214 - Profitable But Still Broke: Where Your Practice Cash Is Actually Going

Welcome to the Private Practice Elevation Podcast. Unlike other shows about marketing and growing private practice, only the Private Practice Elevation Podcast takes you into the peaks and valleys of successful practice owners to give you the lessons they learned and the proven strategies that you can apply to your own private practice, helping you reach the next level in your business. I'm your host, Daniel Fava. Your practice is making money, but your account doesn't seem to know it. If that sounds familiar, this episode is for you. My guest is Emily Bowie, a partner at Thorn Advisors where she helps business owners turn profit into cash and keep more of it at tax time. She works with therapists who are trained to be great clinicians and left to figure out the business side on their own. In today's episode, we talk about where the money actually goes. Emily walks through the cash leaks she sees most often, while pricing is usually the biggest one, and what your balance she does telling you, that your profit and loss isn't. She also shares a story about one client who overpaid for 30 years because of a single piece of bad advice. But before we get into it, let's hear about our sponsors. Zanda is practice management software built for health practitioners. It brings scheduling, telehealth, secure notes, billing, AI, and automation together in one simple system. If you're ready to make your practice management easier, visit privatepracticeelevation.com/zanda and start your free trial today. A year from today, what would your dream private practice look like? Would you spend less time chasing claims or only working with clients who value your skill set? What if you had more time for yourself? Alma empowers you to confidently accept insurance backed by an all-in-one EHR that simplifies scheduling, documentation, and day-to-day practice operations. Your dream practice is closer than you think. To learn more about Alma and receive two free months, visit helloalma.com/elevation. Hello, and welcome back to another episode of Private Practice Elevation Podcast. Sometimes I'm a little start-and-stop with the podcast stuff, so I'm trying to get back in the flow back to, you know, used to doing these recordings, doing these intros and stuff like that. But it's been a great summer as I record this kind of first week back from vacation. A road trip, we took our boys on a big road trip. We went two nights to Louisville, which is my happy place, which is where all the bourbon is, and I got to show the family the Buffalo Trace Distillery, which is just a cool historic place that has some of my favorite bourbons really loaded up on, quote unquote, souvenirs there. We did two nights in Chicago, and you can see behind me here my awesome new Nimbus 2000 poster if you're watching the video of this. We went to the Harry Potter store in Chicago, which I didn't even know was there. We just happened upon it, which was super awesome and nerdy, and just we got to visit some old family we haven't seen in a long time on my wife's side of the family, did an awesome river tour of Chicago, and yeah, it was just a really cool city, and we took the train too. We were in rush hour commute with our boys, with our two boys, and so that was a lot of fun. And then we ended up four nights in Michigan, right by Lake Michigan, South Haven, Michigan, and that was just a beautiful place. It was a little smoky because of the fires in Canada, which I didn't even know was going on. We woke up one day, it was just smoke everywhere. But we still had a great time, and it was much more relaxing than the other two places we were in. So it was a really good time. So, just trying to get back into the groove of things this week, and here we go with this episode. Today, we are talking with Emily Buie from Thorn & Advisors, and she's a CPA and cashflow strategist with more than 15 years of experience, including her time as an audit manager in Big 4 Accounting. She's a CFO, CFO at Thorn Advisors and Accounting and Advisory firm for high earning women who want to feel confident about their money instead of confused by it. Emily works with entrepreneurs, psychologists, and other service driven professionals helping them see where their cash is leaking, and build tax plans that match their actual goals. Outside of work, Emily Leads her Church's Financial Ministry is a mom who three young kids and enjoys a good DIY project almost as much as a well-organized set of financials. So here is my conversation with Emily where we get into really the cash leaks in your private practice, that feeling of "I'm profitable, but I'm still broke, where's the money going?" So let's get into it. Hello, and welcome back to another episode of Private Practice. Good morning, Emily. Welcome to the Private Practice Television Podcast. How are you today? Good morning. Thank you for having me. We're doing all right. You know, crazy summer mornings. Yes. Yep. We were just talking about that before we hit record. It was like you're in a similar boat of multiple camps and multiple directions for the children and just kind of the juggling act, right? For sure. And it's the beauty of owning your own business, but also can be hindering of how things go. Yeah. Yeah. I'm definitely looking forward to when the kids go back to school and just getting my routine back because I'm such a big routine person of which down here in Atlanta, they go back the first week of August. So that's really just a week and a half away for us. Wow. That's early. We don't go back until the last week of August. Okay. Yeah. And I grew up in New York, which it was after Labor Day. You know, you go back. So it's just all over the place. Yeah. All right. Well, let's, I'm excited about our topic today, you know, because we're going to be talking about being profitable, but still being broke or feeling broke in private practice, which I think is a, you know, common symptom of some things, you know, financial health of business and certainly something that I've experienced in my own seasons of growing a business. But before we get into that, why don't you just let our audience know a little bit more about yourself? What do you do? How do you serve small businesses and therapists and how did you get into what you're doing now? Sure. So my name is Emily Booy. I am one of the partners at Thorn Advisors, where we really focus on helping business owners turn profit into cash, reduce that tax strategically, and then build wealth today and tomorrow. I think the reason we got into this, both my business partner and I came out of public accounting. And if you know anything about public accounting, it's rather demanding and not super fulfilling. So we were really encouraged to go small business once we knew you could really do that. I think we always thought there was one path and it was to the money. I mean, I honestly, that was what we were taught in school, like go get that big four job and run with it. And it was great. Built lots of discipline, taught me so, so much, saw so many different things. But at the end of the day, it wasn't very fulfilling because most people saw me. I would came mainly in auditing as the enemy. But because I understood how their business worked, I was able to give them suggestions to improve. And I just brought that to a smaller scale because most small businesses can't afford to have that CFO position within the business. And so we thought that it would be a great opportunity to have that fractional role where you can help with looking at financials while doing something very practical for the business owner, which is finding cash in their business. And then teaching them how to keep it within the rules of the tax code. So like, we're going to do that dual purpose where a lot of people in this industry really just do tax or they just do the financial analysis or they just do business strategy. You kind of get the whole thing when you work with us. Great. Yeah. And that's probably super beneficial. You can have that whole picture and someone that, you know, these small businesses can lean on. You said, often is difficult, you need to be a pretty large business to have that role of an accountant and bookkeeping and CFO, you know, within it. So I think it's such a great service. And, you know, why we started working with therapists specifically is because we solve the need there. We solve that with the clients we did have that often they were set up to learn how to be great clinicians, but they were not set up to like know how to run a business. And then also a lot of them will build solo practices and then go into a group practice. And it's a totally different ball game, you know, financial wise. And so what we really kind of had a heart for it is because a lot of people were paying a lot of taxes and it was hindering their growth so dramatically. And we were like, there's got to be a better way we can serve in this capacity and just kind of be that expert they have in their back pocket to be like, should I do this? Should I not? What does this look like for me? And especially solo practitioners, they they're the ones that get it hit the hardest from the tax side because they don't have as many expenses. So then they are paying astronomical taxes, we actually saved somebody not that long ago about like 120K in taxes because we did an S-corp transition that made sense for them. And then from there help them with with like actual tax strategy. And he had been paying this amount of taxes for like 30 years because one person at one point early in his career said, you don't need to look at an S-Corp, it doesn't make sense. - Mm. - And so, and he took, you know, he took the vice he was given and just didn't have access to more information, you know? - Yeah, yeah, absolutely. I'm hearing about like two or three other podcast episodes that we could do here in the future, you know, going from solo to group benefits of an S-Corp. But let's, I'll try to stay, you know, in the lane that we kind of carved out here. So, let's, you know, when someone comes to you and they say, you know, I'm making good money in my practice, but there's really not enough, it always feels like there's not enough in my account. Like where do we kind of start with this conversation of being profitable with Stillbroke? Like what's usually going on? - Yeah, so what I've always found, step one is if someone has their books done or not. So, meaning have they been maintaining their book keeping on a monthly basis. So, normally, and this is extremely normal. People just don't do their books until they have to do their taxes. And when you do that, you find yourself having to kind of grapple with the decisions you made five or six months ago. - Yeah. - And, you know, having this like spiral of what I could have done versus what I, where I'm at now. And so, what I always recommend to practitioners is outsource your books. Do what you do best and let someone else do your books because accounting's not super intuitive. I mean, other than the fact like don't spend more than you have other than that, that's about as intuitive it gets. But bookkeeping is a lot more, you know, strategic and how you set up your chart of accounts, what the numbers mean, all of that. I always recommend that to be the first thing they outsource. So, then you get good numbers so you can make good decisions because then that also leads into like the first kind of cash leak that I see almost everybody have and it's in their pricing. - Hmm, okay. Yeah, I think that's really good advice. And just I'm thinking through sort of my history and my business, like it probably took me a good six years before I got a bookkeeper and I'm ashamed to admit that because once I did it, it was huge because it really does, it helps you have somebody, number one, you know, setting up those categories for, you know, how you, for your expenses and write-offs and all that. But also to having somebody kind of almost hold you accountable. Hey, what's this expense? And like you're kind of like maybe that's not necessary or yeah, we don't really need to use that software anymore. And so like I'm reviewing those things at a more regular basis to make those decisions like what do we actually need to like increase, you know, profit and like are we spending more than we need to on certain software and stuff like that? - 100%. - Yeah, I feel like that is, you know, awareness always helps with just making better choices in general. And I think having someone do your books, have them get them to you by like the 10th or the 15th. You then can make the decisions you need to change. If, you know, you're going in the wrong trajectory. - Yeah. - But I think, even for myself, I have a bookkeeper do my books because like, why am I spending my time doing that? And I will put it off because I'm in client delivery. - Right. - And we all know if you're in client delivery, you focus on the client way more than you focus on yourself. - Yeah, amen to that, yeah. So you mentioned pricing. So you kind of started into that topic. So take us into that like you said, that's one of the biggest cash leaks you see. - Absolutely. So often we'd price either based on the market or we will price based on how we feel. - Yeah. - And so I think that is usually where most people start. So it's very normal that pricing is the area that cash leaks the most because you're probably undercharging and you don't realize that you're undercharging for whatever it is. And so the reason the books are imperative is because you need a certain percentage from those books to know if you're undercharging. And so if we're looking at a profit and loss statement, which is also known as like an income statement, it's the statement that starts with revenue, takes out all your expenses, ins and a net income. - Yeah. - And so the number that's imperative to us when we're looking at pricing is the expense line in comparison to your revenue line. So these are your expenses that are not directly related to generating revenue, but are still expenses nonetheless. - Yeah. - And so we call those overhead expenses or like indirect costs. And that percentage, when you take that number divided by total revenue, that gives you a percentage to say, hey, this is how much every time you bring a dollar in, is allocated to keep in the lights on for lack of a better way of saying it. And that percentage almost never gets factored in when people are looking at their prices. Usually people look at their prices and they say, it's gonna cost me this much for this clinician to do this session or whatever the case may be. And if there's any kind of tools that are necessary, anything that's directly related is a lot easier to factor into pricing. But that percentage really is what will help you determine if you have predictable margins or not. - Yeah, and is there like a sort of a standard percentage that or like a range that you hope for private practices to kind of fall into when you're looking at that? - Honestly, it would probably be somewhere between 30 or 40%. - Okay. - It just really depends on how much it costs you to deliver a session. So if you are paying other people to do this session, if you take insurance or don't take insurance, like all of those things come into play. But with 30 to 40% there, you really can have a good net income margin after. - Yeah. - But I will tell you, most people are 50 and above, especially if you've never looked at it. - Yeah, yeah, and then over time, that would definitely lead to feeling like, there's not enough money in the bank. 100% and I think a lot of times too, because of when we're talking therapists, they are doing a service for somebody. And if they can't make ends meet, there's resentment that can build up for doing the service. They, you know, there's a lot that comes into it. So it's more than just the money piece of it. It's like really being able to serve well. And so what I encourage therapists to do, if you do find yourself meeting to raise prices, start with your new patients first. That's the easiest. And then if you have old patients rising the fee by $5, $10, whatever you can kind of get behind is a great way to kind of build that gap and like bridge that gap. - Yeah, yeah, and that's great advice. And that's the approach my wife is taking in her private practice where she tends to, you know, she thinks more like three, six months out. And so it's like, hey, January 1st new clients, they're gonna be at this rate. And then come March, I will have brought my old clients up. And you know, sometimes there needs to be conversations and some people do sliding fees and stuff like that. But client can't meet that new pricing. But for the most part, I don't think she's ever gotten much pushback at all. - And I feel like more people need to hear that. And I think about it, 'cause the one thing I always say, 'cause it is a common objection. I'm like, I literally, my therapist changes prices twice a year. I have never once been like, absolutely not. Can't do that. - Right. - I'm like, no, I'm invested into the care and the value I see in therapy, you know? I had a similar process with my coach that I work with. And it was like, yeah, but you're totally, I get that value and totally get it. - I'm here for it, right? - Yeah, yeah. - Okay, so you know, we talked about fees, but like, are there any other things that are kind of impacting the story of why is there not that much in the account here? - Yeah, I think you touched on it earlier about essentially reviewing your expenses. So one thing I encourage all business owners to do, doesn't matter what industry you're in is at least annually. To me, I think you should do it quarterly. But if it's anything in between doing an expense audit and just going through it with kind of three questions, like what is this and do I need it to do I have something else that can fulfill this purpose? And then third would be like, am I getting a return? - Yeah. - And I think that's usually the harder one to decide because it's not just quantitative, it's also qualitative. And so I know I've fallen victim to this where I've stayed in like founding prices for things because I might use it or I've been in like a coaching membership and I haven't actually attended anything in months. And I'm like, yeah, but it's gonna go up and what if I do need it and all of those things? But I think when you kind of get in a standard practice of actually looking at these expenses, you start to detach the emotions from it and it just becomes like a data decision. Like, hey, you said three months ago you were gonna use this and you have not used it and used to get that type of thing. - That's great advice and to be honest, I love doing this. It actually makes me so happy when I'm like, No, we don't need to use that or you know, like I've got my team and at private practice elevation we use a lot of different softwares because we're dealing with websites and SEO and you know, and all that stuff. So things come and go, software's come and go and it's like hey, are we still using this? Is this still serving us? We just went through the process with a software that helps our clients review their websites before we make it live where they can add feedback. And it was kind of clunky. It wasn't working so great. And we found a better and cheaper option. And so then it became that decision, okay, we're going to switch over to this platform. But there's been other things too, you know, like you said, like we're paying for this and this. And they both kind of do the same thing. Let's eliminate one and just go with the other and we just kind of, you know, focus the team around that and making sure that everybody can use it and still get that return like you said. For sure. And I think the one thing you kind of point it at is like there's also this like operating procedure piece of things that do help with eliminating some of these cash leaks that will tend to happen. I think one, so peace in general, which are standard operating procedures are helpful because they increase operational efficiency in general, because you're not keeping it in your brain anymore. But also standardizing expense audits, standardizing, looking at a process and saying, this is clunky. How do we improve it? And how can we save on it? Yeah, absolutely. That's probably the part of it. I struggle the most like setting the time aside each year to review the SOPs and review everything. But I like what you said about quarterly, you know, getting into looking at your your profit and loss and your expenses and making sure that, you know, everything is really working for you. One thing I'll say to ease the SOP review process, I have like a standard way of doing it. You only review and do once a year, but you have a parking lot list. So every time something stutters or stumbles or doesn't work, you throw it into the parking lot list and then you have like a executive team meeting of sorts like whoever like process owners and you say, okay, what from the parking lot list has to be done this year? Yeah. And then you set them off to go do it and you have a very defined end date because with procedures, you could literally work on them all the time and they still wouldn't be the most up to date. Yeah. But you kind of like put those boundaries in place and helps a lot. Yeah, that's great. That's great advice. Now one thing that I noticed, you know, in the notes that I was reviewing before, even for our conversation here, you talked a little bit about people not really looking at their balance sheet. And so we talked about the profit and loss. Yeah. So take us through what the balance sheet is and how does that work together in this conversation of, you know, making sure that you are profitable and you got money in your account. Yes. So balance sheet, I'm sure all of you, if you have a bookkeeper, they send the balance sheet with the income statement or the profit and loss. And you have no idea what it means or why it's important. And I think that's completely normal. But the way I like to look at it is a profit and loss teaches you what the activity looked like for the past month, half the year depending on how you pull it. And then the balance sheet tells you the health of your business. And so that first portion is your assets. And it's normally your cash. So the way I try to explain it to people is that if you are a sole proprietor, meaning you have not elected to be an S corporate or anything like that, and you pay yourself just by transfers out of your account, that net income number from your profit and loss should match that cash balance plus how much you've distributed to yourself. If it doesn't, you likely either have debt or something else is a miss and a rye and means you need to kind of look at it. Then if there's a big difference, that's when you start kind of like pulling back the layers. Do I need to do an expense audit? Look at my debt and my keeping track of things. Then if you are, if you have elected to become an S corporate, you pay yourself via a payroll or a W2 employee within the business. So that's captured on your profit and loss. So when you get to that net income number compared to your cash, the only difference would be in those owners' draws. So other than that, it would be related to debt. And so debt tends to be one of those things where it creates timing delays. So you recognize the expense when you put it on a credit card, but you don't pay for it until later. So that could be one of the things or you only, if it's alone, too, you only recognize the interest on your income statement. But then you're paying down the principle as you go because everything that you've paid for with said loan is already been on your income statement profit and loss for so long. So there are timing deliver like differences that you're going to run into. And sometimes there are just like problems with how the math is working. But this is why when you get to a certain point, it's so important to just hire the experts to come in. And they're going to be able to whittle of that down to what the actual problem is. And then you go work on the problem, not necessarily have to like do the full scope thing yourself, because like it has the time to do that. Yeah, and it's helpful to have somebody kind of like diagnose a professional diagnose, you know, because you could see, you know, if you get used to looking at that balance sheet, okay, something's not right here. What do we do next? What do we, that's the most important thing that we need to kind of dig into. And then, you know, maybe it's some of the things that we've already discussed. But, but yeah, having a professional you can lean on, I think, is huge. The other thing I think business owners run into as well as practice owners is mixing personal and business expenses, which we know, we all know it's a bad idea, but it's a very common practice, right? And I think for, you know, therapists is actually a bigger issue for them because that then can compromise their personal finances if they were to ever get sued or have any other issues. And especially if you have people come inside to a place and like there's all these other layers of liability and risk. So it's really important to take any kind of like business or personal expenses and make sure that they're separate because I will see a lot, especially on business credit cards. They say this is a credit card for just the business. And then there's like a personal Amazon charge and it goes to owners' draws. But then you just really don't have a good feel for what your business is doing or it can just set you up for more liability too. Yeah, no, that's good advice. It can get, it can get a little messy that way for sure. Well, you touched on owner draws a little bit. And so for folks who are, you know, S-Corp and doing the owner draws, like, is there any advice you have for those folks like how do we structure those and what that should look like? Yeah, so if you are an S-Corp, you have to set yourself up with a reasonable compensation. And what that means is that if you were to go hire somebody to do your job for the same amount of hours you do it, that's what your W2 should be. Now that doesn't mean that's all you get to pay yourself. That just means it minimally needs to be at that rate. Now, when you do tax strategy, this is where a tax strategist would come in and say, hey, there are tax-adventitious ways to pay yourself what you need to be paid without having to pre-pay all the payroll taxes that are associated with a W2. And so those are often done via owner's draws, but there are definitely different vehicles. There's things called an accountable plan. There's the Augusta rule. There's a bunch of different ways that you can utilize the tax code for you because of those monies are taxed differently when you become an S-Corp. And so those vehicles would be tax-free dollars. And there's definitely parameters and reasons and why you should do it this way. But that's another common cash leak for business owners is compensation structure issues. That would be a great example for the owner, but then when you start paying people and then you're trying to move a contractor into a W2 position, not factoring in benefits, not factoring that you're pre-paying taxes, all those things can hinder your cash flow tremendously, especially if you didn't plan for them. Yeah, yeah. I think really the lesson here is just higher or professional. Yeah, I mean, it's so hard because you can know all of this, but I think you should know all of this, right? We're very big on education at our firm, so we're not afraid that you're going to go do it yourself. We want you to be empowered and encouraged to make those decisions yourself, but we also know there are things you don't know. And so when we have these conversations, it's so hard to not always end with, well, you should probably just hire some. Yeah, yeah, but I mean, this is definitely not my forte, you know, and so every time when I get into the financials and the books, I'm like, I need somebody on the outside looking in who can, without emotion, help me make decisions and review. these things. Tell me how to structure things and stuff like that. But at the same time, I want to be educated so that at the end of the day, it's still our call as the business owner. But yeah, I think especially when it comes to things that can save you money on your taxes, it's like a lot of professional insurance. And I think if there is another cash league out there, it's reactive tax decisions, right? So if you can plan properly throughout the year, if you know and you can run different scenarios each time, you're going to make a big decision, that makes a huge difference. One thing I do want to like touch on is the difference between a tax strategist and a tax preparer. I think a lot of people believe the person who does their taxes every year should be able to give them advice on how to save on taxes. And that's not always the case. Those are different skill sets, in my opinion. Some people do both. We do both. We'll do your taxes, we'll do your tax strategy. But it's a kind of a different lever in your brain to turn it on because you're looking at the tax code and then you're looking at a person's personal situation to say, hey, you can leverage this or that here's the difference. Now you choose to make which one makes the most sense for you based on your goals. Yeah, yeah, that's a great point. Well, as we're kind of you're landing this plane in this conversation, I guess my last question would be kind of bring us full circle. You know, someone's listening to this and they're kind of hearing, oh, there's some things that I need to check on or things I need to be doing that I'm not doing. What do you advise is kind of like the place to start? What do they do first? I would say the best thing you could do is if you're not having your books done for you already, that would be the first thing I would look into is getting to outsource that because it's, it's helpful, helpful on every level. But then if you are having your books done for you, have them pull an expense report for you so you can go vendor by vendor and just see the impact of each of your expenses. That's a very practical thing you can do today to make sure you're not leaking cash. That's unnecessary. Awesome. Well, thank you so much for your time Emily. This is always so educational for me when I get to talk to folks who are in the financial space and and taxes and all that stuff. So where can people find you if they want to learn more about your your your business and what you do? Sure. If you want to find me personally, I'm on Instagram @emelyvboeboie and then if you want to find the firm, we are at ThornAdvisors.com and that is Thorn with an e. We also have a podcast called Crossbur and Get Paid. My business partner and I do these like five to ten minute episodes of like things you can go and get done right away. So if you're ever interested in just having that like quick hit of information and something you can go do, we hang out there every week. Awesome, and you will put all of that stuff in the show notes. So if you're listening, you can head there and find it and thank you so much Emily. This has been a great conversation. Thank you so much for having me. Great. And if anyone's listening to this and you are looking for help with your online marketing, your online presence and reaching your ideal clients, please head over to privatepracticeelevation.com/kickoff and let us know where you're at and what you're looking to do and we can hop on a call and find a way to help you out and move you forward. So thanks for listening and go elevate your practice. I'd like to thank Alma for sponsoring this episode of the Private Practice Elevation Podcast. What if you had a network to reach out to for questions or free continuing education? With a network of engaged providers and free CE resources, Alma makes it easy for you to build the practice of your dreams on your turns. Alma believes that when therapists get the support they need, mental health care gets better for everyone. Learn more about Alma at helloalma.com/elevation. Get started now and receive two free months at helloalma.com/elevation. Running a private practice can feel like a juggling act. You're the clinician, the scheduler, the biller, and even the IT department. Zanda makes it all easier. It brings scheduling, telehealth, secure client notes, billing, AI, and payments into one easy-to-use system. Clients can book appointments online, receive automated reminders, and access a secure client portal while you manage everything from one dashboard. That means fewer administrative headaches and a smoother experience for everyone. If you're ready to spend less time on admin and more time with clients, visit privatepracticeelevation.com/zanda to start your free trial. [BLANK_AUDIO]