Embark on a deep dive into the world of tax planning and CFO services for small businesses with Chad Brown, CPA, and the visionary behind Kinstler Brown. In this exclusive one-on-one podcast, Chad shares his expertise, insights, and practical strategies to empower entrepreneurs in navigating the complex realm of taxation and financial management.
Join us as Chad delves into the intricacies of tax planning, unraveling key considerations, deductions, and compliance essentials tailored to businesses of all sizes. Gain invaluable insights into optimizing your financial strategy, minimizing tax liabilities, and maximizing profitability through proactive planning and strategic decision-making.
Moreover, Chad sheds light on the invaluable role of CFO services for small businesses, offering a roadmap for financial success. Learn how Kinstler Brown's specialized services empower entrepreneurs to streamline operations, optimize cash flow, and drive sustainable growth.
Whether you're a seasoned business owner or a budding entrepreneur, this podcast equips you with the knowledge and tools needed to navigate the fiscal landscape with confidence and precision. Tune in and unlock the secrets to financial prosperity with Chad Brown, where every insight leads to empowered decision-making and enduring success.
Embark on a deep dive into the world of tax planning and CFO services for small businesses with Chad Brown, CPA, and the visionary behind Kinstler Brown. In this exclusive one-on-one podcast, Chad shares his expertise, insights, and practical strategies to empower entrepreneurs in navigating the complex realm of taxation and financial management.
Join us as Chad delves into the intricacies of tax planning, unraveling key considerations, deductions, and compliance essentials tailored to businesses of all sizes. Gain invaluable insights into optimizing your financial strategy, minimizing tax liabilities, and maximizing profitability through proactive planning and strategic decision-making.
Moreover, Chad sheds light on the invaluable role of CFO services for small businesses, offering a roadmap for financial success. Learn how Kinstler Brown's specialized services empower entrepreneurs to streamline operations, optimize cash flow, and drive sustainable growth.
Whether you're a seasoned business owner or a budding entrepreneur, this podcast equips you with the knowledge and tools needed to navigate the fiscal landscape with confidence and precision. Tune in and unlock the secrets to financial prosperity with Chad Brown, where every insight leads to empowered decision-making and enduring success.
What's up guys, Chris Bowen here with Level Up the Podcast. I am joined today by Chad Brown, CPA. He's going to kind of talk us through tax planning. It's kind of that time of the year. We're getting to the end where we're ready to go ahead and file those taxes and as business owners, if you're not filing an extension, it's coming on up for us. So I thought I'd have Chad on here today and kind of walk us through what they do. Yeah, and Chris, I appreciate you having us on. You're right, man. It's that time of the year. You got two types of folks, right? Those that are ready and those that are saying, oh, shit, I don't have my stuff in order and I need to get it done quick, right? So whatever category they fall into, we're more than happy to at have a conversation, see if we can help. But yeah. Yeah. you tell us a little bit about your company that you're with and what all you guys do man. Yeah, yeah, for sure. So our parent company is Kinsler Brown companies and underneath that umbrella we have a couple of different practices. We do individual and small business tax prep and it's kind of secluded in this box and one of our subsidiaries. All of the subs kind of work together and then we have one real CFO Inc. and that's really primarily the business that is focused. say 99 .9 % if not 100 % on small businesses and their owners. What can we do to assist them in the financial realm? So kind of our North Star, so to speak, if you look at it from a 30 ,000 foot view, we want to enhance the growth and optimize the financial wellbeing of those we serve. And in this particular segment of our business, Real CFO Inc., it's really targeted towards small business and their owners. Well, and I think as small businesses, so many owners are not preparing ahead of time for the following year. You know, they get to the end of the year and go, oh shit, I need to go buy a vehicle or I need to go do this or I need to go do that because my company is going to show a profit. And I think sometimes they need to realize it's also, it's not a bad thing to show a profit sometimes as well. you can still have write -offs and show a profit and still pay yourself as well. I mean, many times in business when I had my construction company, I mean, I took a salary, a W -2 employee salary, my business still made a profit and I still, you know, if I didn't owe it, you know, I wasn't getting a refund, but I owed very little at the end of the year. you know, and I think that's what a lot of people, they don't do. Yeah, there's a couple of misnomer out there when it comes to tax prep. One is that, hey, my CPA handles that. Okay, I'm a CPA. I've been in the traditional brick and mortar old school CPA firm, right? I operated like that for a number of years. And just like in your business or anyone else in their business, they get so busy doing the business stuff that they fail to take. more time and put that energy and that focus on proactive solutions, right? Bettering the business, working on your business instead of in it. Kind of like the CPA, right? We're in our business and we're doing taxes and compliance work. And it's almost too late, right? When we're doing that to kind of be more proactive and guide and plan and make sure that that whole kind of the whole circle of tax and financial well -being isn't being intentionally managed, right? It's kind of an after the fact deal. So that's one side of it. And then the other side is a lot of folks say, Tax planning is avoiding tax. Yeah, that's part of it, but it's got two parts as well. It is minimizing your tax liability, but also recognizing what that tax liability is. Right? You are... economy in the same conversation when you do that. I mean, you're paying taxes on the stuff that you buy as well. Yeah, well you want to know what your exposure is, what that tax is that you're going to owe because like you said, you need to show profit. If you're a business operating and you need to grow, you're looking to grow and scale. you have to show a profit. Otherwise, you can never get lines of credit, you can never get loans, you can never purchase equipment on credit. You have to be able to show that profit for them to trust that they can, you know, for banks or loan companies to know that they can trust you, that you're going to pay your bills. Yeah, I mean, that's one side of it, right? I mean, capital outlays, leveraging other people's money, whether it be banks, whether it be outside investors, different lenders, if you don't do that, and you're not showing it, you don't have that idea in mind as you're putting your financial statements together, preparing your taxes, then you're going to come to the end of the road, you're going to need that, that capital. Now, And I'm not saying it's a bad thing, it works in some situations, but now you're going after hard money. And now you're 20%, 30%, you know, maybe even higher interest rates. Short term, that might be a solution. Long term, that's not a good play. That's not a good place. So it takes being intentional, just like anything else. You want to get fit? Get the gym every single day and work out. But you can't wait until April every year, work out for a couple of weeks to get all your documents and everything together, and now you're all good to go, right? Yeah, absolutely. I think that's probably the biggest missing piece in most small businesses is that lack of preparation that goes into it. That's why I think that you guys have such an awesome concept in that, in that most CPAs, all they're doing is putting information in that you've provided them. You know, it's not set up so that it's preventative. It's... You know, it's more reactionary. It is. It is. And both sides have to share a little bit of that blame. You know, as a CPA, as a CPA, we share a lot of it because we need to influence our clients and who we're working with into the direction they need to take. But as a business owner, you have to take ownership of your stuff. And that's why the way we set up Real CFO Inc. and how we're going to offer our solutions to the client is three pillars. There's three core pillars that you have to look at. One is tax planning and prep. I put that up at the top. Right below that is kind of CFO services. Making sure your financial statements are telling an accurate story of how the business is performing. Not only for others to see, but for you to understand and make improvements off of, right? And then the third is kind of the foundational piece. If you want to have the next two, and it's that controller services. That's where you get into the weeds. You're getting into the... the accounting, the bookkeeping, how the systems are designed, what accounting system are you using? How are you tracking? Are you job costing? You know, are you doing these things and is it set up efficiently in your system? So we may talk with somebody that has, I just got off the phone with somebody, they've got a very dynamic solution built out that works for them in the accounting and bookkeeping side. It's great. He's got part of the CFO side. Most small businesses don't have that though. I'd say 90 % don't have that to where they truly know their numbers and where they need to be at. And I think that's what's so important about having a CPA or somebody who helps strategically with that is that it allows them to truly know where their numbers are and know where they need to spend money when they need to spend that money. Yeah, it's not that December, you know, when you got in December, you say, Hey, I need to go buy a $90 ,000 truck so I can save money on taxes. Well, you need a truck, right? You're in, you have a marketing agency. Do you need a diesel 2500 top of the line for your marketing agency that you're going to use 100 % in your business? No, but that's what people do. Right? It's kind of last minute deal. So that's kind of the obstacle and the challenge that we look to provide the solution to is how do we put those pieces in place, whether we do all those pieces or we help people implement those pieces. But more importantly is like, let's create a strategy and a plan so we can look at and optimize your financials. Right. What story is that telling you? And your tax planning. If we look at gross margin and net margin for businesses and kind of look at industry standards out there, and you can do this for your business. You can go on Google, you can search, you can find some benchmarking stuff, right? But it kind of... You know what yours is, it's showing, right? If you have accurate financials, maybe it's not that your finances are 100 % on point, but maybe they're close. You can figure out what your percentage is. And they compare it to industry. I did that just the other day for Prospect and their books look fairly clean. But looking at industry standards, their gross margin is about seven points less than industry. And for the Midwest, it's a $2 million top line revenue company and they're losing their 7 % below industry. What's that mean to the bottom line? not much of it left. Well, no, but if you added 7 % to it, that's $140 ,000. That's real money, right? So just like anything, if you don't know that number, if you don't have that written down saying here's where the good guys are and we're right here and you're not asking yourself, how can I get there? It paints a picture, gives you a visual if you have solid financials. I think that's spot on. I think that's something that so many don't know their numbers and they don't know what their numbers are supposed to be. And, you know, it can start at every business, you know, obviously has different expenses, you know, and is going to have different, you know, revenue goals and margin percentages. But it starts with knowing what an industry wide standard is. That way you can kind of tweak it along the way, but if you don't have that in the beginning to go off of, you're just flying blind. And that's, you know, that's how businesses fail. is, it is. You know, it's very common when you start in business, you have to wear a lot of hats. I get it. I did wear a lot of hats. I still wear several hats, probably more than I need to, right? I need to be better at delegation. Getting better, but I need to be better. But when it comes to financial statements, what I see, especially in younger businesses that maybe just created a job for themselves at first and then they figured out, oh, they're kind of good at it. Let's hire some employees. Now they're turning into a business, but they're very inconsistent in how they do their financial reporting and in classifying their transactions or maybe, you know, they're, they're going out to dinner and they're buying their wife and kids, you know, dinner and a movie, right. And they put that under meals and entertainment, which is as a write off because everything's right off, right? No. If. You know, Amazon and these bigger companies and really the entrepreneurs are doing it right. They may look for tax advantages, how they can spend money, save money. But when you're looking at financial reporting, if I've got co -mingled expenses, a lot of personal stuff in my books, it's going to misrepresent what my business is actually doing. Okay. And then at the end of the day, you're either going to end up paying more taxes because these are junk expenses that don't deserve to be there. Or maybe your preparer leaves them in there, your professional leaves them in there, because they don't know, because you did the books, you're just giving it to them. Then your financials look like shit and you can't get a loan by that new piece of equipment that's going to generate a 50, 60 % ROI on it. Right? I mean, so you got to think of it holistically and not just the right now and how am I going to not pay taxes? I mean, that's the key. worst case scenario, you get audited and you did that, you know, and you've got thousands of dollars in expenses on personal stuff that was not business related that you wrote off as business related. Yeah, that's always been my biggest fear on stuff like that. And why I've really tried not to do that is for that reason, because yeah, that's... Doesn't sound fun. No, audits aren't good. Audits aren't fun. I mean, you know, they happen, they're random, you know, but if you got your ducks in a row and your stuff there, I mean, that's, you're going to be fine. And there's nothing to fear if you're doing the books the right way and keeping good, good record. So as part of what you guys are doing with small businesses, are you guys meeting with them quarterly to kind of go over those financials? Or is it still the typical CPA role where it's more once a year? No, that's what we prefer doing. It kind of depends on the level of the engagement, right? So if we're doing tax planning, CFO services, and the whole kind of gamut, tax planning, CFO and controller services, we're going to meet with them probably more than quarterly, at least from a controller accounting standpoint, and maybe even the CFO standpoint to review financial statements, say here's, here's what we're seeing, here's what you need to do, here's some actions you need to take, you know. What are the goals? What are the strategies? That sort of thing. And then, you know, from a quarterly standpoint, it's like, like we were talking about earlier, is knowing where you are, right? Because you might owe taxes. That's good. It's not a bad thing to owe taxes. Everybody's going to owe some taxes. Now there's strategies you can implement to minimize, but quarterly, you got to make estimates. And that's where people a lot of times fail. They don't make quarterly estimates. at the end of the year, they've got a 50, 60, $70 ,000 tax bill and they're like, oh no, what do I do now? Well, if you would have known that was going to be 30, 40, 50, 60 ,000 throughout the year, you could have bit off chunks each quarter, which the IRS wants you to do, or you could implement effective strategies that kind of consider everything, minimizing your taxes, still showing a good financial overview for your bank. those are the issues. Yeah, when I used to run my construction company, that's something that we did regularly was do quarterly payments just because you don't want to get caught off guard with it. You know, you may have something that comes in, you know, throughout the year that you get that money back, but I don't want to get stuck with a $50 ,000 bill at the end of the year. I don't know anyone who does. Yeah, exactly. So for our small business owners that are listening to this, How do you guys typically charge for that service? Is it based off the size of the business? Is it standardized? What kind of goes into that? so different tiers. The controller services is based off kind of the size of the business, amount of expenses, transactions going out. It's kind of a hybrid of in between. So that's something that we look at and we work on to come up with a reasonable monthly fee if we're going to do the accounting bookkeeping or if it's just quarterly reviews or monthly reviews, that sort of thing. In terms of the CFO services, that typically comes in for most business about$5 ,000 a year. And that's where we're doing analytics, making sure the financial statements are kind of presenting the story that they need to. And then tax planning, again, a base level tax plan, you know, around five thousand or so. And that's a relationship throughout the year. And what I tell people, if you're not getting an ROI on your accountant, whether that be tax planning, tax prep, you don't need it. Yeah. So what we look at is. you know, what are some strategies? What are some things that we can do? It might not make sense for us to work together long term, you know, on a quarterly, monthly or quarterly basis. But it might make sense to get an annual tax plan done and saying these are things you need to implement. We can help you implement them. Right. So. I especially think for a lot of small to mid -sized businesses that $5 ,000 for that CFO services is probably the best $5,000 that could ever be spent. Because most small business owners do not have the financial aptitude to understand a lot of that. You know, they're very good at what they do in terms of what their business does, but they may not be as good on the business side of things and the financial side of things. You know, and it comes down to hiring people that are good at the things that you're not good at. So I think a lot of businesses could definitely benefit from that. No, I think so. And you know, when we're looking at that, as well as the tax plan, it's got to be an ROI. And we get that. People aren't just going to pay us and not get an ROI. That's basically you can pay and you know, it varies just across the board. A corporate tax return, many places charge$2 ,500 and up for corporate return, $750 to $1 ,000, maybe even more for a personal return for the business owners. you're about, you're going to be about 4,000 and 3 ,500 to 4 ,000 and just on the compliance piece. Right. That doesn't account for any planning, right. Anything. So if you really look at it, in terms of an investment, everybody's a little bit different. So that's why we typically what we do is we jump on a call, kind of lay out a process, the three pillars, right. Then we, we do an assessment. Okay, we do an assessment, that assessment is generally around $997 to do the assessment. We look at the tax planning piece, we look at the CFO piece, we look at the controller piece. We're gonna point out weaknesses, vulnerabilities, and opportunities. We're gonna deliver a report that's gonna have value in. Where you're falling short, what are the opportunities, what are the vulnerabilities? Here. Now, we have a solution that we'll propose for that, and it's this. But you don't have to do this with us. You can take that assessment report. take it elsewhere, yeah. Do it internally, have your current bookkeeper, CPA do it. That's fine, but we're going to do an assessment and from our vantage point, see where you're at. And then we're going to propose a solution. And if it fits and it works, great. If not, you know, at least you got some value out of the deal. Yeah, I think that's awesome. I think that's a great way to do it. And then it also gives people a chance to see what you can do as well. So, not only is it a very minimal in terms of a business expense, but I think that goes a long way in building rapport with clients as well. Yeah. And you know, the strategies that we get from a tax plan, CFO side, they're going to more than pay for that, even if they don't utilize our solution, if they take it and they implement a couple of things on it. I mean, that's. Yeah. That's the value. So you're getting an ROI on the assessment, regardless of whether you move forward with our team or not. So, this is gonna be a very blanketed question and I expect a very blanket response to it. As a small business owner, what's one of the best things that you can do to try to help limit that tax risk? What's a big expense that people aren't taking advantage of that they could be? Well, there's several things. I mean, you can, you look at the Augusta rule. I'm sure if you're on TikTok or you're seeing all that stuff, those are legit, right? But there's legit steps that you have to take to implement them. It's not like you can just say to your tax guy, when you go to your meeting in March or April, whenever it is to get your tax, I want to do Augusta rule. You can't. gonna have to prove you kind of rented your home out for a period of time Yeah, if you have kids, there's things you can do there. Paying quarterly taxes, knowing what they are based on real -time data is something that a lot of people don't do. So they're paying maybe $100, $200, $500,$1 ,000, $2 ,000 in penalties and interest because a lot of business owners, they extend their tax return and they extend their personal return and they think that extension buys them an extra six months of time to pay. The extension is an extension of time to file and you avoid getting a failure to file penalty. It's not an extension of time to pay. The IRS wants to know when the tax is due, what was due, and want you to pay it. If not, they're going to go back once they find out what it was you owed and recalculate all the interest and penalties for failure to pay. So I've seen it in a lot of cases. I've had folks talk to me, I look at their prior year return and give them an assessment, right? They paid a couple thousand in penalties, but they don't want to pay a few thousand in tax planning. Yeah, which makes no sense, but people are like that. Absolutely. but that's kind of where we're at. That's the approach we want to take is saying, we're not a solution for everybody. We will do an assessment. We will deliver you value. We're not in a long -term marriage. We're in just a short -term relationship. You're going to give me your stuff. I'm going to give you a little bit of value in return. We're going to see if there's a fit, some opportunities, and a way for us to move forward together. If not, you take this, work with your current people or the team that you find that you're comfortable with, and implement the strategies, you're going to win. Nah, I like that. And basically, if we like each other, we're gonna get an apartment together. Yeah, yeah, ish, right? We'll start slow, man. man, I appreciate you coming on here with me today. For those who want to get a hold of you, what's the best way for them to do that? Yeah, they can shoot me an email at Chad at kenslerbrown .com or they can go to our website kenslerbrown .com that's K -I -N-S -T -L -E -R brown .com and you can connect with me through there. It's Chad S Brown, CPA on Instagram, Facebook, all of those. You can connect with me there as well. Cool. And then you guys also have a podcast as well that if people want to listen to, it's called KB Articles. Highly recommend it. Lots of good info there. They talk with a lot of small business owners, different things like that. It's a lot of really good information. Yeah, we try. It's kind of all over the board. It's not if you try to avoid podcasts, except for certain times of the year that just talk about tax and accounting and all that fun stuff. We talk very little about tax and accounting and all that fun stuff. So you can check us out 11 months out of the year. Right. And we will have some nuggets in there. We like to talk to business owners. You know, what's good, what's bad, what value can they bring to the table, share their wins, losses, things like that. Just... just supporting the community, right, of entrepreneurship and small business owners. And so, yes, it's the KB article, Kinsler Brown, Knowledgebase, I'm sure most, especially if you're in the tech world, you understand what the KB article is, Knowledgebase article. That's where we got the name, kind of corny, but anyway, good stuff inside. Awesome, man. Well, thank you so much for your time today, and you have a good rest of your day, man. Alright brother, appreciate you.