highly performing at work and being like I have no clean clothes to wear I don't know how to do this it's this idea of this the elusive word balance that you know none of us something has to give right by being here it means you weren't at school drop-off today or but you know and it's kind of if you was at school drop-off you wouldn't be here and that's yeah that's just the nature so the first assumption of this formula is we look at you holistically.

24:43Rachel Harris: This is a number that works in your personal life as well as your work life. Got it. So I want you to look at your gross income. By gross, I mean if you were employed, what is the total number that you want to extract from your business before you've paid personal tax? Got it. Let's say you work really hard and you want to extract 100K from your business. If that number for you is 100K, I want you to knock three zeros off the end. So you're left with 100. half the remaining number 50 my challenge to you is in order for you to sustain and generate 100 000 pounds for yourself personally if you can outsource or delegate anything in your business and you want to because lots of people have non-negotiables like child care delegate it for that amount per hour or less so if you are earning 100 grand right i'm sorry you're gonna have my brain with math this is what i mean i'm i'm tuning in right so if you earn 100 per year if you can outsource anything for 50 pounds per hour or less you should in order to have the biggest impact on your business so someone who's done 100k will have a cleaner yeah maybe someone who helps them with a food shop a bit of ironing in their work life they'll have a pa a va a bit of marketing support they maybe shouldn't be posting on their own socials anything that you can outsource for 50 pounds an hour or less you should and i think for lots of us this is what happens when i mean quality of life like our income goes up but we don't delegate in line with our income increasing me and my husband used to say scruffy rich all the time we'd say like we've got a really big business but our socks have holes in because we don't spend money on ourselves we don't do anything like when we're just laying a dark room at weekends because You were so overstimulated.

26:30Rachel Harris: You were just so tired. I relate to that. And so I feel like this whole concept of quality of life and financial well-being is just a consistent challenge to A, not forget the bloody reason that you became self-employed. I think we build it for tomorrow, to have the forever house, to do this, to do that, to do that. And you think, but are you enjoying today? Are you living? Well, I always say to my friends, I'm like, that kind of wait until theory is so you know or i'll be happy when theory well i'll be happy when we get engaged and i'll be happy when you know we maybe move house and i'll be happy when the summer's over and the kids are back to school like however that looks it's like you have to do the here and now because happy when just doesn't cut it does it right or like okay when doesn't really cut it and we're all guilty of doing that i'm like on my tombstone it will say once i get this couple these couple of weeks out of the way i'll be all right and that is like her last words no yeah yeah the last words but i've got a busy couple of weeks but once they're out of the way i'll be okay and then it goes into the next one and the next phase yeah um so tell me if how how do you get to that place so just explain to you one more time so i'm i'm understanding this theory but why do the numbers look like that so if it so if you're earning 100k why why does it look like the 50 pounds an hour scenario because we have to firstly accept that we can't be everywhere doing everything being that person the second is to scale to grow to get your own quality of life back you in one way or another will probably have a team and you can't act as a great employer if you were doing the job of an employee my accounting firm we have 700 clients 22 accountants i actually have the greatest impact on every client by not doing tax returns if I was at my desk bashing out tax returns I could at a maximum capacity impact 100 clients lives per year by stepping back understanding customer experience building a quality of life audit course that every client gets access to like I can have a greater impact by stepping back delegating the things that do not have to be me yes and that's the challenge because we do get into this trap of it has to be me it has to be me it has to be me but the mantra that I have scaled our entire business on is slow is smooth and smooth is fast so if you're delegating slowly you are training people well you are creating operating procedures process notes like I imagine even booking me as a podcast there's probably email templates there's process notes there's how do we research guests how do we create the questions like that does not have to be you but you could write the process so that someone follows it and it feels like Rochelle and so the goal is to make sure that there is a little bit of you in everything yeah in that if I'm Mary Berry she's my queen I didn't see it going there but okay if I am Mary Berry I can have a greater impact by writing a recipe book that every single person can have in their home creating my recipes at home than if I was just seeing how many cakes I can make in a 24-hour period.

30:06That's the concept. Working smarter, not harder. It is, it is. And I think that's the place that we all want to get to, isn't it? What are some of the most common mistakes that you see in the finance space for, I suppose, female entrepreneurs? What are they and how do we avoid

30:27Rachel Harris: them you have made eye contact with me for more than three seconds and I haven't actually said the word tax so I feel like this is probably a good point in the episode to drop the t word yes the biggest mistake I see entrepreneurs make is not planning and saving for tax I know it's not sexy it's really not sexy and I think it's quite hard to like the money in your account and you feel like it's all yours but it's almost and I've been taxed since I was a child which is a really strange concept to me it always will be yeah don't think I'm quite over that yeah I'm quite bitter about something um but I think I learned very quickly I had a few tax scares at young you know when I was younger and I then learned I think two of it was as in when I say the scare it was okay you have a tax bill and then that's now cleared my account so I think I learned harshly quite quickly that actually it's actually not all yours and I think the minute you separate that in your brain to know that I kiss goodbye to a portion of it as it lands because do you not think it's actually terrifying how low the barrier is to become self-employed in the UK and in like seven clicks on the internet I could register as a self-employed person and at no point am I shown any guidance any education even an on-demand video from someone explaining this is how tax works like if you are employed your employer takes tax away before it comes to you when you're self-employed that person is you but no one tells no one tells you and so like literally my full-time job way like i did yeah yeah and my job is on the internet like creating videos saying this is how to plan and save for tax because nobody tells you and the equivalent in employment is if your employer divided your annual salary into three lump sum payments gave them to you throughout the year and then nine months after that said can i have 20 back please you're like dude no i've literally spent all of it are you joking i've spent the summer and i did that absolutely yeah I said that's the equivalent and so yeah my your first question was why does this work so well on socials that's why is I'm doing the work that should be happening yeah at the point of becoming self-employed so you think the most common mistake is that we're not factoring in the big t the big t so we're not planning and saving for tax and I think again that relationship has to change from I don't even see the tax.

33:05Rachel Harris: Like it sits in a pot on my online banking called corporation tax. Exactly the same happens in my personal bank account called personal tax. It goes to one side. Yes, we can put it somewhere relatively high interest in the meantime, but other than that, I don't even see it. And I think for so many people, that's where the financial wellbeing routine comes in is on a monthly basis, are you running a profit and loss? Scary. like logging into your accounting software running a profit and loss firstly actually asking yourself does that profit look right have you worked really hard and your income is lower than the month before if so you might have missed something something might be sitting in the wrong month so is your profit and loss right once you've reviewed profit and loss one of the big misconceptions is around tax we actually only pay tax on a profit so we love a loss it's not good for self-esteem but it's great for taxes we love a loss so if you are making a profit we then need to segment a portion of that for tax right in the uk at the moment for limited companies corporation tax ranges between 20 and 25 so i would recommend everyone puts 25 aside if you're at the bottom end of the taper great news you can have some cash back at the end of the year but it's best to overcompensate and plan your cash on the basis of 25 i do you know what it's so interesting that you say having those monthly check-ins it's almost like set yourself a diary reminder that you stick to a day and particularly whether when you're self-employed like you know we rush out and we've got this on that day but to have that admin day once a month that it's yours so it's on you to do it so it's it is that thing that you could move and think oh do you know what I'll do that next week But if it comes up, like send yourself a diary invite and go through it and see it as somebody else's job.

34:57As in like you're letting somebody else down because you'll be so thankful if you actually, you know, not. People listening to this episode won't have the luxury of perhaps having an accountant or however that looks. So it is really carving out that time and space to do it for yourself, but treating it like it's a meeting or a work appointment or something that you wouldn't cancel.

35:24Rachel Harris: 100%. And I think, again, it is exposure therapy. Lots of us get financial anxiety and actually exposure therapy is those three numbers that we mentioned at the beginning. Are you looking at them every seven days? Yes. Because if you're looking at them every seven days, once a month, moving some money from your bank account into a little pot, easy peasy. It's not like an all day thing. It's like just taking that time to check in. 60 minutes once a month is enough to make sure that you have explicit clarity. Because I guarantee like if you've got a team, you wouldn't forget to pay them. You wouldn't forget to run payroll.

35:57Rachel Harris: But are you paying yourself? I feel like it is this selfless, feminine way of running a business. I have never forgotten to pay my team. But do I have that check in with myself? And, you know, if you run a business on your own, that doesn't mean you can't have board meetings. Get into your girls group chat. Say to a couple of self-employed friends, what are you doing on the first Wednesday of every month? Can we all sit in a Zoom room or a Teams room and just go through this routine together for accountability? Because if I'm on my own, I will not do it. I love spending time with you. I love being around people who I find their energy and their success contagious.

36:33Rachel Harris: get in your girls group chat and schedule board meetings with your friends say joe malone has kind of named it the pizza boardroom so she was like you know lots of women it's so into at the start and you think i'm doing this thing but i've got to keep it to myself but actually pizza boardroom buy a couple of pizzas get your girls over and ask the questions of people that you actually they might be in completely different spaces to you but people that you actually trust and value their opinion it's such a simple concept but we've all got a board you just got to tap in and find find out who that is what do you think um some of the most sort of key things you think people should know about HMRC and paying taxes obviously we've got the planning for it and knowing that listen a tax man as I've always been brought up never tax woman it wouldn't be would it though it wouldn't I'm gonna be honest um the tax man is gonna knock on your door yeah um so So what do you think, I suppose, yeah, the key things that we should know about paying our taxes?

37:38It's not going anywhere, is it?

37:39Rachel Harris: So the two core concepts I wish were put in front of you when you register as self-employed. The first is, as a self-employed person, we don't pay tax on our income. We do pay VAT, I mean corporation tax. So we do not pay corporation tax on our income. We actually pay tax on our profit. So when you're employed, you get taxed on everything you earn. When you're self-employed, you don't. We pay tax on profit. And our profit is the difference between our income and our expenses. Stay with me. I've got you. I'm nearly finished. I'm locked in. I'm locked in. She could tell. My eyes wonder. This is what I do.

38:15This is what I try. She's got on to me already. I'm in. I'm in.

38:20Rachel Harris: So we pay tax on profit, not income. So we pay tax on the difference between our income and our expenses. generally our income is what it is we can't retrospectively create more income in there so we do have control over our expenses when you become self-employed most people have a friend named dave down their local pub who tells them put this through take your wife out for dinner go for board meetings put this through and you think what's dave on about dave is wrong most of the time but sometimes Dave is right what he means by that is your income is what it is but we pay tax on the difference between our income and our expenses so the more you spend the lower your profit the lower your tax yeah I think a big misconception is that tax is what it is where there are so many quick ticks that you can do to reduce your tax bill that most people only find out through stumbling across me on Instagram thinking why has my accountant never told me that I can process a use of home charge if I work from home to reimburse me tax-free for doing that.

39:26Rachel Harris: I can reduce my taxable profit by£60 ,000 by putting money into a pension pot completely tax-free. I can put my children onto payroll if they do work for me and they want work experience. The second concept past that is that HMRC do not care what you are claiming as an expense. HMRC care why you are claiming it. Right. so for what you're putting through your business would be completely different to dave down the pub who runs the scaffolding business his expenses would be wildly different to yours uh in that like if dave the scaffolder was putting through cameras they'd probably say dave this is your wife's christmas present stop it whereas for you but in today's day and age dave could also he's on tiktok on tiktok building his scaffolding business i'd argue for dave And so HMRC do not care what you are claiming.

40:18They want to know why.

40:19Rachel Harris: Why? So they want to know. And why is that relevant to you? Does this relate to the business? Rochelle, you're in Selfridges again. Literally. So they don't care. I needed the outfit. So they don't care. Ten doesn't cut it. Literally. So they don't care what you're claiming. They care why. Yeah. They care. Does this relate to the business? Does this increase your revenue? Can we put it through the business? All of the way through to, I've had an OnlyFans creator expensive boob job. Wow. Yeah. And did it work? It did work. Yeah, HMRC gave her clearance. I mean, it makes bloody sense. Yeah, so it's not wholly and exclusively, but there is a secondary rule that HMRC use, which is if it's not wholly and exclusively, can it increase your revenue?

41:01So a go-to example.

41:03Rachel Harris: What I suppose on OnlyFans. Yeah. Well, a go-to example that isn't the same is if I was a personal trainer in the gym and I wanted to do a nutrition course. I actually do benefit personally from doing a course on nutrition. I benefit from it in my personal life. But if it's not wholly and exclusively, but it will actually grow my business and help me to generate more income, which a PT who's also a nutritionist will, it's the same. And so HMRC don't care what it is. They care why you are claiming it. And so my challenge, if you get to the point in your business where you want or you need an accountant, find someone who understands your market.

41:38Yeah. And second to that, listens to you. I created a TikTok about our client, the expense to boob job.

41:46Rachel Harris: And I thought, oh, my gosh, because we don't niche. We work with everybody. The weird, the wacky, the wonderful from Bake Off winners to our local village beekeeper. And I thought, oh, my gosh, I'm going to be known as the boob lady forever. And all of the comments were, you listen to her. Yeah. You didn't judge her. Like, if I asked my accountant a question, they'd just tell me this is what the guidance is. Please go away. or they just send me a link to the government website it's so interesting because it's you're right i would never in my wildest dreams think that that's even doable go you yeah well you go yeah i love that it's so so interesting because of course it makes perfect sense but yeah wow i'm gonna be asking you for all the tips there you go um Um, I, God, I feel like we've covered so, so much.

42:37I wrote so many questions for you and I'm like, God, we've got through so many of them. Before we finish, I think let's do a few actionable takeaways for listeners. I mean, you've given us so many. I mean, we're, we're inundated, but I think like three actionable takeaways that listeners can take away from our chat today. I would say I like this one tell me one financial habit to start today that can make a big difference and we spoke about checking in and scheduling that meeting I think that's brilliant I think everybody can send yourself a diary invite now and do the next six months and stick to it be consistent but yeah one small financial habit that our listener can start today that's going to make have an impact on them and their business okay i would challenge

43:33Rachel Harris: the listeners to make sure that their business bank account reflects their business model right what i mean by that is you can't find an online bank nowadays that doesn't give you the ability to move money into pots or spaces and so my challenge to you is to make sure that your spaces or your pots or the segmented ability that you have reflects your business model oh that's good what i mean by that is if you run a wedding planning business and people pay you deposits in advance when someone pays you a deposit you need to put that deposit into a pot until the wedding has happened it shouldn't be going into your bank account yes if you are going to invest in new camera equipment for your podcast in 12 months time can you set aside one twelfth of what you think it will cost you between now and then so that when it does happen you don't see a big sunk cost yeah so I want to see you setting aside money every single month for annual expenditure so it's like different avenues of your business just moving the money so that you have explicit clarity on what is there I take my own team on an all-inclusive holiday every year and so every month we set aside one twelfth of what we think our headcount will be next year into a pot so that when I'm laying out 20 grand to take the team on holiday we just move it from a pot we have new starters every two months so every month I set aside half of what it costs to induct a new member of staff this will look different for everybody if you get podcast sponsorship for sponsorship that is a 12-month sponsorship can you put that into a pot and only release one twelfth of it into your bank account every 12 months like that banking app shouldn't be an area where you look at the number and feel confused it should feel like an intuitive way for you to have explicit clarity of what is happening in your business it's like a financial clear out like what you're explaining makes me sort of feel like I work with the style sisters and they come in at my house and they're incredible and they're coming into this office soon and they're going to sort out the gifting cupboard and this and that and put everything where it should be and you probably start thinking it's cluttered it's messy the colors are all out and it's like god this is really confusing and then all of a sudden it sort of makes sense and the pieces are so it's like it's like having a financial clear out in a Marie Kondo your finances and I feel like it is that when you go from thinking I've got nothing to wear till they come around and you think I'm excited to wear my clothes again this is where people think oh I can invest some money what if I brought that higher forward and that's when we get to the point of you come to me and say I want to make more and work less easy I can literally see how much cash you've got what your runway is I know what's coming in I know what's going out we've planned and safe attacks and your quality of life is improving in line with your income and what you say just you know really applies to the startup that doesn't have the help or the support really streamlining everything makes it easy for you if you're the one in charge and you're the one across every detail yeah streamline it for yourself on your own sort of mental clarity that you know that I don't know say I'm a clothing business and I'm starting out and okay this is for materials this is for I don't know market it that you can easily streamline that and then you know what you've got and where the cash flow is yeah because I think sometimes that's really we're not taught to read financial statements and you run a product-based business I don't need to tell you you know sometimes there's quite a big difference between your profit and your cash yeah like whether you've got high levels of stock you've got this you've got that like new launches and the back end you know the front end of that will look very different every new formula and every new project contains a new lot of testing testing is really expensive at the start but then if I'm now going to place a reorder for the retailer that doesn't then involve testing so it's kind of it changes throughout you know and a certain retailer it will then commit to that stock and actually cash flows back up again but now we've reinvested that back into something else and it's kind of it it does move like that and that's you get used to it but it kind of is not thinking your cash flow is it's nice and full at the minute but there's about to be a big order that's gonna slash that in half so yeah you're right um okay that's a great one next one a myth about money in business that you'd love to bust for good I do think lots of people think money is bad and that people with money are bad and in my experience money is an amplifier of who we are and as long as we are good people with great values you know the minute my business became profitable I started a bursary scheme and I pay for five people who can't afford to become accountants to become accountants money is beautiful it's an extension of who we are as people and as long as we are spending money in line with our values for me that means I go to therapy every week I look after myself like that's my top priority um you know health relationship like investing money into the areas of your business when you do that quality of life audit it doesn't just help you look at where is good where feels good it can also make you look at where am I spending money where can I spend money to reflect the values of the importance of my life whether that is going on nice holidays getting a forever home paying your mortgage off like I wish more people spoke about it yeah because it's a cycle like people don't talk about money and so people feel shame but because people feel shame people don't talk about money and so having these conversations like hearing people like you talk about emotion and money together and financial well-being is so profound I think when you've not had it and then you have it for a bit and then lose it all and then get for you know however that looks it can't it does really come and go and like you say it does if you've got it it amplifies who you are good or bad and it gives you that freedom and I think that's the thing that it doesn't solve any you know any problems but it does provide a lot of freedom but then freedom can look different right if a bad person has money and freedom what they choose to do with it might not be appropriate yeah but you know if a good person has money and freedom like you said you then create a bursary scheme and you're looking to help other people so it kind of I've never ever looked at it like that but it's it's a really but I do I didn't I feel like we were probably raised in quite similar households like the narrative was not like money wasn't discussed on my dining room table and I I think sometimes it's so important that we children's you know subliminal messaging is like built up about money before the age of three yeah so like the conversations that we're having are so important like the language that we're using and I don't know about you like I still now I make decisions from that place yeah not the place I'm at now because all I remember is my mum raising me by herself not having any and the goal was always to get to provide to make ends meet to make everything happen so I think it will always forever be hard for me to shake that outlook no matter how fortunate I am or become or you know I think I'll always be like okay but we've got to do this in case that then goes and then we and you always think about the next move um what would your best advice be for launching and scaling with financial confidence it's the confidence part isn't it yeah you should be checking your numbers every seven days that is the answer that nobody wants to hear but the confidence will not happen if you are looking at your numbers less frequently than that it's like the old saying knowledge is power right and it's like it's the thing that we should we should have the knowledge yeah across our own finances we really really should if you've done a quality of life audit and you've said i want to earn 120k this year which means that you should be earning 10k a month you realizing that you've not done that at the end of the month pointless you realizing on the second monday of the month that you might not do it gives you the opportunity to make decisions delegate push harder work over time pull this lever do this checking it once a month pointless those three numbers and they'll be different for everybody for some people it's income for some people it's profit for some people it's cash that should we should flag we're using hypothetical numbers throughout this whole conversation they're different we don't think everyone earns 120 grand we you know you're right to not be in tune with that you know once the months pass the months pass then you're one month down right yeah it's too late yeah it's too late whereas you know if you have it in you you've got that enthusiasm to run a business like every single Monday and so it can look different for every business so I get a report every single Monday which is not just income it's income per team member right so my team are KPI to bill a certain amount per month I get given every seven days literally team member by team member and I can say to the manager what's happening with this person are they okay Berlin's a bit down could be they're working on a really big job that won't be build until the end of the month but the manager's on it and so the confidence comes from reviewing it reviewing it and realizing that you can change it you can impact it tax a tax bill can go away if you're reviewing your tax at month nine rather than month 12 between month nine and month 12 you could invest 60k into a pension and make your tax bill completely disappear and so the confidence comes from reviewing it regularly in the same way that if i haven't been to the gym for two weeks and I walk in I get anxiety I feel like people are looking at me if I go every other day I love it oh my gosh I've got the Barbie movie soundtrack in my headphones and I'm living my best life and I think I don't care if they're looking at me it is confidence it's routine it is a muscle that we build and keep and I think what this goes back to is that it's actually where we started this conversation is don't let the finance side of you of your business of your life don't let it be the thing that you put off yeah because it isn't going anywhere whether you're starting up a business whether you're trying to live you know we all need finance like it's what makes the world go around and like not and we've all been there where we don't want to open an envelope or there's a bill come in or an invoice been sent it's facing it sometimes feels like the biggest challenge isn't it they're kind of opening it checking it oh god where are we here but if you're regularly doing it it's not such a big deal it's really not and it's okay to talk about it and it's okay to sort of open that dialogue with your girlfriends or boyfriends or how however that might look but actually facing it head on and not being scared of it is is actually really really empowering and it's such a shame that we handle finances in that way and I am definitely better but I've definitely been guilty of that for sure and I think like I said upbringing everything you know has played a big part in that but I'm so pleased that you've come on and spoke about this today because it is so so empowering to see you in that seat bossing finances i'm like honestly i'm delighted to have this conversation with you thank you so much thank you so much for having me very grateful don't forget to follow us on apple and spotify or wherever you get your podcast to make sure that you don't miss out because next time we're going to be talking to another incredible lady who launched.

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