Episode Transcript
[00:00:02] Speaker A: Welcome to Biz Talk, the show where real world business strategy meets execution. I'm your host, Ryan Herpin, and today we're diving into one of the most misunderstood leadership skills in business, Financial clarity.
Joining me is Kelly Coughlin, CPA tax expert and founder of Everyday cpa. With decades of experience helping small and mid sized businesses navigate taxes, accounting and growth, Kelly is known for cutting through complexity and giving leaders practical, yet strategic financial insight they can actually use.
Today's conversation starts with a truth.
Many leaders avoid understanding your numbers. And it isn't really an accounting task. It's, it's really a leadership responsibility.
Financial clarity determines how confidently you lead, how you decide and execute. So, Kelly, it is such a pleasure to have you here today on BizTalk.
[00:01:05] Speaker B: Ryan, thank you for having me. When you say decades of experience, that makes me feel really ancient, Ryan. So let's just use many years of experience, okay? Can we do that?
[00:01:17] Speaker A: That works for me. I know you've got the skills, I know you've got the knowledge, and that's what we're here to tap into today. So it's funny because, you know, I want to step right into why avoiding the numbers often cost leaders more than facing them head on. You know, and honestly, we can put this in a way that our viewers really understand. And, you know, many business leaders feel overwhelmed by financial data and they default to avoidance, you know, believing it's the accountant's job. And as a consultant, I've run into this many, many times where it's like business owners want to just, you know, close their eyes, look away from it, as if, you know, there's not really a problem there. But this creates those blind spots where decisions are made without clarity. And we know that increases risk and certainly uncertainty. So, you know, maybe I'm wrong here, but financial clarity isn't about more reports. It's about knowing which numbers actually drive direction. But I want to dove right into this and ask you an important question.
Why do so many leaders avoid their numbers even while running complex growing businesses?
[00:02:26] Speaker B: It's a fair question, Ryan, and it's a good question.
But I'll be honest with you, it's kind of a surprising question.
And it's surprising because I'm, you know, DNA.
The CPA stuff is kind of in my DNA. And I've, I've always kind of said, you know, Jerry Maguire, follow the money, right? It's, it's all about where you spending money, how much are you spending, where are you spending it, how much is coming in? That kind of Stuff. So when you, when you put that question out to me as a topic a couple of days ago when you said, I think I might want to talk about this avoidance thing, it kind of surprised me. And then I started thinking about it and I really feel like it isn't so much that they are avoiding the, the, you know, bad numbers. You know, guys tend to, you know, avoid going to the doctor because they feel like, oh God, I'm going to get bad news. So we do that. I don't know if it's that the avoid IRS letters, granted, but do they avoid their financial numbers? I think it's, they, many of them don't know if, if they're, if they've outsourced the financial statement preparation. For instance, you have somebody else preparing the balance sheet and income statement.
Then I've seen this happen.
They just kind of gloss over the numbers. It's like, oh, okay, you know, cash is here, percentage of cash is here, revenue is here. You know, they just go through it.
And, and I don't blame them for avoiding that presentation, frankly.
I hate those presentations and I try not to make those presentations.
What they should demand from their presenters, from their accountants is what do I need to know? It's, it's, you know, basic exception based reporting. I don't want to know.
I don't want to know. I'm not in the trenches here. I want to know where there's risk, where are the things that we, that we need to pay attention, that I need to pay attention to. And in my mind, first and foremost, the role of the executive, the chief executive is to make sure he knows what are the 1, 2.
Remember curly said what's that one thing? To Billy Crystal in, in what was that? You know that, that movie about, I can't remember the name, but he said that one thing. And Billy Crystal goes, what is that one thing? He goes, that's what you need to figure out. Yeah, and, and that's what, that's what the chief executive needs to absolutely communicate throughout the enterprise.
What's the 1, 2. It's really about three metrics. And it depends on your next question. I'm sure is going to what are those, what is that one thing or two things or three things. But not jumping into that yet is make sure you know what that 1, 2 or 3 number is. It can't be everything. If it's, I want to see everything. You're not able to run the enterprise.
So that's kind of, I don't know if it's avoidance I think it's not targeting and focusing on the real critical number over complexity.
[00:06:04] Speaker A: It's an overabundance of information.
[00:06:06] Speaker B: Yeah.
[00:06:07] Speaker A: Preventing a leader, you know, chief executive officer whatnot from being able to really target what's most important. You know something my mentor told me a long time ago, I've got to get really good at requiring executive summaries.
[00:06:20] Speaker B: Yeah.
[00:06:20] Speaker A: Because I only need to see a few things. I don't need to know all the dirty details of everything. I need to see the 10,000 foot view of everything.
It's simplified into a few simple KPIs. And that's where the focus needs to be. We don't need to major in minor things. Right.
[00:06:37] Speaker B: Yeah.
[00:06:38] Speaker A: So I can agree with you. I think maybe it's not avoidance, maybe it's being buried in unnecessary information.
And that can change a lot. So that makes me wonder though, why isn't it, you know, why isn't the solution simply more reports and more detailed spreadsheets? Right. If we're on this topic, I'm curious your thought on why more information is not the right answer.
[00:07:01] Speaker B: Well, more relevant information.
So it's kind of like whatever every enterprise knows where it's, it's. I know you call it inflection point. Your point of sensitivity. What's the real key driver for a lot of Internet companies?
Revenues. It's all about growing revenues. Subscriptions.
And so who's ever in charge of revenue creation?
That person. If, if that's the key thing, that person should be going first.
You never save this. This happens. I, I don't know what your work history has been, but I think we've all been part of making presentations and you have some bad news years ago.
It's okay, let's bury that at the end. Maybe we'll never get to it. And then you kind of gloss over it.
That needs to absolutely stop. You need to get each department whatever that number one thing is that gets first.
And we don't go through marketing. If marketing's it, you don't go through whole marketing and spend 20 minutes on that. And then you get to number two. No, he gets one shot at the key thing. Right. And finance gets the other key point. Cost of goods, manufacturing, the other one. You got, you got one shot here. And if you don't know what your key thing is or if your director can't identify that, you need to be thinking about that being your one key thing to deal with. Because they should know that if you're growing revenue, your director should, should know the Key metrics that they just experienced. And then what are you going to do to fix that if it's, if it's negative, you know, it's funny, the rest of the stuff is junk. It's just garbage. And a lot of, a lot of presenters, a lot of companies, you know, middle management, they want to save the other stuff to the end and hope that you never really get to it. And then, then you just gloss over and say, well, the rest of it's in here. Here's the presentation. You look at it knowing that'll never get looked at.
[00:09:07] Speaker A: You know, it's funny, you actually answer my next question because, you know, it's, how do you differentiate what, what information, what metrics really matter most? Because we know it's not a one size fits all answer, right? So it's you, you really mentioned it by breaking it down even to departments, right? What's the key metric, the KPI that really matters to that department specifically. And when you really understand that, you see how they all interact and what they really impact, giving you the main one, two or three that really matter to the executive level team to make the right decisions. So it's not like this paralysis of making decisions. Right. So what happens to leadership focus and execution when key members, you know, key numbers aren't really clearly defined. Right. If we don't have those clear reports, those clear, you know, KPIs, what problem does that cause?
[00:10:00] Speaker B: Well, it, it caused misinformation, disinformation, incomplete information, it causes the problem.
And, and it, it will take one, one episode or one, one session, one monthly, weekly, however frequently they do it of somebody not being proposed. And you know, if there's a, a new, you know, a new kind of strategy here, then you can't be busting somebody's chops for not having that number. But would be good to put it to people and say, just so you know, the next meeting I want each of you to come in with your 1, 2, certainly no more than 3, and it's probably one key metric and make sure that they can get to it and, and it may take them a while to, to kind of diagnose it. That you, you mentioned in my bio that taking the complex and simplifying that is one of my superpowers. You might say it's, it's something that you can't get from certainly lower, lower management, middle management sometimes, but at the, at the senior management, senior executive level, that better be your superpower. And if you, if you have somebody that's running that group and they don't know what that is. He better find out.
[00:11:27] Speaker A: It's funny because before I took an executive role in a company, I was told I have to learn how to operate in cardboard and crayon and simplification is a superpower. So to our audience, coming up next, we'll explore how the numbers often reveal leadership issues long before problems explode. So don't go anywhere. We'll be right back.
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We are still here with Kelly and in this segment we're digging into how financial warning signs often show up before prices hits. If leaders know how to read them, you can prevent a lot of problems. So Kelly, it's such a pleasure to have you here with us today.
[00:12:42] Speaker B: Thanks, Ryan. More than happy to be here.
[00:12:45] Speaker A: You know, this, this topic is a pretty important one. You know, financial problems rarely appear overnight. Leadership habits, execution gaps and decision delays quietly surface in the numbers long before the situation becomes dire. Right. Leaders who understand these signals, they can act early while others are kind of caught reacting to it. Right. It's, it's respond overreact in my mind. So to dive right into this because it is a really big topic, how do leadership habits quietly show up in the numbers long before the problem is obvious?
[00:13:23] Speaker B: Again, another, another good question, Ryan. Here I like to look at, at financial signals, if you will, as this, this might sound a little too wonky or academic but it's not, it's very practical. It's, it's kind of leading indicators, coincidental indicators, lagging indicators. Those, those are just kind of fancy economic terms. I think they're primarily used in, in the economic world. But it's kind of like knowing early is better than knowing late and knowing after.
If it's a, you know, if it's a bad guy breaking into your house, knowing that he came into the house after he got into the house and stole everything, it's helpful. Right. You claim insurance and all that. Right. But it would be much better to know before he gets in ring zoom something that, you know, early detects it and. Yeah. And prevent so you can, you can act on it, you can call the police, you can do something. So it's the same thing with the financial world, is getting a leading indicator.
And every business has some type of leading indicator. The obvious one is kind of revenue. It could be, you know, if you're looking at retaining clients, if that's a key part of your business, not a huge growth business, but hey, we got to keep what we've got on the books.
Looking for complaints, monitoring complaints, keeping customers happy. Don't give them a reason to, to leave. Monitoring your competition, right. That, that's a way people, people either leave on price and somebody comes into the market and undercuts you, you better know about it before you start losing people or losing customers. So getting that leading indicator, I think, is what separates the really good leader, right.
From the marginal one. The marginal one looks at the numbers after the fact. Right.
And, and either while it's happening, you know, if there was a, if there was a cash shortage, CEO has to sign off on a big check or go to the bank, and that's kind of coincidental. That isn't very good either. Right. And then certainly after the fact, right, you get a financial report that says over overdraft, $50,000 in the bank account. That's not very good either. Right.
Leading indicators is the way to do it. And if, if back to what does that signal thing, what's that mean to leadership? It really gets people to adopt that same culture downstream from you.
[00:16:16] Speaker A: It makes a lot of sense. You know, it's, you're, you're diving into a little bit of the predictability and agility kind of all at the same time. Right. You know, you are defining it as, as the difference between a really good leader and a marginal one. Right. The, the difference. And I've seen it both ways, you know, as a consultant and, and being in businesses myself as a peon growing. You know, there's a big difference in that. You know, proactive leader is going to be able to move differently than when you're staring. It's like trying to drive a car. Is it easier to drive and get to your destination if you're looking at your windshield or looking in your rearview mirror? It's kind of the same concept. Right. Even the analogy of breaking in, it makes sense. Are you trying to handle the problem after the fact, so mitigate the damage in advance or clean up the mess after it's already been done?
[00:17:08] Speaker B: Yeah.
[00:17:09] Speaker A: Right. And that, that's a really good way to put it, actually makes it really Clear for me even. It's like, whoa, that was, that was a clever way to put it. But, you know, why do leaders often believe that predictability and agility are opposites when they actually work together?
Because some people I see, they seem to think if it's predictable, you don't have to be agile, or if you're agile, you don't have to predict everything. But why are those really meant to work together?
[00:17:37] Speaker B: That's a great one.
The bigger the company, the less flexible companies can be. Unless they have a culture of flexing, pivoting, and, and, you know, I mean, government is the perfect example of that, right? They're the most inflexible, and trying to break that culture is very difficult. But when I, I did some work at a British bank, director of risk for Lloyd's bank, couple asset management subsidiaries of them, they had kind of put pretty primitive processes going on. This is almost.
Not before Internet, but it was early on stuff, and there wasn't a lot of this technology available.
And so we had this team, the RAD team, Rapid Application development team. So anytime there was a weakness or a breakdown in a process, we'd get these IT guys going on it.
And we try to streamline it and make it efficient and, and it, it stirred the pot a bit, you know, because we, we told people the way you're doing it, fine, you did a great job. But your spreadsheet that has 25 different tabs to it, that's built like a 5.3D, 5D octopus is very hard. If you get hit, you know, the, you get hit by a bus type thing, right, who's going to pick this up? And, and that was. So getting people to flex and change and adapt is hard. And I don't know if that got to the heart of what your core question was there, but whatever you said kind of triggered this ability to flex and predictability. And people like predictability.
In this age, where things are changing so quickly with marketing strategies, with AI, you know, predictability is like, okay, what are we going to do for the next quarter?
So people better get used to adapting, flexing, pivoting, whatever, whatever term you like to use.
But doing it the same way is, I think, a death knell for nearly every enterprise out there, because the world is, is changing faster than. And it's great. It's AI is really doing some cool things.
But they better embrace this stuff and figure out sometimes embracing it is disregarding it, waiting for your competitors to trip on themselves. That's always a good thing too. But you better understand what they're doing, what you need to do or what you do need to not do. And that's, that's what's required, I think, in this, this changing flexibility thing.
[00:20:34] Speaker A: You know, I, I can't, I couldn't agree with you more, honestly, because predictability, you know what I think about it? What is the number one thing people are typically afraid of? It's the unknown, whether they realize it or not. So predictability takes out the fear of moving with decisiveness. Right. But at the same time, an effective, efficient team, company leader, they're going to have that predictability. They're going to create that through consistency, discipline, structure.
And then when something does arrive, you know, when inevitably a curveball comes in.
[00:21:05] Speaker B: Yeah.
[00:21:05] Speaker A: They have a culture created, a dynamic, a structure that supports a quick pivot, quick change into a different direction or some way to alter what could be detrimental to the success of the business.
Now this, this conversation is absolutely incredible. And, and, you know, Kelly, where can our viewers find you if they want to deepen their financial leadership skills and learn to connect with everyday cpa?
[00:21:30] Speaker B: Well, you know, I'm not a, I'm not a leadership trainer. That's certainly not my, my. I'm always happy to help share ideas and concepts, but everyday CPA.com is our, is our website. And you know, at our core, we do tax and accounting, that boring, dull stuff. But, but I use tax and accounting as a leverage point, you might say, or an access point to get in and see what's going on. Right. And identify areas of weakness or an opportunity on either marketing side, revenue creation, operating costs, you know, that kind of stuff. I love that stuff. I mean, I really do. I, I love it. It's.
So we've got, I've got a ton of experience. I've got an mba, cpa, all that kind of stuff. Stuff. And I've got, as you say, decades. Did you say decades of experience?
[00:22:26] Speaker A: We'll just say many years, eons of experience.
That's, that's fair. You know, it's, it's funny because it sounds to me like you're almost the Swiss army knife of the CPA world.
Because the experience, the knowledge, the, the criteria all really does go together. It's not just one strategy, a one focus, a very centralized thing. Although, yeah, CPA stuff, you know, accounting, tax advisory is a major strategic tool and point of value. There's so much more value that can be brought to the table because of the right eyes with the right experience and the right hands in the mix. And to me, this is just a great example of why it's really important to work with the right people because, well, the wrong expert to lead you down the wrong path. And that could be catastrophic in a lot of cases.
So next up, we're tackling one of the biggest stress points in business, cash flow. I've seen this, heard this, been a part of this more times than I can tell you. And really, I want to talk about why it's more about timing than it is failure. So don't go anywhere, Grab some coffee, stretch out, do whatever it is you got to do because we'll be right back with more foreign.
Welcome back to BIZ talk.
Right now we're going to dive into something that's a pretty big topic, really stressful for a lot of businesses, but cash flow.
And really that stress hits every successful business at some point. And in this segment, we're reframing what that pressure really means for leaders. You know, many business owners associate cash flow challenges with personal failure, you know, especially when profits exist on paper. But in reality, you know, cash flow issues often stem from timing, execution gaps and misunderstandings around tax obligations, problems that can be solved with the right leadership awareness.
And today we've got somebody that is the perfect person to talk to about this. A lot of experience, a lot of knowledge has gone through a lot in what it looks like to be a business owner trying to win, trying to achieve more. So, Kelly, it's such a pleasure to have you here with us today.
[00:24:45] Speaker B: Ryan, thank you. Glad to be here. Look forward to this very juicy topic.
[00:24:50] Speaker A: Yeah.
You know, as a, as a consultant, this is a very hefty topic for a lot of, a lot of clients. And the one area I stay away from with as long of a poll as possible is tax. I'm no expert. I depend on people like you to help me and my clients understand it better and to really capitalize on opportunities. But I want to dive in with an important question, and it's why is cash flow still the biggest stress point for growing businesses, even the profitable ones?
[00:25:21] Speaker B: Well, cash is the lifeblood of the enterprise, right? So it's kind of like saying why is blood so important to the human body?
But it is, right? It is important.
And, and I would say that, that in my experience, what I see, the breakdown that I see, you've got kind of operating cash and then you've got financing cash.
You've got cash that's generated within the enterprise by customers.
And your cash that's available, generated through raising capital, borrowing that Sort of thing. So I'd like to focus first on the operating cash component. Is that fair?
[00:26:13] Speaker A: Absolutely. Let's dive in.
[00:26:15] Speaker B: Yeah.
And so what I see, and others may see something different, I'm just telling you what I've seen with small medium sized businesses.
And I think it, it happens to a certain extent to burgeoning high growth or growth more mature businesses because they have, they figure it out at some point. But the early stage ones, you have.
[00:26:39] Speaker A: To match.
[00:26:43] Speaker B: Revenues with collections with your costs. And what I see is, is two components of that one. It seems crazy to say this and you know, I just, I'm just going to say it, but it seems crazy that a company wouldn't get their invoices out timely to get paid timely.
I mean that's the thing that just blows my mind is, is there any wonder why it takes them 60, 90, 120 days when if you do get the invoice out, you let it sit there and you're not, I'm going to say hammering them. It doesn't require hammering, but my experience has been if you, you generate an invoice real quickly and you put 10 days upon receipt or 10 days or some payment terms and if it has, hasn't been paid there, you make sure they've been contacted.
And we've all been on the other side of that, the payor side, right. And we know how it works. Those that scream the loudest or the quickest, like oh God, you got to pay this guy, he'll be on me, I'll get an email from him real quick. So pay him.
You want to be that guy, right? You want to be that guy that is going to get paid. You get your invoice out quickly and you have somebody call them and the bigger it is, I've made calls on, you know, I say, hey, hey Ryan, you know you owe $2,000 for your tax return. You know, I got to pay a tax guy here, Ryan, to help me. Can you get it done? You know, you know, reach out to them in a human way if you, whatever it takes but get on it, right? So that's managing the revenue stuff. And on paying your bills, you know that I've always, or on the furthermore, on the collection side, you always know that, that those that send you invoices, you kind of know also that who's, who's going to be on you quickly. So we all do that. So I kind of prefer to be in the good camp on both sides. Timely, timely collections, timely payables so that if you ever need a break right down the road that you're in that good camp, oh, Ryan pays us all the time.
And if you have to feel the call or I said ryan, we're having the cash flow problem here. I promise you, get it done. We've been good. No problem. Right? That kind of stuff. So those are just kind of nuanced things that, you know, a lot of people already know that I presume, if they're around. But man, I can't emphasize how important it is to ask for the money and then they'll show you the money. Right.
[00:29:34] Speaker A: You know, you could assume that it's, it's common knowledge. But to be honest with you, in, in the midst of chaos, I've seen it where even the most simple, obvious things are easily overlooked. You know, when stress really hits, when cash flow starts feeling really tight, it's then easy to be like, oh, okay, we need to dig back in. We need to dive in. We need to look at this real close under microscope. Let's tighten up on our time frame. Let's, let's be prompt about sending our invoices and following up regularly. It's, it's easy to be proactive or to get really excited about it when it's already a problem. But like you said, you know, you prefer to be the guy that's just consistently where they know that, well, they better pay you and timely. Otherwise they're going to keep getting messages, they're going to keep getting phone calls. It's better to be that way. But you also said something very important. In that process, you earn grace.
If there's ever some kind of type of capital, you know, cash flow problems really become relevant, you can ask for some grace, like, hey, you know, we got this going on. We're going to process this asap, you know, and they look and they see, oh, well, you've paid on time every time or even early or, you know, we've never had to follow up with you a bunch. Like, it really changes the relationship of the business, but also it becomes a habit to act that way, to be that way and to handle it that way. So.
[00:30:51] Speaker B: Yeah.
And then the other part that's related to that, Ryan, is how you get paid is as important as when you get paid. I firmly believe that companies now should be telling their, their customers that they need to pay by ach, by, you know, I mean, these credit card fees are ridiculous now. But, but for every client that I take on, I help them convert to one of these, you know, payment people. I Don't know if I, you know, bill.com or whomever, right? Where you make the payments electronically and you get paid electronically. You know, QuickBooks has their payment processor. Things like gone are the days where it's, yeah, the checks in the mail, then you get it two weeks later. No, we don't take checks anymore. You, you need to cut, you need to train your customers to be on that, right? So that they, they know that, no, they don't pay my check anymore. We're not doing that. Right. And so they pay by ach. Because then, then they can't hide it. Right? They can't say checks in the mail and it's, oh, you didn't get it. They're all issued, you know, we know that game, right? So take that play off the table and have them pay electronically. Even if you got to pay a ridiculous Visa credit card fee, which everybody hates. Got that.
[00:32:21] Speaker A: But, but you're still, you're, you're mitigating the risk of, of not receiving the payment or dragging out the, the payment time frame. And I, I find that to be extremely important because anything you can do to mitigate risk is very, very vital and valuable.
It's funny though, I didn't even think about that. Mitigating the risks of that by just making sure your customers and clients know how you want to be paid. If you limit the options, you are mitigating complexity.
And honestly, consistent documentation flow is important. Consistent transaction information is important. When you've got unified data, you can find problems way easier and in advance because once you have a systematic approach that's really consistent, it's kind of hard to make a mistake at that point. But I am a little bit curious all at the same time, you know, because a lot of this sounds like potential structure problems and, you know, and planning problems or leadership problems. What are some of the bigger execution mistakes that cause cash flow issues in healthy companies?
[00:33:32] Speaker B: Well, the obvious one is over committing on, on different types of, of spend. Right.
I found that, that it's the, it's the big ticket items that are the problematic ones. And the big ticket items tend to be some type of taxes, you know, you know, payroll taxes and sales tax. It's pay, pay as you go. Right. So when you purchase something, you pay sales tax, that kind of thing. So that's a pay as you go. Same with payroll tax, assuming you're making your 941 tax payments. Right.
But others, income tax, property taxes, those are big ticket items. I like the term, the big ticket item concept. Right.
Those Big ticket items that aren't recurring monthly. And those are the things that sneak up on people. And. And they're. They're large, they're infrequent, but they're. They're predictable.
And.
And what I like to do is, is because those can call it, cause a lot of stress, like, oh, God, we got. We got property taxes due for the county. It's $500,000.
Yeah, we got the money, but. Okay, where are we gonna. You know, it's. It's one. It's those expenses that, like. Oh, man. And they just. They can ruin an executive's day.
[00:35:03] Speaker A: Yeah, they change everything. I mean, like you said, you know, they're infrequent, but, yeah, they're big enough. They could cause real problem in the health and operation of a business.
And, you know, it's funny you say that, because I've seen that several times where it's those things that are predictable and they're consistent, but if you're not paying attention to it, if you don't have a process that. That is really built around making sure things are done correctly, there's a massive amount of risk, and it'll hurt even a healthy, profitable company.
[00:35:33] Speaker B: Yeah.
[00:35:34] Speaker A: To our audience, this conversation is extremely, extremely powerful. So don't go anywhere, because coming up, we'll talk about how businesses can withstand IRS pressure with confidence instead of overwhelming fear. So don't go anywhere.
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We are back on Biz Talk with an incredible guest talking about really important things. And as we close today's conversation, we're addressing one of the biggest fears business leaders really carry. That's the irs.
And to be honest with you, IRS scares me, too. That's why I really work with a lot of experts like Kelly. And really, we want to talk about how preparation replaces panic with confidence.
So fear of audits and penalties often stem from disorganization, not wrongdoing. Right. Leaders who build systems, documentation, and proactive strategies can face regulatory pressure with control instead of anxiety. So Kelly, I'm so excited to dive into this topic with you because the IRS freaks even me out and I have been working with experts like you for a while.
[00:37:24] Speaker B: Well, Brian, I don't blame you for that.
I don't. And I think you're probably in good company with many people and, and frankly, the IRS kind of wants you to feel this. They, they want you to be afraid of them.
And, and there's a lot of purveyors of IRS resolution.
[00:37:55] Speaker A: Yeah, that's true. That's very true. It seems like a very diluted market at times. But why does the IRS create so much fear for business owners and leaders?
[00:38:05] Speaker B: Well, partly because the professionals in, in that space of helping you deal with the irs, they want you to also be afraid of them. And so they, they know that inherently people are in their, their default to being afraid. And so they, they escalate the fear and, and then make it, make it, make you feel like you need them. Right. And I would say that, you know, it's, it's, I, it's good to get help when you've got an IRS problem. I wouldn't take that off the table. But my, my position has always been this.
You can be aggressive with your, if we're talking like an audit or something. It's, it's not that you over reported your, your income and it's more that you either under reported your income or over reported your expense deduction. So it's one or one or more of those things.
So you just need to be smart about that. Mistakes happen. And, and the IRS doesn't punish you or penalize you for mistakes. They do punish you, penalize you for fraud, but that mistakes can happen. That said, it's, it's more than reasonable to be assertive. I don't like the term aggressive. I use the term assertive, but assertive with your, your expenses because it's, it's, there are gray areas in expenses. You have mixed use expenses, personal slash business, cell phone, car, that kind of stuff. And so, and with those, I just, I, I recommend that people be reasonable in their allocation of that. If the best example or of a mixed use might be traveling to Florida and though in the winter.
Yeah, it's maybe to get away from the cold. Yeah. Because you live in a, you know, northern latitude state. Fair enough. There's nothing wrong with you trying to set up business activity down in Florida during the middle of winter and, and taking that as a deduction. Now going to Disneyland and taking your kids and flying them down and, and paying $300 or whatever for, for a aqua or what's the marine. Marine world thing, right? And then trying to jam that thing through.
That's just kind of stupid. And, and so you lose. You'll lose the. If it gets challenged, you'll lose the legitimate deduction by being greedy. I use the term pigs get fed, hogs are slaughtered. Right. Don't be a hog. Where you lose the entire thing. Cell phone. Do a little allocation. Take 75 of your cell phone, 90%, even if it's over. Allocation. And it shows that you were trying to be reasonable and you didn't take the position, oh, yeah, I never use my cell phone for, for personal. So when your wife calls you, your spouse calls you, you don't pick that up because it's your business phone.
So don't set yourself up for criticism because it's really hard for the IRS to get in there and say, ryan, that allocation rate that you used, we don't think is fair. It is reasonable. That's a tough one, right?
[00:41:43] Speaker A: That's a really good point. It's perspective.
[00:41:45] Speaker B: Unless. Unless you said zero percent, right? Unless you said zero was. Then that's easy. You can chip away at that all day. Right? That's an easy one for the IRS to get you on 95%. Just do 95% that, you know, that's. I'm, I'm, I'm making a point with that. I'm not recommending people, you know, but.
[00:42:07] Speaker A: It'S a great example because you're, you're right. And, and it does lead to a deeper understanding of, okay, what's true, what's right, what's honest. You know, there's a lot of things that we use for business and pleasure, and, you know, being able to allocate that correctly and with reason can be a big benefit. But if you, like you said, pigs get fed, hogs get slaughtered. I like that term. I'm, I'm actually going to use that term moving forward because it makes perfect sense in this context. Because if you're trying to, like you said, put an entire trip to, like, Disney World or whatever on, you know, on. As a business expense, some kind of trip, that can be a big problem. But you said something that was really key, and I don't think I'm ever going to forget it. And I think our audience really needs to let it sink in.
The IRS is not here to penalize mistakes.
They will penalize fraud.
So mistakes happen.
Maybe it's not so much to fear that they're after you but maybe be more concerned with, are you doing things the right way so that you're minimizing the risks of accidentally committing some kind of fraud.
Right. And working with experts can change all of that. But at the same time, instead of just peace of mind with an expert, you're also getting the, the leverage of knowledge to save money, and you have more, you know, of those deductions at play. So outside of that, you know, in the last segment, we talked a little bit about, you know, some strategies and, and, and some of the big mistakes, you know, the, the execution problems of a financial flow.
You know, I wanted to kind of COVID that a little bit more because you were starting to, you know, in between the segments, you're talking a little bit about some strategies to maybe pull all that together so you can plan appropriately. You can you dive into that a little bit?
[00:43:50] Speaker B: Yeah, I want to, I want to get something that you said. I want to make sure that they, they heard that correctly. On the punishment penalty thing, what I said or intended to say was the IRS isn't set up to punish you for your mistakes.
They will penalize you. Right. For your mistake. Right.
They'll. They'll assess more tax and, and they'll assess the interest on it. And, you know, you go through that thing, but just to be clear. Right.
But that's no reason to be, you know, like, fearful of, of, of them.
I kind of like this notion of if you go into a transaction where you're lined up, it could be a, you know, it could be a sporting event. Right. You go into the game, you're prepared, you're ready to go. You got your team prepared, you're ready, you go in there with confidence, and you go to win.
And that's kind of how I like to deal with IRS stuff, right? Is you, you make sure that you put the best game on.
Frequently, taxpayers don't know how to put their best game on. They tend to get caught up in the. Well, yeah, I did it this way because, you know, my sister was coming down and, you know, they give some backstory of this stuff and, man, they don't, they don't want the backstories. It's kind of like, here are the facts on these things. You just go in there with confidence because they don't, they don't like, they like power imbalance.
As long as they have the upper hand in that.
They love to make you feel weak.
And I'm not at all saying they're bad people. They're just doing their job, you know, they're, they're, they're bill collectors. They're trying to get paid right on what they're to try to run the government.
Your goal is to say no, I don't owe you that. Right. And, and so don't, don't let that power imbalance where they get the upper hand.
You've got to increase your strength in that thing a bit.
[00:46:17] Speaker A: Yes. The confidence, the, the knowing, the, you know, being prepared and actually seeing what's really going on. You know Kelly, I'll be honest man, this is an incredible conversation. This is provided so much value in so many ways and we keep it really simple and that hopefully means our audience is really going to pick up on this a lot more. But where can people follow your work and continue learning how to really lead financially with confidence? And, and where can people find your work so they can work with you and your team?
[00:46:48] Speaker B: Well, everyday. CPA.com is our website and my email is Kellyverydaycpa.com any, any of your small businesses feel free to reach out and I tend to start with a kind of a zoom session to try to see if there's a meeting of the minds here, if there's a match and maybe they don't need our level. I, I try to, I try to operate in the, I'm certainly not the lowest cost provider but you know I used to work for PwC years ago in which are my billable hour rate now in 20, 24, 20, 25, 26 is equal to what it was back in 19 and, and like 2000, something like that. So it was, it was, those rates have really gone up at there. So you know, I'm not the cheapest, I'm not the Walmart. But I, I think we, we do a really good job which we've got high level professionals. I'm not the only one but I'm, you know, I'm the CEO of the company but there's smarter people than I working at our organization. But I just try to keep it all together and get the mission.
[00:48:03] Speaker A: Yeah. I will say to our audience it is worth every penny you spend working with an expert because what you'll save in peace of mind and problems is astronomical. And if today's conversation resonated with you, take one step this week to understand your numbers better. Better because confident leadership starts with clarity. I'm Ryan Herpin and this has been Biz Talk. We'll see you next time.
[00:48:25] Speaker B: Thank you.
