How to Pay Yourself as an Entrepreneur: Finding the Right Approach for Your Business

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In this episode of QuickBooks Mastery for Small Business Success, Erica Northrup and Lee Davis tackle a question many business owners wrestle with: how do you pay yourself as an entrepreneur?

It sounds simple, but the reality is more complex. How you pay yourself affects not only your personal income—but also your taxes, business structure, and long-term financial strategy.

Start With the Basics: What Do You Need?

Before deciding how to pay yourself, start with two key questions:

• What are your personal monthly expenses?
• What can your business realistically support?

Your compensation should strike a balance between your personal financial needs and the sustainability of your business.

It’s also important to recognize that this decision has tax implications, so it should never be made in isolation.

The Three Main Ways to Pay Yourself

Erica and Lee outline three common methods business owners use:

Owner’s Draw

This is the most common approach for LLCs.

• You take money out of the business as needed
• You’re paid from what’s left after expenses
• Taxes are still owed, even though it’s not traditional “income”

This method offers flexibility, but it requires discipline and planning—especially when it comes to taxes.

Salary

If your business is structured as an S-Corporation, you may be required to take a reasonable salary.

• Processed through payroll
• Subject to payroll taxes
• Provides more structure and consistency

Distributions or Dividends

If your business generates strong profits or you have additional income sources, distributions may come into play.

• Typically used alongside a salary in S-Corps
• Can offer tax advantages depending on your situation

How Business Structure Influences Your Decision

Your entity type plays a major role in how you pay yourself:

• $200,000–$300,000 revenue → Often structured as an LLC, using owner’s draws
• $1M–$2M+ revenue → Often structured as an S-Corp, combining salary and distributions

These aren’t strict rules, but they provide a general framework for thinking about your options.

Using QuickBooks to Guide the Decision

One of the most valuable tools in this process is your Profit & Loss statement in QuickBooks.

This report helps you:

• Understand your true profitability
• Evaluate how much your business can sustain
• Make more informed compensation decisions

Without clear financial data, it’s easy to overpay—or underpay—yourself.

What If You Feel Underpaid?

Many business owners reach a point where it feels like their employees are making more than they are.

If that happens, step back and look at the bigger picture:

• Are you building equity in the business?
• Are there tax advantages you’re benefiting from?
• Is the business reinvesting in growth?

Compensation isn’t always just about your paycheck—it’s about total financial benefit.

Additional Considerations

There are a few other important factors to think through:

• Retirement contributions (like a 401(k))
  If your business isn’t funding it, it may not be happening
• Insurance coverage
  • Dental insurance is typically fully deductible
  • Health insurance can be significantly more expensive
• Timing of payments
  There’s no one-size-fits-all answer—it depends on your cash flow and personal needs

Common Mistakes to Avoid

Even experienced business owners can make costly missteps:

• Paying yourself through payroll when it’s not appropriate
• Assuming your pay is automatically tax-deductible
• Not fully understanding what can and cannot be deducted
• Running payroll yourself and failing to pay payroll taxes

These mistakes can lead to compliance issues and unexpected tax liabilities.

Final Thoughts

Managing your business finances effectively isn’t about perfection—it’s about consistency and clarity. The more you understand your numbers, the better equipped you are to make confident, strategic decisions.

As emphasized in this episode, the right systems—and the right support—can make all the difference in building a sustainable, successful business.

If you liked the podcast, you will like our training course. Click on the link below to join our upcoming course.

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Understanding Your Numbers: Key QuickBooks Reports Every Business Owner Should Use

In this episode of QuickBooks Mastery for Small Business Success, Erica Northrup and Lee Davis focus on one of the most powerful—but often underused—features in QuickBooks: financial reports.

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For many business owners, running reports can feel like a task reserved for accountants. But in reality, these reports are essential tools for understanding performance, making decisions, and closing out each month with confidence.

Why Reports Matter

Running reports isn’t just about reviewing numbers—it’s about gaining clarity.

In fact, Erica and Lee emphasize that running reports is a key part of closing out your month. Without them, it’s difficult to truly understand how your business is performing.

QuickBooks offers a wide range of built-in reports that require little to no customization. The key is simply knowing where to find them—and using them consistently.

The Core Reports Every Business Should Run

Here are the essential reports highlighted in this episode:

Profit & Loss Statement

This report shows how your business performed over a specific period.

• Found under Business Overview
• Run it monthly using your preferred date range
• Helps you evaluate revenue, expenses, and overall profitability

Balance Sheet

Think of this as a snapshot of your business at a single point in time.

• Found under Business Overview
• Shows what you own (assets) and owe (liabilities)
• Provides insight into the overall financial health of your business

Cash Flow Statement

Understanding profit is important—but understanding cash is critical.

• Found under “My Accountant”
• Tracks where your cash is coming from and where it’s going
• Helps you avoid cash shortages, even when profits look strong

Sales by Customer

This report gives visibility into your top clients.

• Found under sales and customers → sales by client summary
• Shows how much revenue each customer generates
• Can be sorted from highest to lowest
• Helps identify your most valuable relationships

Budget vs. Actual

This report compares your planned performance to reality.

• Found under the Gear Icon → Tools → Budgeting
• Helps you stay aligned with financial goals
• Highlights areas where you may need to adjust

Additional Reports to Consider

QuickBooks offers even more insights depending on your business structure:

• Profit & Loss by Class
  Useful if you operate multiple divisions or businesses under one umbrella
• Payroll Reports
  Help track employee-related expenses and obligations

Many of these reports are readily available in the Business Overview section, making them easy to access and use.

Why These Reports Are Essential

Using these reports regularly helps you:

• Set realistic revenue goals
• Prepare for loan applications
• Determine when it’s time to hire
• Identify areas to reduce spending

In short, they turn your financial data into actionable insights.

Practical Tips for Staying Consistent

Like most financial habits, consistency is what makes the difference.

• Run your reports by the 10th of each month
• Set calendar reminders so it becomes routine
• Save customizations if you adjust filters or views
• And most importantly: just use them

You don’t need to overcomplicate the process. The reports are already built—you just need to access them and make them part of your workflow.

Final Thoughts

Managing your business finances effectively isn’t about perfection—it’s about consistency and clarity. The more you understand your numbers, the better equipped you are to make confident, strategic decisions.

As emphasized in this episode, the right systems—and the right support—can make all the difference in building a sustainable, successful business.

If you liked the podcast, you will like our training course. Click on the link below to join our upcoming course.

Join our Zoom Class

When to Outsource Bookkeeping: Knowing the Right Time for Your Business

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In Episode 7 of QuickBooks Mastery for Small Business Success, Erica Northrup and Lee Davis tackle a critical question for growing businesses: When is the right time to outsource your bookkeeping?

For many business owners, bookkeeping starts as a DIY task. But as your business grows, so do the demands on your time—and your financial complexity. The goal isn’t just to offload work; it’s to determine whether bringing in a professional will improve accuracy, efficiency, and overall business performance.

Signs It’s Time to Outsource Your Bookkeeping

How do you know when you’ve reached the tipping point? Erica and Lee highlight several key indicators:

• Invoices aren’t going out on time
  Delayed invoicing directly impacts your cash flow and can slow business growth.
• Revenue is scaling ($200,000–$500,000 range)
  As revenue increases, so does financial complexity. At this stage, professional support often becomes essential.
• Tax preparation feels overwhelming
  If tax season creates stress or confusion, it’s a sign your financial processes may need strengthening.
• You lack bookkeeping expertise
  Bookkeeping requires accuracy and consistency. If you’re unsure about what you’re doing, mistakes can become costly.

What You Can (and Should) Outsource

Outsourcing doesn’t mean giving up control—it means delegating the right tasks. Common functions you can outsource include:

• Payroll
• Accounts payable management
• Collections
• Even certain operational areas like marketing

These are time-intensive processes that benefit from professional oversight and consistency.

What You Should Keep In-House

Interestingly, not everything should be outsourced. Erica and Lee emphasize keeping control over:

• Invoicing
  This is closely tied to your client relationships and revenue timing.
• Reviewing expenses
  Business owners should stay connected to spending decisions to maintain financial awareness.

As Erica puts it: “Delegate, don’t abdicate.”

In other words, outsourcing should support your leadership—not replace it.

How to Choose the Right Bookkeeper

Not all bookkeepers are created equal. Choosing the right partner is critical to your success.

What to Look For

• Referrals from your CPA
  Trusted recommendations can help you find qualified professionals.
• Proactive thinking
  A strong bookkeeper doesn’t just record numbers—they offer insights to improve your business.
• Clear, consistent communication
  You should always understand your financial position without confusion.

Questions to Ask

Before hiring, ask:

• How do you typically work with clients?
• Do you have experience with businesses like mine?

These questions help ensure alignment with your needs and industry.

Red Flags to Watch For

If conversations leave you feeling confused or uncertain, take that seriously. Financial clarity is non-negotiable—your bookkeeper should simplify, not complicate.

What the Transition Looks Like

Outsourcing your bookkeeping isn’t just a handoff—it’s a structured transition.

Expect an initial meeting where you provide key documents and information. Preparation is essential to ensure a smooth onboarding process and set clear expectations from the start.

Your Bookkeeper as a Business Partner

As Lee Davis emphasizes, a bookkeeper isn’t just a service provider—they’re a business partner. The right person will help you make better decisions, stay compliant, and position your business for growth.

That’s why it’s so important to choose wisely.

For businesses looking for that level of partnership, Lee Davis and Company aims to provide not just bookkeeping services, but strategic financial support that grows with your business.

Final Thoughts

Outsourcing your bookkeeping is a strategic decision—not just an operational one. When done at the right time and with the right partner, it can free up your time, reduce stress, and give you clearer financial insight.

The key takeaway from this episode is simple: know when to ask for help—and make sure you’re choosing a partner who helps your business move forward.

If you liked the podcast, you will like our training course. Click on the link below to join our upcoming course.

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Building a Business Plan That Wins: Key Takeaways for Securing Funding and Driving Growth

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In Episode 5 of QuickBooks Mastery for Small Business Success, Erica Northrup and Lee Davis explore a critical topic for entrepreneurs: how to create a business plan that not only guides your company—but also helps you secure funding.

For many business owners, a business plan can feel like a one-time task. But as Lee Davis shared from his own experience securing an SBA loan, a strong business plan—combined with solid credit and a personable approach—can open doors to real opportunities.

Why a Business Plan Still Matters

A well-crafted business plan isn’t just a document for lenders—it’s a strategic tool for your business. At its core, it helps you:

• Set clear revenue goals
• Prepare for potential challenges
• Prioritize spending effectively

Equally important, your business plan should be a living document. If it’s sitting untouched on a shelf, it’s not doing its job. Revisit and update it regularly to reflect your current strategy and market conditions.

If you’re new to the process, don’t go it alone—seek guidance from a mentor or advisor who can help you refine your thinking.

The 7 Essential Elements of a Strong Business Plan

Erica and Lee outlined seven key components every effective business plan should include:

1. Business Overview

Clearly define what you do and who you serve. Specificity is key. Lee emphasized the importance of focusing on a defined audience—in his case, the service industry. Your clarity here sets the foundation for everything else.

2. Ideal Customer Profile

Identify exactly who your customer is. Go beyond general demographics and refine this into a concise elevator pitch. If your business is solving a real problem for a clearly defined audience, you’re positioning yourself for success.

3. SMART Goals

Set three to five specific, measurable, achievable, relevant, and time-bound goals. These should include a mix of financial and customer-focused objectives. Start with your “why”—why you launched your business—and build goals that align with that purpose.

4. Revenue Streams

Detail how your business makes money. Be transparent about pricing and focus on your core products and services. Understanding and refining your revenue streams is essential for both growth and credibility with lenders.

5. Key Expenses & Financial Planning

Outline your major expenses and think through your financial structure:

• How will you get paid?
• What does your debt plan look like?
• How will you manage cash flow?

This section demonstrates financial awareness and responsibility—two things lenders look for closely.

6. Marketing Snapshot

Marketing has evolved significantly. While there are more channels than ever, one principle remains constant: word-of-mouth is powerful. Building strong client relationships and delivering value drives referrals.

At the same time, a professional website is no longer optional—it’s a core component of your credibility and visibility.

7. 90-Day Action Plan

What are you going to do next? Break your strategy into clear, actionable steps for the next 90 days. This keeps your plan grounded in execution rather than theory.

Final Thoughts

A business plan is more than a requirement for funding—it’s a roadmap for sustainable success. When done right, it helps you stay focused, make informed decisions, and communicate your vision effectively to others.

As highlighted in this episode, success isn’t just about having a plan—it’s about using it. Keep it updated, keep it relevant, and most importantly, keep it actionable.

If you liked the podcast, you will like our training course. Click on the link below to join our upcoming course.

Join our Zoom Class