121 Your Books Are Caught Up... Now What? Tax Strategy and Building Wealth with Emily Bowie

Hey Bestie, welcome to the GetCompay with Numbers podcast! I'm Erica Miller, your bookkeeping bestie and founder of Bookkeeping with Erica. Whether you need to set up your books, clean them up, or take bookkeeping totally off your plate, I've got you. And if you're already feeling a little sweaty and nervous just hearing the word bookkeeping, you're in exactly the right place. This podcast is here to help female business owners like you go from confused and overwhelmed to clear and confident when it comes to your business finances. We'll keep it simple, ditch the jargon and talk through things like how to stay on top of your bookkeeping in less time, what clean books actually means, how to fix common quick books mistakes, and how to use your numbers to make smart and powered decisions. So grab one of the three drinks on your desk currently and let's get comfy with your numbers. Well, hey bookkeeping besties, I'm so excited to introduce you today to Emily. Emily, will you just start out by telling everyone what you do, who you are, how you got here in business, just tell us all about you. For shares. So my name is Emily Buwie. I'm one of the partners at Thorn Advisors. And what we like to do at Thorn is really help business owners turn profit into real cash. I think sometimes we think profit equals cash and that is not always the case. And we want to make sure that you're set up strategically to reduce your taxes and build wealth today and tomorrow. And legacy is huge for us. And so that is a lot of the reason we decided to start this business. Both Andrea and I, I lost my mom. She lost her dad early on in life. And we know legacy is one of those things where it was important for us to build something with impact, but then also to give something to our children that they can, you know, have live on in our memory. And it is an opportunity for us to honor both of our parents too. Wow, I love that you mentioned that because so many of my listeners have big goals and aspirations to their business. Like so many of us didn't just start this to make money. I mean, that's a great byproduct, but we usually have goals of traveling or paying off debt or being able to send our kids to private school or being generous. And so I love that that's part of your mission too. For sure. And I think for us, both of us came out of public accounting. So we did the grind and we are better for it. Don't get us wrong. Like we know that there's a time and place and a season for that life, but we really wanted to kind of reimagine that accounting firm and really teach people that there is an opportunity out there where you can actually work in an accounting firm and have a life. And I don't know that those two things always exist and often do not exist. And it didn't really for us when we were in public accounting. And once we had kids and we decided like, hey, we want to build wealth, but also be home and be at pickup and do all of those things. So it's one of those things that we want to be able to kind of change and reimagine how this whole accounting thing works too. Yeah, so cool. I think that's why so many of us started our business was because we didn't love the industry standard. And so we were ready to flip it. Okay, so tell us a little bit about what are some red flags that you see when someone has outgrown maybe basic bookkeeping and now they actually really need a tax strategist in their corner. So I think if your bookkeeping doesn't get done until after the year ends, that will be your first sign. And then your second sign. Yeah, exactly. And I'm all for DIY until it makes sense, but I think books are the first thing you should outsource. I have been in this industry for 10 years now. And one thing I've told business owners, no matter when I was starting out in health and fitness, anything like that, your books are the source of truth. And so if you don't know the truth until after it's happened, that's a problem. And so for me, that is huge like sign indicator is if it's not getting done, it's time to find somebody to help you get it done. And then also when you are ending a month, a year with lots of profit, but no cash in the bank, that would be time to get a strategist because they're going to help you find the cash that should be living in your business or at least help you identify where it's leaking out of. And then as your profit gets higher, it can start to be a little cumbersome to pay those taxes consistently. And there's got to be a better way. And there is, but not all CPAs are strategists. So that's also one of the things that I want people to understand is like there is a true difference between someone who prepares your taxes. Somebody who is a CPA, like I'm a CPA and I came out of audit. There is the CPA and she came out of tax, two different types of CPAs. And then not all people who do taxes know and understand the strategies that you can use to. Yeah, can you give us a little peek behind the curtain of what does that actually look like? Because I think some people may be listening, thinking, okay, yeah, I have a CPA that files my taxes. So what is involved with tax strategy? So tax strategy is kind of more of a holistic look at what you got going on. And we typically start with goals. So we understand what are your aspirations in the next five to 10 years because somebody who's trying to get a mortgage soon, their tax strategy is going to look different than somebody who's just trying to not pay a ton of taxes. As oftentimes the tax strategist of the world will just be like spend more money and then you pay less taxes. And for us, we understand that there's a little bit more sensitivity in the balance that needs to be considered. But then also like when do you know to change your entity type? Should you have a different entity? Is it too soon? Is it too late? Those types of things. And I will say it's never too late, but there are times where it is like really a good idea from a tax strategy standpoint to change your entity type and having an expert eyes on it that go beyond chat GBT is super helpful because they are able to consider all the factors of you as a business owner and what your goals are too. Yeah, I love that you're saying it can be custom to your life because I see a lot of cookie cutter Instagram advice and I'm always wondering like well that doesn't apply in this situation or that situation. So that's cool that you really start with goals to know okay how can we build this to set you up for success the best? For sure. And like one thing we noticed in the industry is that there will be tax strategists but there's no one helping you find the cash in your business to use for tax strategy. And even that can be a deficit is sometimes tax strategists don't tell you when they sign you up for their tax strategy that you have to have cash to be able to do most tax strategy. And so what Andrea and I did was we came together and our tax strategy we have it standalone but we also offer it with cash flow services because you just really need to have somebody that has expert eyes that are not biased that can come in and look at your end to end customer journey and say hey you're leaking cash here you're leaving cash on the table here. This is why your bank account doesn't match your profit all of those things. And then you can utilize that cash that you find for these tax strategies and these strategies often set you up for like wealth in the wealth now but also in the future. And then legacy. For those of you listening can you not hear how this is where it gets exciting when we talk about numbers and money because there's so much more than just compliance and checking a box. There's so many pieces of things where when you actually look at your numbers and pay attention you can find all of these little nuances and strategies and things to implement that really can help your success. So thank you for sharing because to me this is where it just like really gets fun I know but keeping it fun don't always go together but here on this show we make it fun. Okay so when you were talking about CPAs if someone's interviewing a CPA what are a couple questions that they should ask before hiring one. First do they offer tax strategies? Actually guys I think a lot of times people will interview CPAs to have their taxes done not to provide tax strategy. That would be the first because not all CPAs will offer strategy and you really want to find a tax strategist that will kind of live the life that you desire to live and not just like speaks on it too because the One thing that I think has Andrea and I stand apart is that we are small business owners too. We also have little kids. We also are focused on building wealth today and tomorrow. And so we bring that energy in because we're doing that for ourselves as well. And then I think the next is what is the driver of their strategy? Is it goals? Do they ever mention cash? Do they say things like, well, we can get you really solid estimates in there or we'll just up your W2 payments because those are all kind of little red flags as far as upping your W2 payments because there's plenty of ways to pay yourself without increasing your W2. And if they start talking about W2s and you're not an S-Corp, then that also doesn't apply. And I think it's really important to not only know what question to ask but also to know when the question's not being answered well too. And the last thing I think for sure, at least in my books, is like, what are their core values? Because I think when we're talking about taxes in accounting, it can be very compliance driven. It can be very law driven. But I want to know about the person behind the numbers and what they're doing and what they value. If integrity, timeliness, communication, all of those things are not ones that are brought up, then I would maybe ask to talk to someone else. Yeah, I would say those are the number one complaints that I hear about tax professionals is just, they don't understand my business or they don't ask questions and then they don't answer my questions. And so I think that's very important to really know, okay, is that a value, even for yourself of when you're looking for someone, is that important to you or just getting it done? Is that more important? So I love that you kind of gave us some of those things to think about. What's something that a business owner could do right now to make sure that they're bookkeeper and their tax strategy are actually working together because hearing you speak just talks about to me, like you need the bookkeeping done right and accurately, but then and then we need taxes filed, but then there's that extra piece of strategy too that I really see a lot of people missing. So how do we make it cohesive to all make the pieces work together? So my biggest advice is introduce them. I think sometimes what will happen is you will have your business kind of piece mailed in a bunch of different ways. You got a bookkeeper, you have that business strategist, you have your tax strategist, but none of them talk. And so what can get really complicated and be a really big point of contention with your happiness with each of them is if you're trying to facilitate a conversation that you aren't as familiar with. And so having a all inclusive conversation when you start implementing or talking strategy is super helpful because first of all, there's the financial ease of it all, right? We all use financial jargon at some point and we all know what we're talking about, but the business owner might be like, what is happening? But then also everybody knows a little piece of the pie. So if your bookkeepers end your books, they're gonna know that you don't have the cash to do the thing that the tax strategist is suggesting. Or the big strategist is like, hey, you just said you were gonna slash that offer. And that's the one that even though it's making you money, it's not bringing you joy. So what are we gonna do then? How can you do that tax strategy? So like that introduction and that collective conversation is huge and that's why oftentimes we offer the cash flow services too is because it's so helpful to have somebody who can analyze the books alongside the person who is maintaining the books alongside the person who is providing additional tax strategy. Yeah, I love that because I see often where as the bookkeeper, I wish that I got feedback from the tax person, hey, like is this helpful for you? Did you, is there anything we can do to make your job easier? But then also I've also had several clients come to me like, hey, can you interpret what my tax person is asking? Because I don't understand these words and so kind of being the interpreter, if you will, between but then also sometimes it's like, I would rather just, can I just talk to them? - It's talking directly. - And we can figure it out for you and then I can kind of break it down and explain to the business owner like what's going on. So that would be so cool from my perspective to have the connection and like work together because I think then we can produce the best product for that client when we all are on the same page. - Well, and I think to just add to that and the business owner probably wouldn't realize this, bookkeepers do, but your books need to look a certain way if you are employing different tax strategies and or your year end books need to be the same as what you file for taxes. So if anything changes, you need to have that open line of communication and it's probably better for the two people who know the two things the best to be the ones talking to. So. - Yeah, so do you recommend that they're the same person or do you see that they're often separate? - I think it just totally depends, but I know for us, we much prefer to have a really good working relationship with bookkeepers and let the experts of the books do the books and us do the strategy because for us, we know that if our energy is spread of doing all the different things, it's really hard to do them at our best capacity, right? And so we have found that, you know, not all tax strategists are the same, not all bookkeepers are the same, but for us, we've really enjoyed that working relationship with solid bookkeepers that we have those opportunities to have consistent conversations with. So then we can educate them on the thing work experts at and let them be the experts and the thing they're doing, which it takes a really strong skill set to do quick books while in making sure the workflows work zero same thing. And for us, we'd rather stay in the strategy and let the people who are in the inner working of your business do their thing. - Totally, that's awesome. Also, you have built your firm around rejecting that the principal's office type of feeling, which I love. So what kind of made you recognize it and decide that that was something worth fixing? I love that analogy because I see the intimidation and the frustration and hear about the tears later on, often. And so how do you kind of combat that? And then what made you decide that it was time to change? - Yeah. So I think it is all too common, unfortunately, for a tax conversation to be really potentially demeaning on one end or the other. And often, like, well, you should have known better. You should have let us know this wouldn't be a problem if. And for us, we know where the experts. So for us, it's important that we simplify the things that make complete sense to us for the business owners so they can go do the thing they're meant to do and do it well. Whereas I think often those conversations are reactive instead of proactive. And for us, if we could get in there and be a business partner in your business, understand the vision, be through the customer journey and actually truly know what you're trying to achieve, it makes you feel way more comfortable saying, hey, this might be a silly question, but I'd love your take on it. I can't tell you how nice it is for us to know that our business owners trust us enough to help them make 401K decisions or how much they should pay themselves in payroll. If it's time to become an S-Corp or they're thinking about keeping this offer or getting rid of this offer and the fact that they send us an email and just like, hey, can you just look this over? Like to us, that's super important because that shows a level of comfortability that I think is often missing with these professionals that are supposed to be partners in your business. And we saw that that wasn't happening a lot with bigger firms or even just people, most people can't relate to, we'll say. I think the ones that spout out all this financial jargon and you're like, I have no idea what is happening. Sometimes even as somebody who has been in this industry for almost 18 years, 20 years over here, it can be a lot of things. It can be intimidating if somebody is talking at you and not with you. So I think for us, it was really important to provide a safe space. And for me, I started out in business strategy more so. And so I really love being able to like pull on that creative side and start giving ideas alongside the practical, tactical things you need for a tech strategy. Yeah, well, we're kindred spirits in that. That's one reason I even started this show was because I just saw so much stuffiness and jargon. And I was like, there's a simpler way to talk about this that people understand. And I saw so many people feeling like, well, I'll just leave that to the expert and then getting taken advantage of. And so it was like, okay, it's time to break this down in a way that simple and easy because the average business owner, I mean, yes, there's complex accounting and tech strategies, but the average business owner can't understand if you can break it down in a simple way. And so I love that y'all have a similar mission of just making it easy and comfortable and not feel like you're in trouble all the time. For sure. And just accessibility, I think the thing is like, this is all available to us, but if you just don't know what you don't know. And so if you're afraid to ask the question, I can't tell you how many times I get on calls with business owners and they're like, I'm switching my CPA because I felt like I couldn't ask questions. And like that for sure is a red flag and one of those like telltale signs that it's time to look for another CPA. If you feel intimidated having the conversation and asking the question and they're not patient or they don't get back to you for like three months, which I hear all too often, then it's probably time to like look for a new one, even if it's just for tax prep, if you aren't quite ready for strategy. Do you have an example of a question that a client was afraid to ask and it turned out to actually be a really important one? Yes. So we often are working with business owners that are becoming S-corp's. And so when you become taxable as an S-corp, you kind of just get a whole new playbook of levers to pull and one of which is an accountable plan. And this business owner was looking into it and provided this to the CPA and was like, hey, I'm really interested in doing an accountable plan. And he was like, no, that's dumb. And that was like the only response, which is wild because it is one of the most advantageous ways to be able to use cash strategy at the same time as tax strategy. And I think it was just one of those things where anytime someone would start with like, well, I sell it on TikTok or I sell it on Instagram, the CPA will shut it down. And not that look, whirl on these social media platforms trying to educate people, connect with them, teach them about things they didn't know about. So you're never going to find that with us that if you have an idea or you've heard of something or your friend does X, we're going to help you understand why it would work for you or it wouldn't work for you for your particular situation. I think oftentimes a lot of people never ask the question because they're afraid of the response they're going to get. And then they go on to chat GBT and then chat GBT doesn't refine it based on like professional judgment. And that's where it's so important to have that expert to have a conversation with. But also to feel comfortable asking these questions too. Yeah, I also just want to empower people if you have experienced that of no that's dumb without an explanation. The industry, people like me and Emily are trying to change the industry and so you're not stuck with that person just because they did your parents taxes and now your taxes. You can make a change and that is a great opportunity when you continually get those kinds of responses to just really think, okay, is this actually supporting me best or is there someone else that might be a better fit? You are in control of who you get to work with. And so I just want you to know that there's better people than that type of response out there. And they might be harder to find but come to one of us and ask for recommendations. Don't just stay stuck in that. Wow. Well, they told me that was dumb without having a reasonable answer to back it up. 100% and I think along that same line, you should always work with somebody who's going to be honest with you of what makes sense for you. And so one big thing that we're about is like, we will let you know if this is something you're going to get a return on or not first. And then second, like just because you do tax strategy with us one year doesn't mean we'll be coming back every year, being like, it's time to do it again because sometimes it does not make sense to do it again because your circumstances haven't changed. The same situation would apply those types of things. But really in the business of making sure you're going to get a return on the investment you make because we know you're trusting us to work with you and like have your goals in mind. So it's important for us to be able to connect those dots for you when you're just a little unsure of it. So never be hesitant to reach out because you just don't know what you don't know, but you can trust people out there, not all are equal in how they're going to respond to things, but it should never deter you from asking the question and feel empowered to like make a change if it's time to make the change. Have you ever had a client come to you with perfect books caught up bookkeeping and still owe way more than they expected and what was missing if that was the case? Yeah, I think it's just strategy that's missing, right? So often you will have books, you have your bookkeeper, they send you your reports on time, they even tell you a little bit about what you're looking at, all of those things. But you get to a point where there's just more that needs to be done. The profit keeps getting higher, maybe the cash is there, maybe it's not. So there's opportunities there to find it. But then in addition to that, maybe you need an entity change. I think that's often the first milestone we'll say for business owners where they have solid books, they're everything's caught up to date. But now it's time to change things that have been kind of set and forget. We become a business, we do all the things on the checklist and then we like never revisit it. We often will find there are people out there paying hundreds of thousands of dollars of taxes and probably 20 years prior should have made that escort conversion. I can't tell you how many times we see it. We see it a lot in like this mental health field, some of the psychologists, they have individual practices, they're not trying to grow them so they're not in the network of talking to people about what they're doing with their businesses and all of that. And they will have really solid businesses for many, many decades and never revisit if they should become an escort. And so I think the biggest thing is to be knowledgeable about what's out there and not just leave it to the experts, but the implementation, all of that is when you call in the experts, making sure you have all your boxes checked and all of that jazz. So yeah, that entity change is huge because sometimes even we have one client right now where a married couple has been a partnership instead of like a multi member LLC and even that has been costing them. So like those are the things I would not expect anybody to know, but we make it our business to know so we can help and support you in that like strategic way. Can you very plainly and quickly explain what an escort advantage is in case someone's like, okay, she's mentioning escort, but I'm not even sure exactly what that is. And then how do you know when is it time to maybe consider that change? Yes. So normally when you start your business and you become an LLC or you just collect cash for the first time, you become a sole proprietor. And so that is when all your money you've made goes onto your normal tax return. And so often you're paying every side of the tax at that time. So your tax liability is going to be higher. There is a threshold where it makes sense to elect to become an escort and an escort is not actually an entity type, but it's a way you're going to be taxed. So you would be an LLC taxed as an escort and that escort election is going to allow you to pay yourself through your business. That's when you would get a normal W2 like you do through your, you know, nine to five jobs out there. And at that time, it opens up all this opportunity where you can. set up an accountable plan. You can do the Augusta Rule. There's so many opportunities that once you make that election, it kind of opens up this whole new world where we always recommend if you're going to do an S-Corp conversion, you should do one year of tax strategy at minimum because you now have all the things available to you. You might not know what they are, but where that happens or where we believe is the tipping point of time to make that conversion, it is at 100K and profit. Not 100K revenue. It is revenue less expenses in that bottom line number profit. If that's 100K, we can confidently say in most states, not New York City, specifically. And S-Corp conversion is appropriate because at that point, you have enough cash coming in the door to justify paying yourself regularly, prepaying some of your taxes, doing these things that now are going to be required of you. I have heard in the industry a lot of bookkeepers will say around 40 to 60K in profit. And we found somebody who is looking at cash flow, looking at what all is available to you, that that's a little too soon. And there's not, it's actually a lot harder to go from like 60K in profit to 100K in profit. Then it is to go from 100K to 500K because there is just that threshold. So we would hate for you to make that conversion early because it sounds cool. We'd rather you make it where it makes the most sense for you. Yeah, that's so helpful to know because sometimes I've seen clients books and said, okay, hey, it might be time to talk to a tax strategist and that's as far as I get. Yeah, for sure. But at least kind of giving them the, hey, if you didn't know this was available, maybe start having a conversation and being able to just know that there's options, I think, is when it can be really helpful for clients. For sure. For sure. Well, Emily, this was so helpful, just so much knowledge and encouragement to share with our listeners. So thank you for being here. Can you tell everyone where they can connect with you and learn more about the services that you offer? Sure. We are at thornadvisors.com and we are also ThornAdvisors on Instagram. That's where we hang out. Andrea and I are launching a podcast called Prosper and get paid playbook that will be out soon. So check that out. And we did create a little give me for this opportunity and it's at thornadvisors.com/cashleaks. So the idea with this is like you can identify cash leaks in your business, but also the most common tax deductions that people miss. And I think that is helpful because that's like the main questions people ask me like give me some examples. They're all in that freebie. Love it. Okay, we'll be sure to link that in the show notes. So that all of you can grab it. But thanks again for being here and until next time everyone, happy bookkeeping. Thanks for hanging out with me today on Get Come Feet with Numbers. If today's episode made your bookkeeping feel a little lighter, I'd love if you would take a minute to write and review the show. It helps more women business owners find the support they've been looking for. And until next time, happy bookkeeping.