222. Tax Strategies That Turn Profit Into Real Cash with Emily Bowie

[MUSIC] I'm Kim Tulson and I'm the traveling therapist. It's my passion to teach therapists how to navigate online private practices and multiple income stream so they can travel the world. I'm a digital nomad with a virtual insurance based private therapy practice and a multi six figure coaching business. In this podcast, I will discuss my journey as a digital nomad. I'll chat with other traveling therapists and help you navigate the complexities of running an online insurance based practice. I'm so glad to have you with me on this journey. [MUSIC] 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. Learn more about Alma at helloama.com. A year from today starts now at helloama.com. [MUSIC] Hey, everybody. Welcome back to another episode of the traveling therapist podcast. We have a very interesting guest today. She's not a therapist. You guys know sometimes I bring in guests that are not therapists, but have really important information for us to learn about and from. We have Emily Bowie here with us. I'm going to let her introduce herself. Emily is a CPA. She's with Thorin advisors. She's going to talk to us about a lot of things that she sees therapists doing financially that they could be doing better. We don't know how to run businesses really, not necessarily. We get into this, we're like, "We're going to start a private practice." This is so great. It's like, "Oh my God, wait, I've got taxis." What do I do? Emily's here to talk to us a little bit more about that, what she does, how she helps therapists, but also give us some tips, strategies, and understanding of some of the common things that come up with therapists like in solo, private practice, or even group practice. Emily, welcome. Thank you for being here. Thanks for having me. My name is Emily. I'm one of the partners at Thorin Advisors. We are really passionate about helping business owners and therapists turn profit into cash. I know that sounds like what does that mean. But often, we see people have profit on their income statement, but not cash in the bank. We're really passionate about helping them turn that into real cash, reduce their taxes strategically, and not just Willie Milley, and then help them build wealth and legacy, because we all got into business for this bigger, better life in a different way to do things. We're really passionate about helping people figure that out for themselves, but we know everybody's situation is unique, especially, I love what you are doing here, and really reimagining therapy and having therapists on the go, because that's kind of what brought us into business and creating an accounting firm is because we both came out of public accounting. And we were like, there's got to be a better way to do this, where we can be present and be able to do what we want to do, travel, be available for our children, whatever the case may be, while still making an impact in doing the thing we were technically trained to do. I love that so much. Before we hit record, we were even talking about your travel aspirations, maybe you can share a little bit about your situation, and I love that you've made this sort of a remote situation for you, because I think accounting, right, they're like in the stuffy office and a big, big skyscraper or something. You have to go and see them in their office, that kind of thing. So maybe share a little bit about your goals with us? For sure, that was my life. If I'm being honest, I was in big for accounting, so I was very much your typical accountant. I was more on the audit side of the house, but the idea of having to ask for time off and really never knowing what the week looked like, because it was dependent on everybody else and whatever they told me I was doing. Yeah. Oh. It really pushed me to make some changes. But as far as travel and all of that is concerned, I started my first like travel endeavor when I studied abroad in college. So I came from not, let's just say humble beginnings. And so traveling was like not a thing in my family. No one had really flown on an airplane, let alone leave the United States. And so I was like super passionate to, I love culture. I love seeing what's out there and being able to kind of get immersed in other cultures and, you know, learn about how they're doing life on this world, while we're doing life differently. It's just amazing to me. And in my late to early 20s, I spent a lot of time on the road traveling I studied abroad in Brazil. I really made it like my available to go wherever I was called. And then I quickly had children in my 30s. And I have three kids. They are three, five, and seven. So I spent a lot of time just raising babies while I was building my business. And so now that things have settled down, they can kind of be a little more self-sufficient. My husband and I are talking about like where are these opportunities we can go. And now that we have this flexible schedule. So we're looking at France in the fall. And he has a couple of other opportunities. And I'm like, let's go. And like teach my kids early on to like embrace being on the go. Oh my gosh, that's amazing. And you even took the kids hiking in Zion, which is like so cool. Yeah, I'm very much this believer that we need to have life experience in order to like determine what's for us and what's not. And being able to get them in an on a mountain and like make them hike it. Make them know like what's required to do something like that. I think you do it young and you do it often. Yeah. So oh, I love it. You're just instilling that early, especially coming from a background where you didn't necessarily have that instilled in you. And to be able to. No. Give that to your kids is just amazing. Very cool. Yeah. It definitely feels like such a blessing to be in a time where we can do things differently. Like there was not a time before where you could be a high producing accountant at home. Yeah. And the fact that we have that opportunity now for us and then being able to pay it for it to other CPAs to do that. And then even on the client side of it. Giving, taking something like this off their plate so that they can go be about and do about whatever they want. Yeah. Oh, I love it. I love it so much. I love like partnering with companies like this that have the same values and like goals that we do. The traveling therapists do. You know, it's amazing. So something you talk about is profitable but broke. Can we talk about that? Like what does that mean? Yes. Yes. So I think it's more common than not that business owners just don't understand how their cash flows in their business. So they are very familiar with generating income, but they don't know how it's actually moving in and out beyond that. And so what I do on my side of the house of the firm is helping people walk through their end to end customer journey and identifying where they're leaking cash or leading cash on the table because there's so many times when you're pricing isn't optimal that you're not actually making a profit after you pay all your overhead or on the flip side of it, you pay so much in taxes that your profit just kind of dissipates very quickly with your estimated payments or in other unfortunate times not having any money available to make the payments because you've paying yourself and compensating yourself in a way that you can't track and quantify well. Oh my gosh. Yeah, I mean that is such real stuff especially with therapists like one we always under price for sales not all of us, but you've probably seen this if you're working in this population all it's like you know we learn in grad school that it's like not okay to like make money. You know it's the craziest thing like one of the few professions is like you can't really like make money it's like not okay. So I like hearing that that they're not pricing themselves right. Let's dig in at that a little bit like water the strategies like okay so you help them identify the leaks and then how to plug the holes or whatever. Gwitter some strategies you would do with somebody that comes to you with a situation like that. So first and foremost I always look at pricing because oftentimes we're pricing based on the market or what somebody told us or what we've priced in the past and so what we encourage our therapists to do is hey send me your income statement and let me see how much your expenses are in relation to the income you're making and this helps us because that shows us what your overhead is and so then when I put your service price less your direct labor to do that and then take that number because that's the number you think is profit. Yeah. Then I multiply it by that overhead percentage. Wow. And then you get what your real profit is you're like oh I'm only making a dollar a session. Two dollars a session. - Wow. - Some people are making negative and they feel it because they're, not having enough money to cover their expenses or the timing doesn't work out, especially if they utilize insurance and do different things like that. And so that is like one of my really party tricks. Yeah, bad. Where I'm like, because as soon as I do that, it makes them realize how much sense it makes that everything has felt so tough. And once you feel like grounded in that, then you can start making decisions like, oh, I actually need to be able to turn the lights on to be able to continue this business. And if I don't make more money, I can't do that. And then I'm limiting my impact and I'm limiting the person on the other ends impact because I can't serve them. Yeah, absolutely. Oh my gosh. So yeah, that's kind of hitting me hard too. I'm like, I wonder what my number is. Like I've never looked at, I mean, that's enough to live comfortably, but I've never looked at like seriously, like what is that actual number I'm making based on everything I'm paying out? That's so interesting. Wow. I think it's one of those things where you probably are ready now that something's off, right? Like there's something there where you're like, well, why does this feel misaligned? And what I encourage people to do, especially if they feel sticky around raising prices, is remind themselves that they don't want to build resentment towards doing their job because they can't make ends meet. But then they still have to show up and counsel and help people. And so it really does prevent heart ache in the end by making the changes now. And you don't have to change everybody's prices. It's just the new patients. That's how I encourage people to start is start with the new patients because you're setting what the standard and expectation is. And then you can maybe raise standing clients $5, $10 at a time, whatever you're comfortable with. Once you land on a price that you think is going to not only cover what it costs you, but then also give you margin to be able to grow and scale for whatever your dream is, you know, oh, that's such good advice. Oh my gosh, look at the numbers, y'all. And I think that's, you know, when I talked to therapists often, a lot of them are doing their own bookkeeping. That's the first thing I tell them to outsource because it's really hard to make strategic decisions if you don't know the numbers are right. And you already have such a capacity. I don't know a better word for this, but like a job that requires a lot of your capacity. So to then do it in something that is not your expertise, you might as well outsource it. It's just going to serve you better, but also it gives you some comfort that you're not making this up. This is actually what's happening. And then you can use those numbers to decide if it's time to transition into an S Corp. If it's time to change your prices, you know, all of those things. And I think it's super important that as the business owner, you have enough of an idea of what's going on, but also when it's time to delegate it and outsource it to somebody who knows it a little bit better, you know? Yeah, because you don't know what you don't know, especially with stuff like this, you know, like it, I mean, it's, you can enter numbers in, but you probably have so much experience around strategically, like you just said, like raising, raising with the new clients only and then working up to this number that you need to hit, like that's really smart. It's really smart to scale that way. And I think to along those same lines, I just see so many therapists paying an absurd amount of taxes. Yeah. And so if we're going back to like where people are profitable, but they feel broke, that's another area that I see often with therapists because they go into practice 20 years ago and an S Corp election didn't make a lot of sense then. Yeah. And I never really like revisited it and I had one client. We saved him over $90,000. It taxes because he was a very high earning individual and he was just paying so much in taxes and just making the S Corp election alone change the game. And we didn't even apply all the strategy that's available to you what you become an escort. We're doing that this year. So like just keeping that in mind is like the S Corp election is a strategy in itself, but then you open this whole avenue of levers to pull that you can't do as a taxed as an assault prop. Yes. Can you talk about like the S Corp and when it is smart to, I mean, I'm sure it's like individualized, but there's probably like a general like this is when you would opt into it. And why would somebody want to do that in somebody that's listening to it? They're like, I have no idea what you're even talking about. Yes. So normally everybody encourages you to become an LLC or a PLLC depending on your licensure and how it what is required of it. And that will then automatically make you a assault prop unless you elect to be an S Corp. So the difference between the two is that it's just the tax election. It's basically saying I want to be taxed as an S Corp versus just myself. And when you are getting taxed as a sole prop, you're paying all the sides of the taxes. When you become an S Corp, you're paying the employment side because you are now paying yourself through payroll and you then have a lower percentage that you pay taxes on of what remains in the business. Whereas when you're a sole prop, everything that remains plus the money you pay or so that you get taxed on. So like it saves you a lot, but there are rules and specific things you need to do. So this is where I say for therapists specifically to outsource it to somebody who knows because your state has different requirements. And then your licensing board has different requirements based on the state your ends. And so my rule of thumb in general for everywhere except New York, your net income. So that bottom line income, not top line revenue, but that bottom line after all your expenses should be at 100 K 70 to 100 K. And that would be the time to switch. Now if you are in New York because of the way their taxation works, we recommend that to be around 250. So 250,000 net income would be like the ideal time to switch. And it's just different there, but we've learned working with an actual, it was a couple therapists actually in New York that one converted too soon. So we took like we made them back into just a normal LLC and then one who hadn't switched and then they saved lots and lots of money. And so you'll hear kind of other places like 40 to 60 K net income and we don't agree with that because we don't want your cash flow to be stunted. And we want to make sure you're not taking on those extra expenses that it's not going to actually give you a benefit on the other end. That makes sense. Yeah. That's one of the best things that ever happened to me who was early early. I got an accountant and they were like, you need to be an S corp like immediately. And I was like, oh, I didn't even realize like the benefits to it. You know, you're paying straight, you're paying taxes on a salary instead of like everything you bring in essentially. And the rest is just what they're, but you don't have to pay tax because I mean, that's how I think of it, right? Yeah. Yeah. And I think that's like very simply put your paying on your salary and then you're paying a very low percentage on the what remains. Okay. Whereas when you're in that sole prop designation where it comes straight to your schedule see not to get too technical, but like if you're in that realm, you're paying self employment tax, you're paying the employee side of your paying all these other taxes on everything. So whether or not you take the money out of the business or you leave it in, you're paying it on everything. So that in itself makes a world of difference. But then there's this like strategy that can be unlocked when you become an S corp, which is just not available to you as a sole prop because of what you report or don't report to the IRS. So basically when you become an S corp, they have a better idea of what you're earning. They know how much you're paying yourself. They have a little bit of an idea what's going on. And so they are actually the least audited tax election. Yeah. Go to the app. Yeah. And they are discouraged and they're like, oh, I don't ever want to make that because it's going to put a flag on my head. And it's actually less audited because they know more about your business. Oh, interesting. That's a good tip. Well, at least that's my theory on it. I don't know that that like the technical side of it. But when you become an S corp, you then can start reimbursing yourself for expenses that you say it is an expensive doing the business here. It's called an accountable plan. You can rent your home back to yourself for meetings and other things like that. Instead of going to a conference room to rent that out, you can do comps nearby and use that to cover some of your taxable income. So there's options that you just don't have available to you until you become an S corp. Wow. Very interesting. I live in Airbnb. So I can't probably do that. But it's interesting. - Yeah. - Well, but so I did find out, so I'm not the tax expert, right? So my business partner is the tax expert, but I know enough to be dangerous and to tell people they need to do this part. - But I did find out, even if you rent, you can still take that rental income and show the difference and put that as like, cover some of your taxable income. And then there's just so many different options out there that this is where you want to engage a tax strategist to say, hey, have you considered this? Have you considered that? And even if you are making that transition in the first year, I always recommend to do tax strategy that year just so you know what levers are available to you. And then from there, if everything stays the same, it's not super complicated, whatever, you don't need to do tax strategy again for a while, depending on what your situation is. - Now if you own Airbnb's in addition to your practice and all of those things, that then becomes like, hey, there's probably rules that change from year to year that give you a little bit more strategy that can be used to. - Interesting, yes. Let's talk about the P&L. I mean, I get a P&L, right? I mean, I look at it. I don't know. What should somebody that's getting it, I know that you talk about a little bit, the one thing, the one number you should know on your P&L, like, can we talk about that on here? - It would be a P&L. - Yeah, what is the P&L? - Yeah. - I think this is so common, and even if you're a seasoned business owner or not, I think a lot of people spend a lot of time on the P&L and that's your profit and loss or your income statement. Those are kind of interchangeably used, but they forget about the balance sheet, but the balance sheet has how much money you have in your bank account. And so I'm a huge proponent of looking at that profit and loss aside your balance sheet and say, okay, that profit at the bottom, what does that look like in comparison to the cash in your bank? Because if they do not look similar, they're telling me a story. That story is that, you know, maybe you have built your business on debt. And so there's money that's going out, that's not captured in your profit and loss statement. That's a high probability. It could be that you're taking owners' draws that are not reflected in your W2 or they're not gonna be on your profit and loss to you've extracted more cash out of your business than you do profit for the year. Which you can do if you've been in business for multiple years. So it tells a whole story that helps you identify where you need the systems, the structure, the policies, the procedures, all of that. And I feel like I heard an episode with you where you're talking about SOPs and like being able to make things repeatable. This is like something that I often talk to people about because operating efficiency is your best opportunity to get that cash leak back into your business instead of letting it leak out. It is the best plug for most of them. It's having a policy and procedure how you pay yourself and when you use debt and when you don't and are you using credit cards or are you getting a line of credit? Like all of those things, I'm a cash girl. So I don't ever really recommend debt unless it's strategically used. There's a plan and play and we know that if worse come to the worse, we could pay it off. Because to me, the growth won't, it could be stunted if you're stressed out overwhelmed, can't figure out how you're gonna make ends meet. And usually what I talk to people about before we get into all of that is what their personal finances look like. - Yeah. - Because that also will tell me how responsible they'll be with their professional debt as well. - Yes, oh my gosh. I'm just thinking about my account and she probably hates me. 'Cause I have no like, oh, I'm gonna take 5,000 a month and put it into my personal account and then pay my bills that way. It's like, literally we just bought e-bikes the other day. And it's like, oh, I need to just pay that off. I'm gonna take the money out of the business account and just put it into my personal and pay it off. She's probably like, where is this like $3,000 coming from, Kim? - Well, and to that point, so when you become an S-Corp, you have to determine what your reasonable compensation is. And so there's like a survey you can fill out or someone can do research to see like how therapists are paid for the number of hours you work so on and so forth. But if your owner's drawers are bigger than your reasonable comp, then you become a flag. And the most common audit when you become an S-Corp. So S-Corp's don't really get audited that much, but when they do, it's typically around their reasonable comp. Is are they actually taking a salary that is reasonable to pay somebody else to do the same thing they're doing? - Interesting. Yeah. - Oh. - And this is why you, this is where I say, you know, there's seasons in your life and there are like levels you attain as you become a business owner. - Higher that expert. - Yeah. - That can tell you, that can monitor it with you, that can support you in making those strategic decisions 'cause to your point, you don't know what you don't know. - Right. - Exactly. - Oh my gosh, such good information. So how do you guys help? Like, let's say I just get off this call and I'm like, okay, I'm booking call with her like, seriously. - That's the problem. - Like how do you help us if we need it for sure? - So our main offer is the cash flow tax strategy bundle and the way that works is we get on a discovery call regardless of what your situation is. And I really get to know where you're at now, where you wanna be, and then what's working for you and what's not working for you, getting there. And then I will kinda go through my role of decks of what we offer to see if it's a good fit. I am a huge proponent of like saying, it's not the right time, or we might not be the right people or whatever the case may be because I always step in integrity and I wanna make sure if I'm gonna offer you something like tax strategy, cash flow strategy, as core collection, it's gotta get you a return because it does nothing for me if it doesn't make sense for you. And so that's why that call is so important is for me to look at your specifics and know what you have going on, know what your goals are to figure that out. But when you engage with us for cash flow tax strategy, we do a goals call because we know your cash strategy, your cash flow strategy has to make sense with your lifestyle. So if you travel a lot, your strategy's gonna be different than somebody who is at home, has a home base all the time, you know, all of those things. And then we do the end-of-end customer journey and we just hear and find anywhere that we feel like you either need to do an analysis over, you may want to make some tweaks and changes, but then Andrea comes in with the tax strategy piece and she gives you different scenarios based on what we know what your goals are, where you're at today. So the things you can implement for this year or for the next five to 10 years, depending on how much you think I had because for us, we don't wanna give you a strategy that only makes sense for this year. We wanna make sure that your setup, especially as business owners, when we need to buy a home, we need to qualify for a line of credit. It does not make sense to make your tax liability the smallest we can make it because we need to show that you're profitable, that you can cash flow things, that you can do that. So that's why doing those things in tandem are so helpful because if she, like let's say Andrea comes back with a tax strategy and I'm like, she doesn't have the cash for that. - Yeah, that's not gonna work. We can strategize together to get best of both worlds. Like how do you make that make sense for you today? So that's kind of where we spend our time and we kinda make it our business to know what's out there because one, we're a small business so we wanna take advantage of what's out. But two, we are very big on integrity and making sure that what we're offering you, we make sure you have the proper documentation, you fully qualify for it and do all of those things too. And the only way we can really do that is like knowing the ins and outs of your business. Yeah. - That's so interesting. - Do you guys, this is Chotel's side note, do you guys do anything with like foreign income tax? - Yeah, Andrea. - Yeah, Andrea is, so she came out of public accounting in this like mid-tier level. So she is well first in lots of things I don't even. - Okay. - Really cool. - We're both CPAs but she's like your tax CPA and I'm like where I know how to save you money see you day and on. - Try to do it. - Yeah, that's a good combination though. That's very cool that you guys were doing this together. - So interesting, yeah. So she would know about that because a lot of the listeners are like working out of the country like for, what is it, more than 333 days a year or whatever and then they've got to like consider like, you know, foreign tax income and how to do that. So it's like a, you know, it's a whole thing. So I didn't have you guys know about that or if you could help with that too, somebody's listening. - Well, and that's where that scenario analysis would be huge. So like if you're planning out your year or your next few years of travel and all of that, she would be able to say, if you do it this way, this is what it looks like. if you do it that way, this is what it looks like because that's like that next level. - Yeah, right. - We're not just like, oh, I wanna go here because my heart says so. - Yeah. - My heart says so and my wallet approves. - Yeah. - It's what I wanna make sure I pay the taxes at all the places, at all that good stuff, yeah. - Yeah, 'cause you just don't wanna get stuck with penalties and you also, there's such strategy to be had when it comes with taxes too. And it would be crazy to try to do those things on your own when you start having a more complex situation, right? Because there are people out there that it is their business to know those laws in and out and they change so frequently, you need to have somebody who knows what they're doing just so that you don't find yourself in a situation where you have to like shut down the business or you owe more than you've made in a year 'cause that has happened before. - Oh my gosh, that would be a total labor. - Yeah. - I don't want the complexity of those things to discourage you from living your life well. You know what I mean? And that for us is why we started the firm, the way we did is because we knew that people needed this and we knew that this is something a lot of people trip up on and get overwhelmed by and like don't do things fully because they just don't know. And we kinda take that out so you don't have to do it alone and we partner with you in that way. - Love it. - That's so awesome. Yeah. - Well thank you very much. So where do they find you? People are listening, they're like, "I need that in my life." - Sure, you can find us at thornadvisors.com and I can share a gift with you guys and it is the five most common cash leaks as well as the five tax deductions most people miss. And so that is at thornadvisors.com/foredslashcashleaks and these are those things where you can kind of get that quick win that's like, "Oh, this is tax strategy." Oh, this is cash flow. - Nice. - These are those things that like you can do on your own or you look at it and you're like, "I can't do this on my own." - Yeah. - And then you're like, then call us. The book of call with us. We love to simplify things that feel complicated. - Amazing. Gosh, you guys sound awesome. Thank you so much for taking the time and coming today. - Thanks for having me. - I just love us. - Thank you. - Thanks a lot. - Thank you so much for listening to the Traveling Therapist podcast. For show notes, links and downloads, head over to thetravelingtherapist.com where you'll be able to learn more about my journey, the courses I've created for you and other exciting resources to make your dreams become a reality. If you've enjoyed this episode, please share with your traveling therapist friends, subscribe to the podcast, and if you'd love this episode, please leave a review. (upbeat music)