0:01

Hello everyone, my name is Vinci

0:01

Gary, I'm the president of a web

0:04

design company named distinct.

0:04

Since 2013. We've worked with

0:08

over 400 small businesses to

0:08

improve their online presence

0:10

through web design, SEO and

0:10

marketing. I'm also the host of

0:14

the Small Business Big Ideas

0:14

podcast and Facebook Group.

0:17

Today I'm joined by Ken idle and

0:17

Tiffany deer. Tiffany holds two

0:20

degrees in business and is both

0:20

a senior professional in HR, and

0:25

an enrolled agent. She works

0:25

closely with local businesses

0:28

and nonprofits, helping them

0:28

analyze their profitability,

0:31

operational spend, and projected

0:31

tax liability. Ken is a familiar

0:35

face from our last session. And

0:35

his his career has included

0:38

small business creation and

0:38

ownership. He's been the

0:41

director of an entrepreneurship

0:41

center, a faculty member of

0:43

community or other community

0:43

college and leadership in the

0:47

nonprofit and community

0:47

development organizations in

0:50

this community. I'm going to

0:50

first bring Tiffany up to say a

0:52

few words and Oberyn cons well. Hey, Tony. Hey, Vince, thanks so

0:55

much. Yeah, have you here. I'm

1:00

excited to have the opportunity

1:00

to be here. Absolutely. Is there

1:03

anything you want to tell

1:03

anyone? Listen, before we get

1:05

started? I'm Tiffany here. As

1:05

Vince said, I have been in the

1:11

tax preparation industry for

1:11

just about five years. And prior

1:16

to that I spent 10 years in

1:16

human resources.

1:20

I currently am the owner of deer

1:20

accounting here in Greencastle,

1:24

Indiana. Awesome. And before we

1:24

get started, someone does want

1:28

to send you an email, what's the

1:28

best way for them to reach you?

1:32

Great, you can reach me at

1:32

Tiffany at Deer accounting.com

1:37

Perfect. Let's bring Ken in. Again.

1:43

Welcome Tiffany Glad to have you. i My background has been said is

1:46

in retail business, probably 50

1:50

years in retail. But in addition

1:50

to that teaching at a community

1:54

college, as well as doing

1:54

consulting for small business

1:56

startups. I just want to take a minute to

1:59

talk about what we talked about

2:01

last week to try to bring those

2:01

who weren't around up to speed.

2:06

And then kind of turn it over to

2:06

Tiffany for the first section of

2:08

what we're going to do here. We

2:08

talked a lot about business

2:12

statements. We talked about

2:12

balance sheets, or asset and

2:17

liability statements. We talked

2:17

about earning statements which

2:20

some people call profit and loss

2:20

statements, and how you need

2:24

accurate statements to properly

2:24

run your business not just to

2:28

know where you are, but actually

2:28

with forecasting and experience

2:33

where you're going. And so

2:33

Tiffany is going to talk a

2:36

little bit about common pitfalls

2:36

that she sees in her accounting

2:40

practice. In terms of what what

2:40

you all need to know, after you

2:46

open your doors, usually there's

2:46

a lot of planning goes in

2:49

before, and a lot of excitement.

2:49

But sometimes there's these

2:52

realities that come along after

2:52

you kind of get launched, so to

2:56

speak. So Tiffany wants you to

2:56

talk about some of the common

2:59

pitfalls that you see. Sure can,

2:59

unfortunately, a lot, a lot of

3:04

what I'm about to tell you isn't

3:04

exactly as exciting as it is to

3:08

start a business from the ground

3:08

up. But that said, it is just as

3:13

important to focus on a few of

3:13

these items that I will bring to

3:18

your attention. Some individuals

3:18

that have just started a

3:21

business may not have thought

3:21

about these areas. And just when

3:27

you don't think about these

3:27

areas, it really it could expose

3:31

your startup business to risk.

3:31

One of the very first things

3:36

that I always encourage clients,

3:36

or new entrepreneurs to do is to

3:43

start up and open a business

3:43

checking account. I know can you

3:47

touched on this last week. But I

3:47

want to reiterate, it's so

3:51

important to separate the

3:51

transactions between the

3:55

business and your personal. And

3:55

when you mix those two, it

4:00

becomes very complicated and

4:00

challenging to determine what is

4:05

the expense of the business?

4:05

What are you paying yourself?

4:10

When all of those funds are in

4:10

the same pot? It's next to

4:15

impossible to reconcile that and

4:15

to determine what your expenses

4:19

are for your business as well as

4:19

the revenue coming in. This also

4:23

helps at tax time when your tax

4:23

preparer might ask you to

4:26

provide a summary of what you

4:26

what your business brought in as

4:30

far as revenue for the prior

4:30

year.

4:36

On that point, I can't stress

4:36

enough that it's important to

4:41

find a good banker. Build a

4:41

relationship with somebody local

4:48

with somebody that understands

4:48

the community. Maybe not the

4:53

direct industry that you're in,

4:53

but certainly the area that

4:57

you're located. Build a

4:57

relationship

5:00

With somebody reliable and

5:00

somebody that can follow you

5:03

along as you grow, as you might

5:03

need a loan or even just about

5:09

somebody, bounce some things off

5:09

of them.

5:13

So find a good banker. It's just

5:13

as important as finding a good

5:16

accountant, is it really is I've

5:16

been blessed to work I work with

5:20

PNC here in town. But you know,

5:20

on the local level, everyone in

5:25

the bank knows me they know

5:25

what's going on in our account,

5:28

it's been so beneficial, even

5:28

though it's a national brand,

5:31

that local touch has been so

5:31

beneficial.

5:34

And you don't have to catch

5:34

anybody up. When you do come in

5:37

the doors. They know you they

5:37

know your business, even

5:40

probably know a little bit about

5:40

your industry. And you can't put

5:45

a price on that. Absolutely.

5:48

The next thing I encourage

5:48

entrepreneurs to look for is

5:52

make sure you have accurate

5:52

accounting ongoing.

5:57

This starts from the beginning.

5:57

It's not impossible, but a very

6:05

big challenge if you decide to

6:05

have accurate accounting a year

6:10

or two in because then there's

6:10

the challenge of the catch up.

6:15

You may not be educated enough,

6:15

or even have a desire to spend

6:20

that much time looking at your

6:20

books. So it's important from

6:23

the very beginning to make sure

6:23

that your chart of accounts and

6:27

your accounting is in a good

6:27

position to grow and to succeed.

6:33

Make sure that those are the

6:33

transactions are sorted

6:37

correctly. Because this allows

6:37

you to run reports to look at

6:41

your current trends, what's

6:41

happening currently in your

6:44

business, as well as it allows

6:44

you to do projections to look

6:50

and see what what do I expect in

6:50

the near future for my business.

6:57

The next point is debt. So many

6:57

times I have clients that say

7:03

they want to stay away from debt. But I challenge you to think

7:05

about debt in a way that it's

7:10

maybe not always bad debt

7:10

positions you in the market in

7:15

such a way that you might be

7:15

able to borrow some money from

7:20

that local banker and take

7:20

advantage of some market growth.

7:28

Maybe you might be able to

7:28

offer, maybe you have some extra

7:33

warehouse space. And you might

7:33

think about offering an

7:37

alternative product, if you are

7:37

willing to take on a little bit

7:41

of debt, you might be able to

7:41

increase that revenue and see

7:45

success with that. I do caution

7:45

you though with debt. And that

7:49

you it's important to be

7:49

proactive with it and not

7:52

reactive. So think about the

7:52

interest rates that that are

7:58

available out there. Make sure

7:58

you shop and are aware of those.

8:02

And don't find yourself in a

8:02

position where you're behind on

8:06

the operational bills. And so

8:06

you just need to borrow money to

8:09

catch up with those. I. So I know, Tiffany, you're

8:12

the expert here. And Ken, you

8:15

have more experience than me.

8:15

But I found that the last year

8:19

or so there's been so many

8:19

opportunities with Small

8:22

Business Association lending and

8:22

COVID relief that it's a really

8:25

good time to take on that that

8:25

debt if you want some get to

8:30

grow your business with a low

8:30

interest rate. So I'd love to

8:32

hear both of your takes on that

8:32

and see if we all agree or if

8:35

there's a difference between that. I agree with what Tiffany saying

8:38

completely, that the money you

8:42

borrow in some way has to relate

8:42

to how your business grows. And

8:47

I've been through very high

8:47

interest rates as well as very

8:50

low interest rates. I mean, I'm

8:50

talking 14 15% interest rates.

8:55

So my general rule is, is that if

8:57

if that money is borrowed is not

9:03

making enough additional revenue

9:03

to at least pay the interest.

9:06

It's not a good debt. So

9:06

someplace that money whether you

9:11

buy a piece of equipment that

9:11

increases your sales,

9:15

or you know, you use it to buy

9:15

additional inventory that you're

9:18

going to sell somewhere that

9:18

expense, that interest expense

9:22

has to come back through

9:22

revenue. And that's kind of been

9:25

my rule of thumb on. Yeah.

9:30

Right. And that goes back to the

9:30

accurate accounting, because in

9:34

order to determine if that new

9:34

piece of equipment will pay back

9:39

more than the interest, you

9:39

really need to have a good

9:44

constant knowledge of your

9:44

business plan. Absolutely. And I

9:51

don't want to take us down a rabbit hole so we don't have to go here but knowing your ratio

9:53

is something that I've recently

9:56

learned over the last 12 months

9:56

or so and that's been really

9:59

helpful for me So we don't want to go that we

10:00

can go on to our next subject.

10:03

But last week, I did not hear

10:03

your comment and what what

10:06

rabbit hole was this? Oh,

10:06

managing your ratios,

10:10

understanding duration. So I

10:10

brought this up last time you

10:13

would think they're paying me.

10:13

But managing by the numbers

10:16

really helped me understand my

10:16

different shows and how that's

10:19

important for my business. So we

10:19

don't have to go down that we

10:23

can move on to reserves. But I

10:23

just wanted to drop that again.

10:27

Well, let me give us a segue

10:27

into reserves. Because one of

10:31

the things since I tend to be

10:31

the more aged person here,

10:36

if you go back many years, and

10:36

much farther than me, you know,

10:40

it used to be business was

10:40

financed, it was all equity

10:43

financing. If you wanted to

10:43

expand a business you took on a

10:46

partner, or you saved until you

10:46

had the money to expand your

10:50

business, then all of a sudden,

10:50

things changed. And we became a

10:55

debt expansion economy. And

10:55

that's where we are now. And so

11:01

it really is very different than

11:01

it used to be. And some use

11:06

properly as we're talking here,

11:06

that's great. But it's become

11:09

awfully easy to find yourself,

11:09

way too far away. And that money

11:15

that was saved to expand is what

11:15

Tiffany's kind of talk about

11:18

next, which is reserves. And if

11:18

you think about that, reserve,

11:24

this is why reserves are

11:24

important. So Tiffany, exactly.

11:28

I see it. Unfortunately, too

11:28

often that a business can be

11:34

very successful, even profitable

11:34

at the end of the year. But

11:39

they're really one endemic away

11:39

from having to close the doors.

11:44

And this can happen to a small

11:44

business or even a large

11:49

business. It really doesn't

11:49

discriminate. It's so important.

11:55

I say the rule of thumb to have

11:55

between three and six months of

11:59

expenses. Should the revenue

11:59

stop coming in? Should we

12:05

experience something

12:05

catastrophic? God forbid we have

12:08

another pandemic. It's so important to be able to

12:11

take the time to plan and how

12:16

will you continue to keep your

12:16

doors open? And how will you

12:19

continue to service your

12:19

customers?

12:22

If you don't have a cash

12:22

reserve?

12:27

And how I guess that leads into

12:27

how do you build that if you

12:31

don't have it, I say it just

12:31

takes some discipline, set up a

12:36

monthly payment, just like it's

12:36

a fixed a fixed expense.

12:42

transfer that money, you can

12:42

even set it up to auto transfer

12:45

every month so that you don't

12:45

even have to worry about it.

12:49

And before you know it, you'll

12:49

have that cash balance

12:55

for that emergency fund. And

12:55

then another piece to that is if

12:59

you do dip into that it's so

12:59

important to pay it back.

13:03

Don't fall into the habit of I

13:03

need to grab $500 here. And then

13:11

Oh well, I'll just add this to

13:11

my tab. Be sure to put it back

13:15

every time you take money out.

13:15

That should be an account that

13:19

you should try and leave it on

13:19

touched on your lawn.

13:24

That makes a big difference for

13:24

me having a recurring deposit

13:28

going into a savings account for

13:28

reserve. Like you said, it just

13:32

feels like another expense even

13:32

though not spending it mentally

13:36

that helps me a lot. Exactly.

13:41

Another common pitfall that I've

13:41

seen is aging accounts

13:47

receivable. Accounts receivable is going to

13:50

happen. You have people that you

13:57

provide services for and then

13:57

they pay you. I think you should

14:01

be thoughtful in how you

14:01

structure those payment

14:04

arrangements. If you are in an

14:04

industry that you require a lot

14:10

of the payment upfront so that

14:10

you can purchase the materials

14:14

for the product or service, then

14:14

it doesn't make sense to have a

14:19

60 day payment term. Make sure

14:19

your accounts receivable payment

14:24

arrangements match up with what

14:24

you realistically can function

14:29

with. And on the same token,

14:29

make sure you negotiate good

14:34

payment terms for your for your

14:34

accounts payable as well. That's

14:39

just as equally important. That was a sorry to keep

14:42

interrupting but that was

14:45

something Ken had taught me a

14:45

few years ago. And I my net

14:50

terms were based on QuickBooks

14:50

defaults. I think they were just

14:53

net 30 Like said in the simple

14:53

change of changing that the net

14:57

15 Just gives you

15:00

So much cash to work with that

15:00

you can really guide the ship

15:04

better. So that was a huge

15:04

revelation for me. And I'm

15:08

pretty sure I mentioned that a

15:08

lot, you change your receivables

15:12

or give people an incentive for

15:12

paying sooner. So simple but a

15:15

game changer. Something totally

15:15

contrary, yeah, right. Yeah. In

15:19

our in our, in our Flower Shop

15:19

Business, we were daily

15:22

invoicing, the day, the day, the day it was

15:24

delivered, the next day the

15:27

invoice went out. So, you know, obviously, you

15:29

have a one time when you start

15:34

that you have a one time

15:34

immediate cash flow. But you can

15:38

identify those bills that are

15:38

past due before they get really

15:42

old. Because we did generate

15:42

statements at the end of 30

15:45

days. However, my billing daily,

15:45

we had a constant cash flow, and

15:51

we almost became a cash business

15:51

because of that, especially when

15:55

you started seeing more credit

15:55

cards because you got paid

15:57

immediately with the credit

15:57

card. So I whether it's

16:01

definitely required deposits on

16:01

large or too large jobs that

16:04

will cover your purchases that

16:04

you have to make to get started

16:08

draws whatever you want to call

16:08

them. It's just really, really

16:11

important that you guard that

16:11

because

16:15

your factor business, absolutely.

16:21

For the inventory. I've seen this. I personally

16:24

provide services for less

16:29

clients that have inventory, but

16:29

I can still speak to it, and

16:33

that it's important that you

16:33

make sure that the inventory

16:38

you're purchasing and retaining

16:42

is selling. I know that sounds

16:42

really common sense. But it's

16:48

unfortunately, something I've

16:48

seen that inventory is not

16:52

reviewed as frequently as it

16:52

should be. If you have inventory

16:56

in and I don't know, Ken, maybe

16:56

you have a rule of thumb for

16:59

this. But if you have it sit for

16:59

X number of months, maybe you

17:05

should consider changing how you

17:05

purchase.

17:10

Okay, so there's several things

17:10

about this, I think definitely

17:13

one is is yes, stale inventory,

17:13

particularly if you're in a

17:16

business that has trans is just

17:16

something that if it's if it's

17:20

not selling, put it on sailing

17:20

and and move it out, because you

17:23

need that cash to do something

17:23

else. So that's the first rule.

17:27

Second level, we we use what we

17:27

call conservative risk. And so

17:32

we would go to a Gift Show and

17:32

we would buy an AI that we

17:36

thought would be really good

17:36

might sell here, we'd bring it

17:39

and put it in a hotspot for

17:39

display, and it didn't sell. But

17:43

if it did sell, we'd reorder

17:43

more than the minimum order. But

17:46

we never ordered the first thing

17:46

we first order was never more

17:49

than the minimum, because we

17:49

wanted to test the market before

17:52

we did it. So that's one other

17:52

way you can manage that. One of

17:56

the other things that's interesting about our business, which was a retail flower shop,

17:58

and gift store, is that the way

18:02

you will you market fresh

18:02

product, because it turns if you

18:06

don't sell fresh product in

18:06

three or four days, you're not

18:09

going to sell it, you're going

18:09

to adopt it. But the gift items

18:12

just they sat there, and they

18:12

just sat there and so you had

18:16

$1,000 in gifts. And you may

18:16

only be able to turn that over

18:21

once every six months, because

18:21

you didn't sell them. Yet with a

18:24

fresh product, whether it's a

18:24

hamburger or a rose, you sell

18:29

that. And so you've got that

18:29

same $1,000. But if you're

18:32

selling it, you can take that

18:32

$1,000 and operate on that for a

18:36

whole month or whatever your

18:36

terms are. So it's really

18:39

important to know how your

18:39

inventory works and what its

18:42

personality is. And you also

18:42

have different markups on all

18:46

those things. And so when you

18:46

get into mixed margin

18:49

businesses, there's all sorts of

18:49

things that you have to learn.

18:52

But if it doesn't sell, get rid

18:52

of it, sell it, donate it, just

18:58

get it out of the store, and

18:58

stay knowledgeable, like you

19:01

said, make sure you know,

19:01

sometimes I get frustrated that

19:06

I can't always put a specific

19:06

cost to a service, right one

19:11

website might be a little take

19:11

more hours than another website,

19:14

it frustrates me and then I

19:14

think about people who have to

19:17

manage inventory. And I just put

19:17

my hands up like okay, I don't

19:20

want to do that. That's great,

19:20

especially, you know, like a

19:23

restaurant and managing

19:23

inventory that's going to go

19:25

bad. Yeah, I can't I couldn't do

19:25

it. I can't even imagine doing

19:30

it. So I'll deal with my issues.

19:34

Right. I agree. So I think

19:34

you'll Tiffany's talking a lot

19:38

talking about now things that

19:38

you have to pay attention to, or

19:43

you can get yourself in trouble.

19:43

Yeah. And and how do you how do

19:47

you want to what are the signals

19:47

for that? You know, Tiffany

19:51

talked about cash flow. That's

19:51

this critical because if you

19:55

don't come around is payroll

19:55

time. And you have people

19:58

working for you and They depend on you to provide

20:00

them or pay a paycheck to buy

20:04

their groceries to pay their

20:04

rent, and you don't have it. And

20:08

so that's a real red flag, if

20:08

you don't have the reserves to

20:13

be able to take and and pay

20:13

payroll as an example, the other

20:17

one is an inability to pay

20:17

taxes. And Tiffany, you want to

20:20

talk about those tax surprises?

20:20

You see?

20:23

i Yes, they happen. Too often,

20:28

what I see is a client might

20:28

have reviewed, their earning

20:35

statement will say Profit Loss,

20:35

for example. And it shows the

20:41

bottom line of, for example, $40,000. Net.

20:49

Unfortunately, they don't have

20:49

that same will not

20:54

unfortunately, it just is the

20:54

nature of it, they don't have

20:57

that $40,000 sitting in their

20:57

bank account. for variety of

21:01

reasons, it could be that they

21:01

took owner draws, it could be

21:04

that they've made payments

21:04

toward debt.

21:09

But what then surprises

21:14

business owners is that the IRS

21:14

taxes on the revenue minus

21:21

expenses, which is profit, it doesn't tax

21:23

on the bank account balance. So

21:32

even if you don't have the cash

21:32

in the bank account on December

21:37

31, like maybe the p&l suggests,

21:37

you still are responsible to pay

21:44

the income tax on the income

21:44

that you earned.

21:51

So unfortunately, that's can be confusing when you're

21:54

when you're really in it day to

21:57

day. But it's just something

21:57

that I think people need to hear

22:02

and to hear into here and to

22:02

hear repeatedly. So I think the

22:06

thing I touched on last week,

22:06

possibly, but it was payroll

22:09

taxes. Yeah. And what I've seen

22:09

in the businesses that I've

22:14

worked with, is the realization

22:14

that at the end of every

22:18

quarter, the IRS, and the state

22:18

is going to come to you and say

22:23

we want our sales tax that

22:23

you've collected. And we also

22:27

want the Social Security match

22:27

that you owe on what your

22:31

employees have paid. Plus some

22:31

other little hidden things that

22:35

we all kind of here know about.

22:35

And if you don't set that aside,

22:39

in a separate payroll account,

22:39

you are very much in in danger

22:44

of having that money, had not

22:44

having those dollars, because

22:48

you thought you had money in

22:48

your checking account when you

22:51

actually you did not. And so

22:51

it's just very important.

22:55

Tiffany talked about having a

22:55

separate checking account, from

22:58

your personal business, if it is

22:58

also very important, when you

23:01

write your payroll to put all of

23:01

the money, all the payroll taxes

23:06

in a different account. One of

23:06

the advantages of having a

23:09

payroll service, not that small

23:09

businesses can necessarily do

23:13

that. But it's just really

23:13

important to put money aside in

23:17

what kind of savings however you

23:17

do that to make sure when the

23:20

government comes calling that

23:20

you have their money, because

23:25

you don't want to mess with the

23:25

government. They're going to get

23:28

their money, that's for sure to

23:28

get their money. So that's

23:31

that's one that I've seen

23:31

numerous times. And it's very

23:35

hard. It's very hard to get back

23:35

from.

23:39

Absolutely. So how do you avoid

23:39

these troubles? Definitely. What

23:44

do you how do you what's your

23:44

recommendation to people in

23:47

terms of how they how they avoid this? I think I

23:54

think the cash reserves is huge,

23:58

which then leads to being

23:58

disciplined.

24:03

Have patience with yourself.

24:03

It's not easy to set money

24:07

aside, especially when you have

24:07

bills coming in.

24:10

But I think my biggest piece of

24:10

advice is to prioritize setting

24:17

up a cash reserve. Another piece that I could

24:21

suggest is to continue to stay

24:25

aware of the expenses that you

24:25

have, that you're going to have

24:30

and that you have already had. It's invaluable to be able to

24:34

mentally have an ongoing

24:39

knowledge of where your bank

24:39

account is going, on a minimum a

24:44

weekly basis. For that time, as Ken just said,

24:47

when the IRS sends you a bill,

24:51

it's important to be able to

24:51

have that into and those things

24:54

are things that it's reasonable

24:54

to plan for that

25:00

Yeah, talk about, excuse me. I

25:00

was gonna say Vince mentioned

25:04

the like the ratio, I wanted to

25:04

point out. One important ratio

25:10

with respect to this topic is

25:10

the assets liability. That's a

25:14

ratio that you generally find to

25:14

be pretty low. If a if a, it's a

25:21

good sign, generally, it's a

25:21

good sign if that ratio is low.

25:25

Now, if your company is rapidly

25:25

growing, if you are trying to

25:31

encourage growth, and you've

25:31

recently taken out debt,

25:33

obviously, that ratio will be

25:33

slightly higher. But what that

25:37

is, it's how much the company,

25:37

how much of your company's

25:40

assets are made of liabilities?

25:40

Go ahead.

25:45

Yes, yeah. Yeah, that's that's

25:45

important. If you're a retail

25:49

business, that has

25:49

merchandisers, ratios that tell

25:52

you how your inventory relates

25:52

to your sales percentages. But

25:58

those current ratios, the bank,

25:58

the bank looks at specifically,

26:01

how strong you are in relation

26:01

to assets and liabilities, if

26:05

they want to loan you won't

26:05

borrow more money. And they also

26:08

will look at your cash flow. And

26:08

we didn't really talk about that

26:11

last week, but that's another

26:11

financial statement, that will

26:14

kind of tell everybody where

26:14

your money's going. And that's

26:18

just a really important thing to do. So I think, you know, Tiffany,

26:21

your your comment about

26:24

discipline, I think is one of

26:24

those things, that it's just so

26:26

hard. You know, you get caught

26:26

up in your business, you you

26:29

have bills to pay you, you have,

26:29

you know, or even when things

26:34

are going really well, you know,

26:34

oh, yeah, I really like to do

26:38

that. Let's just sponsor this

26:38

event or sponsor that event. And

26:41

all of a sudden, you have no

26:41

cash because you've sponsored

26:44

everything. I'm a great

26:44

marketing person, don't get me

26:47

wrong, that marketing is just

26:47

like everything else, there has

26:50

to be a return on that. Yeah.

26:50

And so how do you do that and

26:56

just can't get caught up. And

26:56

some of the things that you can

27:01

emotionally, when it comes to

27:01

operating your business, whether

27:04

it's a product you like, and you

27:04

really want to bring in the

27:06

store, because you want to have

27:06

so that your house, but it

27:10

doesn't sell. So you shouldn't

27:10

do that. And so there's a

27:14

reason to do that. One of things

27:14

I learned is to buy things I

27:17

didn't like, but they sold. And

27:17

so if they sold, it would make

27:21

no difference. Right in like a great rule of thumb. One of

27:25

the things I talk about, and I

27:29

people don't always understand

27:29

this, but it's called the

27:32

personality of money. And I guess I've looked, because

27:34

I've been to I've talked a

27:38

little bit about this. So,

27:38

Tiffany, how do you understand

27:42

how do you manage the

27:42

personality of money? How do you

27:44

give money personality? I mean,

27:44

it's just money, right?

27:50

That control can I think one of the pieces I can

27:54

recommend is to

28:00

be proactive, as I mentioned

28:00

earlier, and not reactive.

28:07

When you need to take draws, if

28:07

you're an LLC and you need to

28:11

pay yourself, it helps if you

28:11

pay yourself on a regular

28:18

structured basis. Yeah, as if

28:18

that were a paycheck.

28:24

It becomes more of a challenge

28:24

when you take $1,000 One week

28:28

and then $250.02 days later

28:28

because you forgot you had this

28:32

other bill personally that you

28:32

owe I think making sure that

28:39

you're very proactive and

28:39

planning and thinking ahead

28:43

helps when it comes to that how

28:43

the flow of the cash and and

28:48

that personality of money that's when you think about

28:52

personality in my

28:55

my talks Yeah, you know, I can notice

28:58

that we've been through

29:02

different kind of seasons of

29:02

cash and data and understanding

29:07

of money understanding of ratios

29:07

and you know, if if you're not

29:11

paying attention to it, it will

29:11

kind of run off and talk on its

29:15

own so I think I think kind of going

29:16

back to Ken's favorite

29:20

statement, you know, cash is

29:20

king and that's the most

29:24

important aspects in my opinion.

29:24

I just saw a question come

29:29

through you guys mind if I pop

29:29

it up. Now let's see if I can.

29:35

Here we go. So really enjoying all this I

29:37

own two businesses one is

29:40

tracked 100% Because the way

29:40

company bills monthly first of

29:45

the month so the other businesses cash for

29:47

service can finish reading it

29:51

here so she asked cash in hand

30:00

versus claiming everything. I

30:00

think I think this question

30:04

really gets to the gist of

30:04

differentiating personal and

30:10

separate businesses and kind of

30:10

what you're doing there to both

30:15

maximize your tax benefit, but

30:15

also

30:19

kind of keep track of everything. Accountant?

30:26

Well, when you've got multiple

30:26

businesses, I'm gonna throw in

30:30

there with that recommendation

30:30

one more time is to make sure

30:33

that you've got multiple bank

30:33

accounts, don't try to do one

30:38

bank account both businesses out

30:38

of one bank account.

30:44

And then go ahead and engage somebody

30:47

that can keep your books,

30:52

because at that point, at the

30:52

time when you're doing, too,

30:55

when you're an owner to

30:55

businesses, you have to have

30:59

time to to excel at those

30:59

businesses. If you're self

31:02

employed, I don't find it likely

31:02

that you would have time to sit

31:08

and focus regularly and make any

31:08

sense at all of what your books

31:13

are telling you. So find a

31:13

bookkeeper find an accountant

31:17

that can help the partner with you know, daily, weekly monthly,

31:20

helping you understand what your

31:25

business is, what the successes

31:25

are, and then what are your

31:29

opportunities for growth? I

31:29

think, I don't know if this is

31:34

really what the question is, but

31:34

it reminded me and maybe it is,

31:38

before I jumped into starting my

31:38

business, I had some experience

31:43

kind of seeing family and

31:43

friends growing up running their

31:46

business. And one thing that was

31:46

always kind of in the back of my

31:50

mind, I heard it all the time.

31:50

Well, it's a business expense,

31:52

expense, expense it, no show

31:52

loss, things like that. But

31:56

after starting my business and

31:56

being self employed for a few

31:59

years, and then applying for a

31:59

mortgage, and realizing that my

32:02

first three years of business,

32:02

had a lot of expenses and didn't

32:06

show real profit, even though we

32:06

were making money.

32:11

How do you advise people

32:11

typically to kind of balance

32:13

that, you know, investing in

32:13

their business, but maybe not

32:16

spending all of your annual

32:16

profits in swag to show a loss,

32:23

kind of you encounter that and

32:23

people who want to do that and

32:26

not think about the long term

32:26

showing of their profits.

32:31

I'll just jump in and say, I

32:31

pretty black and white about

32:35

this probably doesn't surprise

32:37

anybody. But if you take

32:41

something in for a service that

32:41

you're offering, or product or

32:44

selling, that's, that's income.

32:48

And that income is taxable. Now, you can take expenses

32:50

against that.

32:54

But I can remember what I first

32:54

bought my business, there were

32:58

things that the IRS would allow

32:58

you to take that later on in 10

33:01

years or so they changed the

33:01

rules. You couldn't take it, I

33:04

could take until I was honored.

33:04

Yeah, so if, and I've ever been

33:11

to an IRS audit, but I've been

33:11

through state sales, tax audits,

33:14

and some of those kinds of

33:14

things. And so

33:18

if you want to have peace of

33:18

mind, that, you know, when you

33:21

get audited, that everything's

33:21

gonna be fine. You need to claim

33:24

all your income, whether it's

33:24

cash or cheques. And then you

33:28

need to take and take the

33:28

appropriate expenses.

33:33

There are ways the IRS could

33:33

look at how you live

33:37

and what you claim as income.

33:37

And recognize that that doesn't

33:42

necessarily reconcile. So.

33:48

That's my view, it has always

33:48

been my view. And that's what

33:52

I've always done. That's who I

33:52

am as a business person.

33:57

But it's hard. So, so let me let

33:57

me rephrase the question,

34:01

though. If you've made a lot of

34:01

money, and there's there's

34:05

eligible business expenses you

34:05

could spend in December, do you

34:11

think there's a benefit to

34:11

spending a lot of money to have

34:15

less profit? Or do you think

34:15

cash is king in tents, and you

34:19

made profit? So pay your taxes

34:19

on it and have that cash on hand

34:22

and not just blow it away to pay

34:22

less in taxes? You said eligible

34:26

expense? Yeah. So there's a I'll give you an

34:29

example, a few years, a number

34:31

of years ago, there was a time

34:31

where you could accelerate

34:35

depreciation. And we may be

34:35

talking too much counted here. I

34:39

don't know. But you instead of

34:39

tape, buying a car or a truck

34:44

and expensing there over five

34:44

years,

34:48

which is what the government

34:48

requires you to do at that

34:50

point. You could this particular

34:50

year tax year you could buy the

34:54

truck and expense all of it.

34:54

Well, if you were showing a

34:58

large profit You wanted to buy that truck and

35:00

you had the cash or you could

35:03

borrow it, you could go ahead

35:03

and buy that truck and expense

35:07

the whole thing and not

35:07

depreciate, which would cut down

35:10

on your profits. The other way that you do that,

35:12

or can do that is, and some

35:16

people do this, that they don't

35:16

take physical inventory, they

35:20

guess that their inventory based

35:20

on how much taxes they want to

35:22

pay, well, that that's a short

35:22

term way to do that. But anytime

35:28

you have an eligible legal

35:28

deduction, and you can do that,

35:33

yes, you can do that. And you

35:33

should do that. Yeah.

35:40

I definitely want to weigh in on

35:40

this. I mean,

35:43

yeah, I agree. Can if it's

35:43

eligible, if it's eligible in

35:47

the IRA? Eyes of the IRS?

35:47

Absolutely. Especially if it's

35:51

an asset that your business

35:51

needs to grow?

35:56

I don't necessarily look at it,

35:56

though, as avoiding taxes,

36:01

rather than just paying them

36:01

later.

36:05

As a result of that purchase?

36:05

Yeah. I think I used to be hyper

36:10

focused on buy, you know, maybe

36:10

it was, you know, sweaters to

36:14

give to the clients kind of an

36:14

eligible marketing expense.

36:19

Yeah, exactly. With the logo.

36:19

Yeah. And I used to, I used to

36:21

think, you know, I'll do that

36:21

the end of the year. But

36:24

anymore, I really just like

36:24

having the cash, if that means I

36:28

have a more profitable and I pay

36:28

a little bit more taxes, I want

36:30

that cash for the next year,

36:30

versus, you know, spending on

36:34

things that are eligible, but

36:34

not really necessary. I think

36:38

I've kind of moved beyond that

36:38

at this point. So, you know, we

36:43

were on a fiscal year, rather

36:43

than a calendar year. So you

36:48

can't really do that much

36:48

anymore, I think, if I'm correct

36:50

about that, but so our year ended right after

36:52

May, which was our best month.

36:57

So we ended up with about six

36:57

months, and six months, even

37:01

income, which is not always the

37:01

case in the business. But there

37:05

was there was, there's nothing wrong with

37:07

delaying a sale, or recording an

37:13

account for a week or two, to

37:13

put the revenue elsewhere, just

37:18

like it wouldn't be uncommon for

37:18

us to go ahead and buy something

37:24

that we might be able to buy

37:24

now.

37:27

To get the expanse to minimize

37:27

what we had to pay in taxes.

37:32

That's perfectly legal. It's

37:32

perfectly appropriate. But do I

37:36

understand the question here is

37:36

is the money that I'm taking

37:41

this 100% cash out? How do I account for that?

37:43

My answer to that is as you

37:47

account for that, just like you

37:47

would account for any revenue,

37:50

and it's taxable. Yeah. I think

37:50

I understand that question.

37:55

Yeah, I agree with that. So

37:55

thanks for the question. Yeah.

38:01

And there's I know, we've grown

38:01

we're kind of running into our

38:04

time limit now. But we've had

38:04

quite a few more viewers pop in.

38:06

So if anyone does have a question, go ahead and submit that before we wrap up,

38:11

is back on track? Yeah, I'd like

38:11

to talk a minute, though, about

38:14

this personality money thing,

38:14

because I think it's just so

38:17

important. You know, it's the

38:17

dedicated use of monetary

38:21

assets. And so the savings

38:21

accounts we've all talked about

38:25

here. So you have an account,

38:25

that's a payroll account, you

38:28

have an account, that's a

38:28

savings account for asset

38:30

purchases, you have an account

38:30

that's set aside for something

38:34

else for a particular I don't

38:34

care a Christmas bonus, I don't

38:38

care, whatever it might be, or

38:38

you have something set aside

38:42

for, for inventory, expansion,

38:42

whatever you want. And however

38:47

you want that money to work for

38:47

you, you make that money work,

38:52

how you want it to work to help

38:52

your business grow. And, and too

38:56

often, we don't see it that way.

38:56

It's just this big hunk in our

39:00

checking account. You have as

39:00

many accounts as you need to be

39:03

able to set money aside so that

39:03

when you get ready to do

39:06

something, you don't have to

39:06

borrow all of it. You may have

39:10

to borrow a majority of it, but

39:10

you don't have to borrow all of

39:13

it. As Stephanie said, it predicts

39:15

against loss and emergency, it

39:19

gives you assets for your

39:19

business to grow, gives you a

39:23

revenue stream to pay certain

39:23

monthly operating expenses. And

39:27

it's also the ability to pay

39:27

cash for something and not

39:30

borrow. And that's something

39:30

sometimes we don't think enough

39:34

about is that discipline and

39:34

patience to save

39:39

money for future expense. And it

39:39

is a discipline to be able to do

39:45

that. Think about think about that is

39:46

just not a piece of paper. Yeah,

39:51

give it a personality that that

39:51

is like those three jars. She

39:55

used to keep, you know, a dime

39:55

here a dime here and 25 cents

39:59

here and they all went to search Two things. Same thing. Exactly

40:00

the same thing. Yeah.

40:05

Absolutely. Can what else? What else you're

40:09

gonna cover? Wait before we

40:12

start slowly wrapping up? You asked me that. Yeah.

40:19

You're the star. All I want to talk, I think.

40:24

Let's talk about next week we're

40:24

going to talk about managing

40:26

employees. That's that's always

40:26

an interesting subject. Yeah, it

40:30

is something I'm learning about rapidly. I'll be I'll be listening to you

40:34

more than anything next week.

40:38

You won't be listening to you

40:38

more than anything. Yeah. I

40:42

don't know about that. I find it

40:42

so interesting to learn about

40:45

what motivates different

40:45

personalities. Oh, I'll be

40:49

definitely tuning in next week.

40:49

Oh, boy. I mean, maybe you can

40:53

share what motivates you next

40:53

week, if you want to join us

40:55

again? So yeah, I so I don't

40:55

know whether it's still

40:58

available or not. But when I was

40:58

teaching, I used to use a thing

41:01

called Kingdom ality calm. Okay.

41:01

And it's a personality test

41:06

based on for guild halls in

41:06

medieval Europe. Oh, and it's

41:12

fun to exercise is not

41:12

scientific. But you can find out

41:16

whether you're a white knight or

41:16

Black Knight, whether you're a

41:20

benevolent ruler, or whether you

41:20

are a shopkeeper or a doctor,

41:25

and it's all divided into

41:25

quadrants, and it tells you what

41:28

your profile is. And it's kind

41:28

of an interesting thing. It's

41:31

fun exercise. That That sounds

41:31

awesome. Can if you want to send

41:35

it to me, remind me after I'll

41:35

put that in the notes for anyone

41:38

viewing this after, I'll check

41:38

and see if it's still available.

41:40

It's been a while since I've

41:40

worked, but there were 13

41:42

million people taking it one

41:42

time. Wow. Wow. That's

41:46

incredible. Well, I can I think

41:46

I'm gonna go ahead and shut down

41:51

your stream and let Tiffany kind

41:51

of close out in her. And is

41:54

there anything else you want to

41:54

share? Before we close out

41:57

today? I've just enjoyed having

41:57

Tiffany.

42:00

I will tell you how long I don't

42:00

have any but it's a long time.

42:04

And she's just a great person.

42:04

And his I recommend her as an

42:09

accountant and a human resource

42:09

person because I've worked with

42:12

her before. So can I stay on and listen to

42:15

Tiffany? Yeah, of course you

42:17

can't, I won't. I won't shut I

42:17

don't want to be I want to make

42:19

sure she doesn't say something.

42:19

Yeah. Cancer rebuttal. If you

42:23

need. Tiffany, the show is

42:23

yours. All I really want to say

42:27

is I'm so grateful for the

42:27

chance to partner with both of

42:31

you, and to be here and speak on

42:31

a little bit about what I see in

42:36

my daily life. And

42:40

please send me an email anytime

42:40

Tiffany at Deer accounting.com.

42:47

Perfect. Well, thank you both.

42:47

For anyone who's listening live

42:52

or finding this shortly after

42:52

this recording will be available

42:55

on YouTube. The channel is

42:55

called Small Business Big Ideas.

42:59

And so also be available on any

42:59

podcasting system that you use

43:03

with the same title. And feel

43:03

free to join our Facebook group

43:07

for small business owners and

43:07

entrepreneurs. Also the same

43:10

title, Small Business Big Ideas

43:10

on Facebook. So yeah, so we're

43:14

going to be coming back maybe

43:14

next week. I don't think we have

43:17

a date set. But we'll make sure

43:17

we post that. Talking about

43:20

employees. And maybe we'll see

43:20

Tiffany back again. We'll have

43:24

to find out. Well, with human resource

43:26

background, she won't be able to

43:28

tell us a lot. I would think so.

43:28

Yeah, I think so. Maybe I'll

43:36

thank you all. Thank you for the

43:36

good questions. And thank you

43:38

all for watching.