Q2 2022 A PUBLICATION OF
Go Figure Accounting
Randy Lesperance contemplates the future of landscape design
Ready, set…
BUSINESS I PERSONAL CONSULTING • BOOKKEEPING • TAX PREPARATION • QUICKBOOKS
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Splendor in the Grass
In the midst of a challenging business environment, Randy Lesperance unearths the gardens of tomorrow.
6
18
6 Points of Interest
18 Taken into Account
Go Figure’s newest nonprofit client is for a great cause
Straight Talk, Big Profit Dr. Scott Colonna reflects on one year of Profit First and how it has changed his business for the better, even in the darkest times.
What the Metaverse has in store for the future of accounting
Rachel Siegel’s upcoming speaking engagements Women demonstrating excellence
Employee Spotlight Joan to the Rescue!
25 CPA Q&A Rachel answers your pressing accounting questions
25 For What it’s Worth
Cash Flow is one of the top concerns for small business owners. That’s why we’re getting back to basics to help you keep the cash flowing. gofigureaccounting.net / 3
KEEPING TRUST
SECOND QUARTER 2022 VOLUME 2 NUMBER 1 A P U B L I C AT I O N O F
Rachel Siegel, CPA Owner, Small Business Development Expert Cindy Lovan, EA Accounting, Tax Kirstin Pastorick Joan Kellman Bookkeeping Beth Kisner Communication Coordinator
Strong families. Strong communities.
Hannah Joseph Alyssa Hunter Accounting
Northeast office: 732-374-9641 Southeast office: 407-855-6648 gofigureaccounting.net
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Jamie Ezra Mark Creative Director Heather Anne Lee Editor Rheya Tanner Art Director Josh Clark Designer Wendy Mak Designer Caleb Jensen Web
407-573-6061 hello@emagency.com emagency.com @EMagencyinc Goals is published quarterly by Go Figure Accounting. Volume 1 Number 4 Copyright© 2021 Go Figure Accounting. All rights reserved. Reproduction in whole or in part without written permission is prohibited. Opinions expressed in the articles are those of the authors and do not necessarily represent the opinions of Go Figure Accounting.
R A C H E L’ S D E S K
Stories from
ancient mythology tell about the phoenix, an immortal bird that rose again and again from the ashes. And don’t we all feel a bit like that right now? Our phoenix story, much like yours, looks a lot like this: hurried adjustments, pivoting and pinching, Plan B giving way to Plan C-D-E, doing whatever possible to help our clients rise and thrive during times of disruption. Take, for example, Randy Lesperance. The founder and CEO of LanDesign never imagined spending 11 weeks living at his office during the pandemic, let alone having to navigate unprecedented labor shortages, supply chain challenges, and the possible demise of H-2B visas. And yet what keeps him motivated is his passion for great landscape design. “I want to push the boundaries and be daring and creative and delightful,” he shared with us during his interview, and that really resonates. Working with creative entrepreneurs like Randy keep us excited about our jobs. Every client gives us an unique opportunity to define—or redefine—success in new, interesting ways. That’s what keeps us motivated. Profit First is also keeping us on our toes. We’re well into our second year as official Mastery Certified Profit First Professionals, and it’s revolutionized our business. In June, we’ve been invited to speak on Profit First at the prestigious Small Business Leadership Conference in Orlando, and in September we’ll be at American Photographic Artists Conference in Atlanta. Plus, we’ve had the privilege of taking several clients through an entire year of Profit First and their success stories are inspiring. Indeed, you may recognize Dr. Scott Colonna; he graced the cover of our first issue of Goals, and now we’re sharing his Profit First success story on page 18. Much like Scott, I’m confident that Profit First can help every small businesses improve the overall health of their company, and be profitable. And from business owner to business owner, let’s be honest: we all want to be profitable, right? Profit First is just the most practical, sustainable way to get there faster.
We are thankful for financial stability, an expanding Profit First portfolio of clients, a growing team in both our Florida and New Jersey offices, and exciting opportunities on the horizon.
Rachel Siegel, CPA rachel@gofigureaccounting.net
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POINTS OF
Heavy Meta Four ways the Metaverse will change accounting
At its core, the “metaverse” is an immersive digital reality combining social media, online gaming, augmented reality, virtual reality, and cryptocurrencies to allow virtual user interaction. If you’ve seen Ready Player One, you get the idea. Wondering what that has to do with accounting, bookkeeping, and business? A lot, actually. Right now, only a few companies have a real stake in the metaverse. Facebook — now, Meta — being the most obvious. However, Apple’s AR glasses are on the horizon. Microsoft with Microsoft Teams and gaming is perhaps the most advanced company in the world regarding the metaverse. And WeChat’s ability to facilitate payments and access to a variety of services is the start of the metaverse super apps. Although still in its infancy, we believe that the Metaverse, VR, and AR will quickly impact the accounting profession in the following ways. 6 / goals / second quarter 2022
1. Client Engagement Building relationships has always been an important part of business strategy; arguably more so following the COVID-19 pandemic. When meeting in person with potential clients is not possible, virtual reality creates a personal environment ideal for connection. Instead of seeing face on a Zoom screen in 2D, the Metaverse will be able to facilitate meetings where members experience meetings as if in real life.
2. Training and Development Much like client engagement, the Metaverse will bring “in person training” to a remote work environment. The immersive training that financial professionals are accustomed to can be easily adapted to VR. That goes for staff training as well as client training. Imagine being able to stand over the shoulder of your QBO client in VR rather than
FA C T S & FIGURES: EMAIL MARKETING
4.1
BILLION The number of daily email users worldwide, and a 4.3% growth over last year.
$42 The average ROI for every dollar spent on email marketing, making it one of the cheapest, highestreturn marketing methods available. SOURCE: HUBSPOT
74%
sharing a screen in real life. For global companies, the Metaverse will make intimate, in-person meetings for global employees a possibility. Even when employees are thousands of miles apart, they can still meet, in what feels like in-person meetings.
3. Employee Networking Many companies have continued to encourage employees to work remotely, thus shifting team dynamics. Companies like ours, with multiples branches and offices, will be able to foster better communication and social patterns while encouraging intra-office networking. This can also help with employee motivation and satisfaction, as working in the same
place that one lives in can be isolating. In virtual reality, there can be collaboration and the feel of being somewhere else to increase productivity.
4. Sales and Marketing There will always be clients who prefer an in-person experience over online interactions, however virtual reality allows companies to bridge the gap between online sales and physical presence. Imagine a lunch meeting or sales presentation where you are enjoying meals in separate states, but sitting across one another in VR. Plus, the storytelling capabilities in a VR space will make Reels and scrolling IGTV obsolete. Imagine virtual showrooms, if you will.
The percentage of Baby Boomers who think email is the most personal channel to communicate with brands.
7.6x
Marketers who use segmented email marketing campaigns note as much as a 760% increase in revenue.
4of5
The proportion of marketers who said they’d rather give up social media marketing than email marketing. SOURCE: HUBSPOT
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POINTS OF INTEREST
Charitable Spotlight: ROSA Offshore wind energy development has the potential to play an important role in U.S. efforts to address climate change and build a clean energy economy. It also has the potential to destroy fish habitats and ocean ecosystems. We are not experts in either of those topics, but with offices in New Jersey and Florida, water, fish, and wind are topics of interest for Go Figure. So we were thrilled when we were offered the opportunity to provide accounting assistance to a nonprofit in that field.
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The Responsible Offshore Science Alliance (ROSA), founded in 2019, will provide for and advance regional research and monitoring of fisheries and offshore wind interactions in federal waters. It’s a collaborative effort among fishing industry representatives, offshore wind developers, and state and federal government agencies. The Responsible Offshore Development Alliance (RODA) was a key partner in forming ROSA, and will ensure continual, comprehensive fishing industry representation
“So much is poorly understood regarding the impacts of largescale offshore wind energy development to fisheries and fish stocks.” – Annie Hawkins, Executive Director, RODA
in ROSA’s much-broader efforts. “So much is poorly understood regarding the impacts of large-scale offshore wind energy development to fisheries and fish stocks, and studies that have been performed lack regional coordination,” said Annie Hawkins, Executive Director of RODA. “This forum will be immensely helpful to the
fishing industry so that it may provide leadership in study prioritization, methodology, and execution through cooperative research.” To reach these goals, ROSA is engaging fishermen, wind energy developers, fishery scientists, and federal and state management experts in identifying regional research and monitoring needs; coordinating existing research and monitoring; and advancing understanding through collaboration, partnerships, and cooperative research. We’re excited to help ROSA navigate accounting challenges presented by 501(c)3 accounting, specifically grant tracking, real-time financial visibility, cash flow and management, and tax reporting. For more info, visit rosascience.org.
#MOTIVATION
Change doesn’t happen when circumstances improve. Change happens when you decide to improve your circumstances.
Goal Getter Jeopardy! nerds, here. Which is exactly why we got a little excited when Amy Schneider became the first woman in the show’s history—and only the fourth person ever—to surpass $1.3 million in winnings . Schneider, an engineering manager from Oakland, California, closed out the show’s second-longest win streak with a 40-game run. Only host Ken Jennings has more, at 74 wins. What’s her secret sauce?“You just have to live a life where you’re learning stuff all the time,” she told the New York Times. Probably good advice in general. “The best part for me has been being on TV as my true self,” she told George Stephanopoulos in an interview. “Expressing myself, representing the entire community of trans people and … just being a smart, confident woman doing something super normal like being on Jeopardy!”
#FYP
Charli D’Amelio raked in $17.5 million in 2021, making her the highest-earning TikToker last year. But it’s probably time to call her a “business mogul” instead: D’Amelio’s compensation was more than the CEOs of Exxon Mobil, Starbucks, Delta, and McDonald’s, per the WSJ.
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Cash Flow Talk Join Rachel Siegel and Go Figure on June 2 at the Small Business Leadership Conference at the JW Marriott in Orlando. Rachel will be hosting the “Profit First: Let’s Talk About Cash Flow” and we couldn’t be more excited! The Small Business Leadership Conference is hosted annually by the Jim Moran Institute for Global Entrepreneurship, part of the Florida State University College of Business. This event is the premier professional development and networking opportunity for small business owners, entrepreneurs, managers, executives, community development leaders, and nonprofits in Florida and beyond. Learn more or book your tickets at sblconference.com
#MOTIVATION
Have You Heard?
Go Figure sat down with Penny Breslin and Damien Greathead for the podcast Strategy & The Virtual Controller! It’s a great conversation about setting goals and empowering your team. Hosts Penny and Damien have more than 30 years of combined experience in the accounting industry. The SATVC podcast shares their experiences of working in, and consulting to accounting and bookkeeping firms of all sizes, helping them grow. Whether you enjoy accounting or not, there’s something here for everyone when it comes to leading a team. Take a listen: satvc.co/ episode/putting-it-into-practice-special-guest 10 / goals / second quarter 2022
“Ambitions tend to remain undisturbed by realities.” —Frank Herbert
In the midst of a challenging business environment, Randy Lesperance unearths the gardens of tomorrow. STORY HEATHER ANNE LEE PHOTOGRAPHY FRED LOPEZ
“Location, location, location” was once everything in real estate. But since the start of the pandemic that’s shifted to “space, space and more space” for home buyers and homeowners alike. Demand for properties with gardens and outdoor areas grew considerably as millions began working and schooling from home. And even though people are now returning to office life, the appeal of the great outdoors remains.
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in the
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A boon to landscape architects and designers from coast to coast, who are ready to step into the limelight. But the diversity and scale of work in landscape architecture is huge, and the mix of skills and expertise required to make these plans come to life puts landscape architecture right in the crosshairs of labor shortages and staffing challenges. Which is exactly where Randy Lesperance of LanDesign finds himself in 2022, three decades after he first incorporated. “It’s been a journey of love,” he says. “The only career I’ve ever really wanted. And yes, there were obstacles along the way, but nothing like what we’re seeing now. First with Covid-19, and then with what is happening inside the United States’s labor market, it’s dramatic. Unprecedented. To be honest, I’m not entirely sure how we’re going to come out of it, either.”
Planting The Seeds
The Rutgers graduate, class of 1983, first started a landscape division within his parents excavating company. Five years later, his designs needed room to grow, so he formed LanDesign and has been a sole proprietor ever since. The 34-year journey began on very small, postage stamp-sized properties with three figure budgets. These days look very different, indeed— working 14 / goals / second quarter 2022
on affluent ocean-front estates with unlimited resources. “There are so many avenues to pursue within landscape architecture, but I wanted to create individual unique oasis for people, satisfy all their needs on and compliment the incredibly beautiful architecture. Which is why I chose to focus my business on high-end residential properties and not commercial or parks,” Randy shares. And focus he did. Specializing in landscapes along the New Jersey shore— Ocean and Monmouth Counties to be exact—Randy cultivated a roster of clients whose net worth and square footage grew over the years along with his reputation for unrivaled design. “CEOs, CFOs, millionaires, and celebrities alike, the kind of people that have three of four homes,” Randy shares. “They don’t go to just anybody; they’re going to who’s ever at the top of their game and has the best reputation. In fact, I would say that ten years ago, 90 percent of my business was reputation. That’s still important, but now they are researching you before they even meet you to determine your net worth and financial position. You better have a clean record, a good profile, and a great website, because these are people that are shopping Ferraris. And they didn’t get to where they’re at by not being able to make intelligent decisions.”
Still, landscape architecture isn’t the S&P or a banking portfolio or a medical practice. Intelligence is important, but so is creativity and vision and intuition. Great design, landscape or otherwise, can elicit an emotional response. And that’s what keep Randy in the game, despite such banal business challenges as labor shortages and H-2B visas. “That’s what keeps me motivated. In a nutshell, I still want to be different and come up with the unique design solution, that one that stands out from all the others. I want to push the boundaries and be daring and creative and delightful. And I want to work for the right people, the ones who can afford the creative solution because the creative solution usually costs more money.”
Pandemic Effects
“I lived in my office for 11 weeks to save my business.” The weight of that statement hangs in the air. “I know I have a partial view, but I feel that business owners took it much worse during COVID than the average employee because it was awful lot of responsibility. That’s not to diminish what employees went through, not one bit, but as a business owner, I carried the weight of my family, in addition to my employees and their families. It was very isolating. Randy continues: “To put it in perspective, in our area of
the Jersey Shore, I thought the worst thing that I would ever go through would be Sandy. We had over 25 landscapes, more than a quarter-million dollars obliterated, but we were fortunate that our clientele was affluent enough to replace. With COVID, the situation is way more, the mental, physical, and emotional damage has last for years. Sandy was terrible, but the storm came in, we assessed damage, and then we could go to work fixing it. In this
instance, we’re still waiting for storm to stop raging. And it’s not just the Coast of New Jersey. It’s the entire world.” Carrying such a burden is lonely, and isolating. Two years into the pandemic, health challenges still exist as the virus mutates, but now there is the added element of supply chain and labor shortages. And the landscaping industry can’t exactly work remotely. “There’re some businesses where remote works very well, and there’re some businesses that don’t. Meetings and CAD design can occur virtually, but excavating and digging
and laying materials are all-in person endeavors. But truth be told, my full time staff, and there’s about 15 of them, they can function in a hybrid model. But a large percentage of my project employees, my laborers, are here on the H-2B visa program, which may or may not even be running this year. Then what? I have a business that is poised to grow exponentially, but I may not even employees available to me. And then ones I do find are going to be in highdemand. Poaching is, and will be, a huge problem.”
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Randy leans back in his chair, obvious concern furrowing his brow, and takes a deep breath. “Here’s what the last thirty years have taught me: I can be as uncomfortable as I want, as angry as I want, but the bottom line is if I want to stay in business, improve and grow my business, I have to go with the flow. I have to work around the supply chain, and I’m doing that. My team is doing that already. H-2B? I have no control over that, but what can control is the work environment, the benefit structure, the kind of things that make working for me more compelling than other companies. And you know who’s been really great at helping with this? Rachel Siegel.”
Make An Impact
Properly managing your books and making the right financial planning decisions takes time, skill, and effort. It’s not a one-time thing, either. “Our financial lives are complex and inter-related,” says Rachel Siegel, owner of Go Figure Accounting. “Pulling one lever can have unintended consequences in another aspect of your business, today, tomorrow, and well into the future. Which is why we really value our long time clients.” LanDesign and Go Figure have been working together for close to 15 years, possibly longer, but neither Randy nor Rachel want to do that math. Suffice it to say, both of their businesses have grown 16 / goals / second quarter 2022
exponentially over the last decade and a half. “When I first me Rachel, she was young, passionate, full of good ideas, and aggressive. In a good way. She has a tremendous personality and wit, but when it comes to finances, she has always been firm and confident. It was just a good fit from the very beginning,” says Randy. “I knew I could trust her, and she knew that I was the kind of client that was going to get her whatever she needed at whatever particular point because I understood the value of good finances. I also knew that I needed to plan well and I needed to run the business well, and Rachel’s guidance during those growing years was crucial for me.” These days Randy’s goals are steadfast: Optimizing the business finances, running a tight ship, and “minimizing the amount of benefit that goes to the government,” he explains. “I believe in the government, and I believe in the tax system, even though there are inefficiencies. But I prefer to stay in the middle lane, paying the proper taxes, but maximizing the benefit that goes to me, the employer, so that I can better take care of my employees.” A hot topic for Randy, who is keenly aware of ongoing labor shortage issues and looming visa challenges. “Keeping my employees happy and healthy is a top priority for me,” says
Randy. “It has been for a number of years, and Rachel has been very good in helping me find the right opportunities. For example, she introduced me to a profit-sharing program that has worked really well for my team, while benefiting my bottom line at the same time. She’s very creative numbers, how you can maneuver things to make this situation better. And you can genuinely see how passionate she is about her client’s success. She’s invested, personally invested.” Also on Randy’s mind is his own future. “About 10 years ago, I started talking to Rachel about planning for the future sale of the company, specifically how that relates to my tax exposure. What purchases would optimize the company, which do not. Controlling the end bottom line. And about seven years ago, eight years ago, we put a plan into place. You know, I already had a financial advisor. Now I have three different ones working all together to do the best thing. That’s all Rachel. She helped put those pieces together for me, and it’s working. That’s why I’m with Go Figure, why I stay here.” Randy pauses, and then continues. “You can get accounting anywhere, but really good, intuitive tax and financial planning? That’s a skill. That’s a creative skill that has an intangible element. Like landscaping, but with money,” he laughs.
“The pandemic undoubtedly surfaced an appreciation for our yards like we’ve never seen before. Our yards have become the space to do essentially everything we also do inside— dine, cook, entertain, work, play, and relax.”
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TAKEN INTO
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Straight Talk, Big Profit Your company has more money than you realize. Profit First is the tool that helps you find it. Just ask Dr. Scott Colonna. The ultimate goal of the Profit First system is financial freedom. But what does that mean exactly? Mike Michalowicz says it’s doing what you choose to do whenever you choose to do it. We think it’s more than that. It’s peace of mind. As we all know, in business and life, that can be a moving target, changing year to year or even month to month. Take for example Laurie Dutcher, CEO and owner of Secretly Spoiled who was living check to check. At first, financial freedom meant taking a salary. Then it meant vacations with her family. For Jorge Morales, co-owner of Specialized ECU Repair, Profit First helped fund his wife’s law degree. There are hundreds of these great examples in the book and online, but at Go Figure, we love championing our own clients’ successes. For Dr. Scott Colonna—physician, entrepreneur, and business consultant—that means expanding and scaling his businesses, Westminster Eyecare Associates, GMC Properties, Mandalay Optical Labs,
and Uppercut Consulting, while providing for his family. Dr. Colonna, a longtime Go Figure Accounting client, became one of the very first Profit First Professional clients, starting in December 2020. With a full year under his belt, we thought it we’d share his perspective with you. How long have you been doing Profit First? Officially, just a little longer than one year. However, informally, I’ve been doing a version of Profit First for 21 years. How so? I say informally because my mother, and my grandmother, used a similar approach in managing family finances back in Brooklyn, New York where I was raised. The envelope method, that’s what Profit First reminds me of. When my grandfather got paid, the money would get divided into white envelopes: one envelope for rent, another for food, another for savings. There was even an envelope for Christmas
gifts. That’s how she taught my mother to manage money, and that’s how I was taught. My business partner, Dr. John Ormando, was raised the same way. So that’s why I say it’s how John and I have done things for since we started our first business 21 years ago. Obviously, Profit First is more sophisticated, but the concept is familiar. Do you think that made your onboarding experience easier? Absolutely. But I would also say that even though the envelope system helped me understand the concept, there was still a learning curve. The formal steps of implementing Profit First across all of our business took real effort. To be honest, our business was already so big, I don’t think we would have been able to get Profit First up and running without the Go Figure team. Certainly not as quickly or as seamlessly. What would you say was your biggest challenge? I would say the biggest learning curve was the actual setting up of the multiple Profit First accounts. There were accounts for payroll, income, expenses, and operational costs, but we also needed diverse accounts for taxes and other things that we knew were coming forward. And then, the second hurdle was figuring our the percentages to allocate. That was definitely a challenge. Tell me about that process. We started very conservative, but by doing so, we could make gofigureaccounting.net / 19
During the course of the last year, what surprised you the most about Profit First? I would say how calming it was to know the we had Profit First in place. Almost every day it felt like there was something new to deal with: staffing issues, health care policies, and mandates. Knowing that we were running by a predetermined budget and percentages, and setting ourselves up for success in a way that would keep the business profitable, was reassuring. Knowing that our financial foundation was strong, and could adapt during challenging economic times was comforting. How does that compare to 2020, before you were using Profit First? Good question. That’s also the first year of the pandemic, so first I have to say that Rachel’s team did an awesome job helping us navigate the challenges of COVID-19, from helping with PPP loans to reassessing and pivoting our business goals. The pandemic is still affecting our business, obviously, but there are differences between 2020 and 2021. What I can say is that 2020 really forced us to take deep 20 / goals / second quarter 2022
dive into our finances. John and I had whiteboards on every wall in our offices, and we literally wrote out every single expense for every practice, and every business. Seeing it in black and white really helped us learn a great deal about our company finances, good and bad. So when it came time to launch Profit First, we went into it with a true understanding of what is really being utilized and valuable, so that we could set up our budgets, percentages, and so forth. Other companies just starting out with Profit First will need to do that kind of deep dive, which will make their ramp up a little slower than ours, probably. But that’s something Rachel and Cindy are really good at, so it’s not insurmountable. I just think we were able to use our experience from 2020 in a way that set us up to maximize Profit First faster in 2021. Would you say that your first year of Profit First was a success? Absolutely! Without a doubt. In what way? Well, expansion has been at the heart of our business for a while. Expansion and scaling. 2020 slowed that progression, but we really wanted this to be the year that we pushed forward. With that in mind, we were able to set up Profit First in a way that created a specific account to help us achieve that goal. And we did. By using the Profit First model, we were
able to purchase an additional practice without having to take on any more debt. That’s a big win. Another success is the way Profit First really built a solid, trackable, financial foundation that made us attractive to banks for financing. Not only were we able to grow expand our business with Profit First, we’ve set ourselves up further that growth even faster by being attractive to lenders. That’s fantastic! So what’s the plan for 2022? Are you making any pivots or changes to your strategies? So right now, our plan is to continue to expand our organization through additional practices. That would be the primary focus. Secondarily, we have a medical lab business, Mandalay Optical that will see more of our attention in 2022. Our goal is truly develop that company into a model that services our clients and future clients all over the United States. Also, and this is something every business can relate to right now, we’re using Profit First to budget for increased hiring and marketing costs. Hiring staff is such a challenge right now. It needs to be a focus. Based on your experience, how would you explain Profit First to another business considering trying it out? Just do it. Hire a great Profit First Professional team like Go Figure to support you. That will make it so much simpler. But honestly, you have nothing to
PHOTO BY ELECTRICEYE, ADOBE STOCK
minor adjustments every month. And then, quarterly, we would review the big picture with Rachel and Cindy and pivot from there. Starting small allowed us to see progress without really stressing our businesses, and it gave us more confidence to make larger leaps every quarter.
PHOTO COURTESY OF MIKE MICHALOWICZ
lose and everything to gain. The most challenging part of the program is easily the first three months where you have to schedule undivided time to focus on your books and truly understand where your company is spending money. Making that time, and sticking to it, is definitely the most challenging for business owners. But the setup is so important. If you don’t do the hard work in the beginning, it won’t work. Or it won’t work as well. Any parting thoughts? Here’s the thing about Profit First I wish more people would talk about: peace of mind. As a business owner or entrepreneur, worrying about money, paying bills, taking risks, it’s all very stressful. Is the money going to be there? Will we have enough? What happens if there is another pandemic? The questions and doubt are always there. But Profit First helps take away the worry. From business owner to business owner, think about eliminating the financial worry from your company. Even if you don’t want to expand your business like I do; maybe you just want to your family to be better off. Fine. When your business is healthy, your family life can be financially healthy. With Profit First, you’re always looking forward to something exciting, growing, expanding, experiencing as opposed to always worrying about what bills are left to pay. Profit First is peace of mind.
TAKE ACTION While you can absolutely stick with Profit First and avoid the biggest mistakes on your own, working with a Profit First Professional will make it easier. Working with someone who has already has the experience and knowledge of navigating challenges with other companies will not only help you profit faster, but with fewer problems. At Go Figure, we have that experience. And we’d love nothing more than to share it with you, so that next year, you can be our success story!
“With Profit First, you’re always looking forward to something exciting, growing, expanding, experiencing as opposed to always worrying about what bills are left to pay.”
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CPA Q&A
Rachel Siegel, CPA
Putting Your Best Foot Forward Rachel answers your most pressing business questions. The first quarter slipped away from me. Is Q2 too late for tax planning?
It’s never too late! Tax planning is actually a year-round endeavor, so while you may have missed out on last-minute spending opportunities, you can still proactively tackle several other ideas. Now would be a great time to review how your business is set up, and whether that’s still optimal. As your business and income grows, the best structure for your business may change. Making changes early can significantly impact your 2022 tax burden. This is something you should review with your CPA and certified financial planner every few years (or more often if your business is growing rapidly or if there have been changes to the ownership). While you’re on the tax planning topic, you should also take a look at your bookkeeping system. Still relying on that shoebox full of receipts? Now would be a great time to organize and upgrade. This can be easily done with software like QuickBooks, and most bookkeepers and accountants still have time to help you through the process.
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How much startup capital do most small businesses need?
When calculating your startup costs, a good rule of thumb is to be able to cover six months’ worth of expenses upfront—don’t count on your revenue to start easing your costs until at least after that..
Like everything else in life, the answer is, “It’s complicated.” According to the U.S. Small Business Administration, most micro- and small businesses should have $3,000 to $5,000 to start. The Wells Fargo Small Business Index says $10,000 is more appropriate. While others, like The Kauffman Foundations study, suggest that the figure is more like $30,000. And honestly, none of them are wrong. It really depends on your specific business. When calculating your startup costs, a good rule of thumb is to be able to cover six months’ worth of expenses upfront— don’t count on your revenue to start easing your costs until at least after that. You’ll want a cushion while you get your feet under you and work on attracting business.
How is a S Corporation more beneficial than other business structures?
An S Corporation, or S Corp, is a special type of corporation that’s designed to avoid the double taxation drawback of regular
C Corps, partnerships, or even LLCs. However, the IRS places more restrictions on S Corporations. For example, these businesses are not allowed to have more than 100 principal shareholders or owners; and they cannot be owned by individuals who are not U.S. citizens or permanent residents. They must also have a board of directors and executive officers, and use either accrual or cash basis accounting. But what you really want to know about is the tax benefit, right? Well, if you can overcome the restrictions, incorporating as an S Corporation means that the corporation itself is not taxed on its profits. The profits are passed onto the shareholders and are taxed as personal income, much the way an LLC is taxed. S corps are also allowed to pay out dividends to their shareholders. Dividends come from the net profits —what’s left over after all expenses are paid. Shareholders are not required to pay self-employment taxes on these dividends, which is a savings of 15.3%. However, there is a catch: The IRS requires that active owners of S corps pay themselves a reasonable wage. That means you can’t simply take all the S corp profit as a dividend —you must pay yourself a salary, which will be taxed as standard payroll wages. How much will you save? It really depends on
the business’ profits, how many partners are in the S Corps, and what your personal tax bracket is. But if you really think S Corp might be best for you, give us a call. We can walk you through it!
Should I use cashbasis or accrual accounting?
You can’t simply take all the S corp profit as a dividend —you must pay yourself a salary, which will be taxed as standard payroll wages. How much will you save? It really depends on the business’ profits, how many partners are in the S Corps, and what your personal tax bracket is.
Like most everything else with accounting, that depends. Cash-basis accounting is often the simplest way to manage your books—you only record transactions when you physically make or receive a payment. With accrual accounting, on the other hand, you must record money whenever a transaction takes place, even if you don’t physically give or receive money. You must record two entries for each transaction in a double-entry accounting system. Generally, you can choose the method you want to use, but the government does require some businesses to use accrual accounting. For example, you must use accrual accounting if you make more than $5 million in annual gross sales or $1 million in gross receipts for inventory sales. You are also required to use accrual accounting if your business structure is a C corporation. If you aren’t sure which is best, you can always choose to leave the heavy lifting to our team of bookkeepers. We love both methods! gofigureaccounting.net / 23
SPOTLIGHT ON THE TEAM THAT PUTS THE “GO” IN GO FIGURE
Joan to the Rescue The newest Go Figure team player is a delightful mix of tax wizard, receipt wrangler, and rescue mom.
Whether you sell, medical equipment, landscaping services, or Mary Kay cosmetics, there are three things we can guarantee about your business: you earn money, you spend money, and then you report it. Sounds simple in theory, but how you report it can cause any number of nightmares. Which is exactly why you want Joan Kellman doing your books. Go Figure’s newest team player is an exceptional bookkeeper: data entry enthusiast, receipt wrangler, and tax prep wiz by day; tender-hearted rescue mom by night. Just ask the seven feral cats she’s been feeding the last few months, in addition to her 25-year-old son and three rescue animals.
What’s your official title at Go Figure?
Tax Preparer and Bookkeeper.
What’s your specialty?
Individual and corporate taxes. 24 / goals / second quarter 2022
Do you have a formal degree?
Yes, in Business Management.
What’s the best part of your job?
Interacting with the clients. I just love talking to people. Being able to help them solve tax issues is just a bonus!
What’s the one thing your clients can be doing right now to improve their finances this year?
them repair their books and get them through the audit, I was able to set them up so this didn’t happen again. It’s so rewarding.
Significant other?
I’m a sucker for soft paws. I have one dog and two cats, all rescues. And there are at least seven feral cats that I feed and water. My son is pretty awesome, too.
What’s something
Contribute to a retirement interesting about yourself plan! That’s good advice for that not many people know? individuals as well as companies I was adopted three different looking to offset their tax times. burden. Everybody wins.
Tell us about a client challenge you helped solve.
I had a client who was being audited for two years on returns prepared by someone else, out of state. It was a mess. Multiple items were claimed without merit. Financials didn’t add up. Not only was I was able to help
Favorite way to spend the weekend?
Reading, working in the garden or binging on missed TV shows.
You have 30 minutes of down time, what do you do? Read or spend quality time with my kids, two legged and four.
F O R W H AT I T ’ S W O R T H
Grow with the Flow Go Figure’s guide to cash flow Every business needs cash. Regardless of how much revenue your business earns, if your cash is tied up in unpaid account receivables or unsold inventory, that money doesn’t do you any good. Maintaining a healthy business cash flow gives you the capacity to meet your financial obligations and the flexibility to grow with new opportunities. Cash flow is one of the most common road blocks to success—so much so that we’re presenting on the topic at several conferences this year. So let’s get back to basics, shall we? gofigureaccounting.net / 25
What is Cash Flow? Cash flow is a measurement of the amount of cash that comes into and out of your business in a particular period of time. When you have positive cash flow, you have more cash coming into your business than you have leaving it. When you have negative cash flow, you have more money going out than coming in. In layman’s terms, managing cash flow is all about figuring out when you’re going to have cash in your hands, figuring out how to get more of it in your hands faster, and how to manage your spending.
Managing Cash Flow
CASH FLOW AFFIRMATIONS Can you say “yes!” to all these statements regarding your business? • I pay myself consistently at a level that is appropriate for the type of work I perform in the business and at a level equal to or above any other employees. • I have no business debt or if I do have debt, it is continually being reduced and never increases. • I have ample money set aside whenever it is needed to pay taxes, buy inventory, and cover expenses • I consistently take a profit distribution (separate from my pay) that is NOT reinvested in the business to pay back my initial investment and compensate me for taking the risk of being a business owner. • I am easily able to make informed decisions to grow, contract, or adjust my business based on real-time cash flow information. The more yes answers, the better your cash flow. However, even one “no” indicates that are opportunities to improve your cash flow through the use of a cash flow system.
26 / goals / second quarter 2022
Revenue measures how much money is coming into your business, while cash flow measures both how much comes in and how much is going out. Cash flow also takes into account things like financing activities; for example, did the bank just deposit a $10,000 loan into your account? It’s cash, so it counts! It’s how you manage those funds that will make or break your business. If you’re looking to improve your cash flow management, we often suggest starting with these seven simple steps: 1. Stay on top of bookkeeping. It’s the single best way to understand all the financial transactions in your business, and you can’t do the rest of the steps without it. 2. Generate cash flow statements. If you have an accountant, they can do this for you. Otherwise, you can use soft-
3.
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ware—or calculate it yourself using spreadsheets. You can up your analysis with cash flow projections to see how your decisions are impacting your future financial health. Analyze your cash flow. Take the info from your cash flow statements and use it to understand how money is moving through your business. Figure out whether you need to increase cash flow. Relying on your credit card or line of credit to make ends meet? These are signs you need to free up more cash flow. Cut spending where you need to. Overspending can result from either covering unnecessary expenses or paying for expenses at inopportune times. Cut overspending to increase cash flow. Speed up your accounts 7. Rinse and repeat. Make receivable. Whether you’re analyzing your statements waiting on invoice payments a regular part of your back from clients or deposits office routine. The more you from payment processors, do it, the better you’ll get at the faster you get money in spotting opportunities to your pocket, the more cash increase cash flow—and nip flow you’ll have. shortages in the bud.
By “paying yourself” first, it ensures that your financial results are based on having enough cash on hand before you pay any expenses.
The Relationship Between Cash Flow and Profit Here’s the truth: Making profit generates cash flow. However, entrepreneurs commonly confuse cash flow with profitability. The two are not the same, but the best way we’ve found to illustrate that is by implementing Profit First into your business. Mike Michalowicz’s “Profit First” model changes the Revenue – Expenses = Profit expression of traditional GAAP accounting into Sales – Profit = Expenses. While this is not an official figure to report on any of your financial statements, it’s an excellent cash flow management mindset that helps business owners prioritize their personal and business savings so that operating expenses, expansion, taxes, and personal income are always being paid. By “paying yourself” first, it ensures that your financial results are based on having enough cash on hand before you pay any expenses. Thereby simplifying cash flow inside and outside your business.
FLOW FIGURES
56% The percentage of small business owners that are facing cash flow pressure. SOURCE: XERO
2 82% OVER HALF
WEEKS
Businesses with more than $10,000 in monthly expenses had only 2 weeks of cash on hand. SOURCE: PNAS
The number of failed businesses that said cash flow problems were a factor in their failure. SOURCE: US BANK
The proportion of all businesses worried about how they’re going to pay their bills. SOURCE: XERO
Good accounting gets business go ing.
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