Video Transcript

00:00
you’re listening to the simple growth
00:02
podcast
00:03
the show that helps business owners get
00:05
their life back
00:06
here’s your host mike callahan o’clock
00:09
last night
00:12
hey welcome back to the essay weekly
00:13
talk show had some technical
00:14
difficulties um
00:16
right back again with carla of uh
00:19
landscaping accounting of
00:20
cycle cpa and carla i want to open it up
00:23
really quick
00:24
obviously you’re an expert in the
00:25
industry in
00:27
all things accounting for lawn care and
00:28
landscaping if you’re in a different
00:30
industry such as home cleaning pest
00:31
control
00:32
or anything else along those lines this
00:34
is going to be applicable so don’t
00:36
um you know hop off this facebook live
00:38
because there’s gonna be a lot of
00:39
content applicable to any service
00:41
business
00:42
um that is watching this so carl if
00:44
people haven’t seen you on facebook um
00:46
you’ve been pumping a lot of really good
00:48
valuable content that’s executable for
00:50
specifically long care and landscape but
00:52
any service business i think would apply
00:54
to this so
00:55
if you would mind really quickly i know
00:56
we’re kind of rehashing we just went
00:58
through we got kicked off but
00:59
um give a quick background if people are
01:01
just tuning in of
01:02
how you cut your teeth as a cpa and then
01:05
how you ended up actually transitioning
01:06
into the green industry
01:08
yeah so i um i first started off
01:12
at a small generalist firm and we didn’t
01:15
really
01:15
niche down on any industry and help
01:17
trying to really help
01:19
any industry per se it just so happened
01:21
that we had a lot of clients in the
01:24
green industry
01:25
and so i saw the same recurring um
01:28
issues that they were facing such as
01:30
cash flow
01:32
profitability and just not being aware
01:35
of
01:35
the financial statements and how to
01:38
navigate their financial health so
01:40
i also worked with a large cpa
01:44
firm and we didn’t niche down there
01:46
either
01:47
but once i started forming my own
01:50
business
01:51
i really became passionate in that small
01:55
accounting firm on really helping the
01:57
green industry and so
01:58
it was just a no-brainer once i for my
02:01
own business to kind of
02:02
help um this industry and really
02:05
learning everything that i can
02:07
so i can guide them in the right
02:08
direction
02:11
yeah i really appreciate you joining us
02:12
and i know um 20 years plus almost now
02:14
25 with the lawn care business that i
02:16
own snow removal lawn care in upstate
02:18
new york
02:18
uh there was a lot of things through
02:20
those 25 plus years that we’re looking
02:21
at cash flow charts of accounts
02:24
how do we keep our book keeping up to
02:25
date whether it’s quickbooks online or
02:28
quickbooks desktop and when we’re
02:29
talking to that cpa
02:32
most of the firms that i use pretty much
02:33
all the firms that i used in my business
02:34
were
02:35
the generalists they didn’t understand
02:37
what we went through in a daily basis
02:40
and the cycles of cash flow
02:42
and the different ways that when we
02:43
lived in those trenches how a service
02:45
business should interact with an
02:46
accountant so
02:47
i had to kind of go out and get my own
02:48
education to be able to talk accountant
02:50
talk
02:50
in the service business and say okay you
02:53
know what are we talking about are we
02:54
talking about top line revenue or is
02:55
that gross revenue or what are these
02:57
different things and what are you
02:58
calling it on
02:59
the chart of accounts versus what’s
03:00
actually in my budget so that was really
03:03
interesting thing but i figured out once
03:04
we got the accountant
03:06
the business owner and my financial
03:08
advisor all on the same page talking the
03:10
same language that’s kind of when the
03:11
magic happened
03:12
um but before we really get into that um
03:15
if you’re just starting out or even if
03:16
you have an existing
03:18
business i think one of the most
03:19
important things that you can bring some
03:21
content to
03:21
is entity structure so a lot of people
03:24
are going out and saying well
03:25
should i do be a dba should i be an s
03:28
corp should i be a c corp an llc or if
03:30
i’m just starting out working you know
03:32
out of the back of my garage do i even
03:34
need this or can i just kind of fly
03:35
under the radar so would you mind
03:37
spending a few minutes just breaking
03:39
down
03:39
the different types of entities the pros
03:42
the cons
03:42
and maybe based on whether it’s a sole
03:45
proprietor a partnership maybe a husband
03:47
and wife team
03:48
uh is there certain things that play
03:49
into a better uh
03:51
entity structure for taxes and i’m
03:54
assuming you’re probably gonna hit on
03:55
some liability or
03:56
the ability to shield yourself from some
03:58
liability as well
04:00
yeah i mean with these entity structures
04:03
i mean a lot of the business owners are
04:05
always
04:07
okay with where can i pay less taxes
04:10
legally but also we have to consider
04:14
some non-tax issues sometimes
04:16
um depending on your situation so i
04:19
think
04:20
the one that is so popular is the llc
04:24
and that’s because of all of the
04:26
advantages that it has
04:28
and it’s also very confusing to some
04:32
small business owners and i um totally
04:35
understand
04:36
just because the llc does provide that
04:39
limited liability
04:41
which is awesome so if you get sued by
04:43
anybody
04:44
they can’t go after your personal assets
04:47
they cannot go
04:48
they can go after only your business
04:50
assets which is a huge plus
04:52
but the reason why it’s a little
04:53
confusing is because an
04:56
llc can be taxed as anything
04:59
it can be taxed as a sole proprietorship
05:01
s-corp
05:02
corp and a partnership so that’s what
05:05
makes it confusing and i’ll break that
05:07
down right now
05:08
so under the irs’s eyes if you
05:11
are applying for an s-corp as a single
05:14
member
05:15
you’re automatic automatically going to
05:17
be taxed as a sole proprietorship
05:21
so you’re gonna file your taxes in
05:24
your 1040 your personal tax return under
05:26
your schedule c like you normally would
05:28
but you’re still getting that limited
05:31
liability piece
05:32
which is awesome for someone who’s just
05:35
starting out but still wants that
05:37
coverage
05:38
um i think that is an awesome um way to
05:41
go
05:42
but if you’re starting off with a
05:44
partner um like you said maybe
05:46
a husband and wife the wife’s gonna do
05:48
you know the bookkeeping side or
05:49
like the admin side they’ll
05:52
automatically place you as being taxed
05:54
as a partnership
05:57
so two or more under net llc under the
05:59
default rules under the irs you’re going
06:01
to be taxed as a partnership
06:02
but you can be taxed as a corporation
06:06
or an escort so you can if you’re an
06:09
llc you can be a lack to be taxed as an
06:11
s corporation or now
06:13
um a court so i think one of the major
06:18
advantages
06:18
of applying to be an llc is the
06:22
limited liability piece and also that
06:24
it’s so flexible
06:25
you know if you start adding more
06:28
revenue
06:29
more clients if you start adding more
06:30
employees or want to bring in a partner
06:33
it can go with you as far as taxing um
06:36
structures go so you can elect to be
06:39
taxed as an s corporation along the line
06:41
if that’s what’s going to benefit you
06:44
next up is a partnership like i had
06:47
mentioned that’s two or more owners
06:49
and a partnership is a flow through
06:51
entity and
06:52
a partnership itself does not get taxed
06:54
on
06:55
as an entity um so all the
06:59
uh net profit or losses at the end of
07:01
the year
07:02
flow through to the shareholders and
07:04
then the shareholders
07:06
claim that on their personal side
07:09
but um and then in a corporation
07:14
the corporation itself does get taxed at
07:17
uh 21 so
07:20
i think that once you are a corporation
07:23
you get you’re getting taxed on your now
07:25
operating profit at 21
07:27
but also if you’re um giving out
07:30
distributions to its shareholders you’re
07:32
going to get taxed again
07:33
so you have that double taxation right
07:35
there
07:37
um in a sole proprietorship you don’t
07:40
have
07:40
any um you don’t have limited liability
07:44
so uh you are the business and the
07:47
business is you
07:48
you’re filing it under a schedule c on
07:51
your personal taxes
07:53
but it is low cost to form so if you’re
07:57
starting
07:58
off and you don’t have a lot of money
07:59
it’s only a couple hundred dollars to
08:01
form
08:02
so that’s a big plus um and the
08:05
simplicity of taxes
08:06
you just file your income and expenses
08:08
on a schedule c and you’re done
08:10
it’s very simple um
08:13
but what i see what benefits the
08:16
landscaping
08:16
industry the most and is the
08:19
s-corporation
08:20
and that’s because it does the
08:22
s-corporation gives you a limited
08:24
liability
08:26
and under the s-corporation
08:29
the entity itself is not taxable uh it
08:32
is a flow through entity
08:34
uh the profits flow through the
08:36
shareholders and
08:37
then you um take care of that on your
08:39
personal side
08:41
but also um you save money on
08:43
self-employment taxes
08:45
uh which are 15.3 so a large percentage
08:49
and you save money on taxes that way by
08:52
being an s corporation so i see that
08:54
as uh the most advantageous for uh
08:57
landscaping business owners
09:00
and carl i’m so glad you mentioned that
09:02
so that was one of the questions i was
09:03
going to have
09:04
half of you is the benefit of that
09:05
escort versus self-employment tax it
09:07
almost pays for itself
09:09
especially with the ability of that
09:10
corporate shield so unless you’re
09:12
absolutely negligent and purposely run
09:14
someone over um
09:16
i mean that corporate shield you know in
09:18
itself is great but then
09:19
the these tax savings for that
09:21
self-employment tax
09:22
is a massive benefit so that’s what we
09:24
did in my business the early years
09:25
literally when i was in college
09:27
um filed as an s corp and then bought
09:30
the additional insurance for an
09:31
additional umbrella around that but that
09:33
that’s huge but i’m also glad you
09:34
brought up the llc because that’s also a
09:36
very interesting structure
09:38
um and be completely transparent when we
09:40
started simple growth that actually
09:42
started as an
09:42
llc and the the i i got upset with my
09:46
accountant because the same guy i’ve had
09:48
15 20 years but once again we weren’t
09:49
speaking
09:50
the same language so i mean it was via
09:53
email finally i called up and
09:54
uh got greg and crystal on the phone i
09:56
said guys what are you doing here
09:58
i’m getting uh letters from new york
10:00
state because we wanted to
10:02
re-categorize the business as an s-corp
10:05
right but it didn’t
10:06
kind of like not in normal terms saying
10:08
you could be an llc but file tax-wise as
10:11
an s-corp and still catch the
10:13
the benefits of both of those so very
10:15
interesting when you’re going to talk to
10:17
a professional like
10:18
carla um ask the questions there’s no
10:21
stupid questions around this and a lot
10:22
of times it’s just
10:23
miscommunication of like you know
10:26
we’re talking about whatever we talk
10:28
about industry specifics as
10:30
professionals and the cpa is talking
10:31
their language has
10:32
returned so you got to make sure you’re
10:33
on the same page because greg and i were
10:35
not on the same page and i’ll be honest
10:37
carl i was frustrated
10:38
but really the guy had my back he knew
10:40
what he was doing but i’m ripping my
10:41
hair out over here and going
10:42
man this guy doesn’t know what he’s
10:43
doing this is crazy
10:46
you know he’s telling me one thing but
10:48
i’m getting other letters from new york
10:49
state he goes no we’re
10:50
you know we’re filing as an ass car like
10:52
oh all right
10:53
i looked on google and i’m like oh you
10:54
can do that all right now this is what
10:55
he’s talking about
10:57
so i think i was like i owe this
10:58
gentleman apology
11:00
but after we set up this corporate
11:02
structure here
11:03
the next thing that most uh small medium
11:06
or even large businesses run into
11:08
especially in the lawn care industry
11:10
but even home cleaning as well at pest
11:11
control is cash flow
11:13
and a lot of times we see this with
11:15
seasonality especially our businesses so
11:17
uh i know at least in my business uh
11:19
especially in the up uh the upper
11:21
northeast here where we do lawn care and
11:23
snow removal we even see it in the
11:24
companies
11:25
in south south and southwest is it’s
11:28
somewhat seasonal even if you don’t even
11:30
if you go year round you ramp up in the
11:32
spring it’s a cash outlay for marketing
11:34
advertising equipment repairs
11:36
and you really don’t start seeing
11:38
positive
11:39
cash flow where it’s extra cash flow in
11:41
the bank at least in my market to like
11:42
july or august
11:44
um and there’s a there’s definitely a
11:45
seasonality of that cash flow and then
11:47
if you’re uh blessed or not blessed
11:49
enough depending how you look at it
11:50
to have the crazy white stuff flying out
11:51
of the sky is snow to plow
11:54
by the time you’ve got that bank account
11:55
ramped up again and you’re
11:57
you know you’re pushing some bottom line
11:58
profits you’re dumping an extra 150 200
12:01
000 in pre-bought materials of salt and
12:03
ice melt
12:04
and then it’s just this financial roller
12:07
coaster of cash flow
12:08
um and i just it’s interesting to see
12:11
the perspective of simple growth where
12:13
uh it’s more of a subscription-based
12:15
model it’s a year-round spread out and i
12:17
think you’re probably gonna hit on this
12:18
how you can do this in the launch
12:19
industry
12:19
but to see the comparatives of the
12:21
seven-figure business
12:22
um in a seasonal business versus one
12:25
that’s more
12:26
um i don’t want to say leveled out
12:28
completely there’s a little bit
12:29
seasonality simple right but you
12:31
it’s completely different so if you’re
12:33
not working with this epa that
12:34
understands seasonality and cash flow
12:37
that’s another major advantage of going
12:39
to a vertical
12:40
industry specific cpa so my question for
12:43
you carl is
12:44
how do we go out and look at that cash
12:47
flow from a tax standpoint or just a
12:49
business operation standpoint
12:51
and are there some ways that you
12:52
recommend um to level out those cash
12:55
flows
12:56
uh for the seasonality of the lawn care
12:57
and landscape business
12:59
yeah i mean i think that
13:03
the seasonality of it really affects
13:05
cash flow and
13:06
i think that we all have to go in with
13:09
a plan so as long as we have a plan
13:13
in place and we never have to be on that
13:15
roller coaster
13:16
you know so um starting off with the
13:19
subscription-based model
13:20
um we’re in a subscription-based era
13:24
we’re subscribing to things some boxes i
13:26
don’t know it’s a wine or
13:28
anything of this story we’re subscribing
13:30
on amazon
13:31
right so that that’s the norm that’s a
13:33
new normal i mean
13:35
we’re really getting out there and just
13:37
um subscribing to
13:39
different services why can’t we
13:41
subscribe to
13:42
landscaping lawn care services okay we
13:45
can bring this model
13:47
and into this especially when you’re
13:49
providing
13:50
law maintenance services whether that’s
13:52
maybe six months
13:54
go ahead and get your clients signed up
13:58
on a subscription-based model
14:01
that way you have those predictable cash
14:04
revenue coming
14:05
in and you can plan for that okay i’m
14:08
going to get
14:09
uh eighty dollars from xyz
14:13
person for the next six months and that
14:16
is really what we want to focus on is
14:18
predictability
14:20
and what we’re gonna get in and what’s
14:22
coming out that’s really what um
14:25
cash flow revolves around with and so
14:28
being on a subscription-based model is
14:29
really going to help you with that
14:32
and um so as far as invoicing
14:35
i see a lot of um clients fall behind on
14:39
their invoicing
14:40
as well and that prolongs their
14:42
invoicing cycle and
14:44
their cash flow cycles so when you’re
14:47
performing a job or a big project make
14:49
sure to invoice them
14:51
the same day or even ahead of time
14:54
right or have it you know where
14:57
you’re saying okay it’s 50 down before
15:01
and then
15:02
after we’re we’re going to charge the
15:04
other rest 54
15:05
50 of it so i think just
15:08
staying ahead of that invoicing is
15:10
really going to help cash flow
15:12
in your business um
15:15
as far as crms go such as service
15:18
autopilot or java that’s really going to
15:20
help you
15:22
invoice clients clients are going to
15:23
have a place to come where they have a
15:25
client portal and they’re able to pay
15:27
you
15:28
quickly and easily having that within
15:31
your business and staying organized
15:32
on top of that is really going to have
15:34
help you with cash flow
15:36
and building up that
15:39
savings account okay so during those
15:42
busy months where you’re gonna have a
15:43
lot of cash coming in
15:45
um having that
15:49
you know like that
15:52
savings account there for the slower
15:54
months
15:55
during the winter and being ready for
15:58
the spring
15:59
rush that’s going to not only provide
16:03
you with a peace of mind but
16:04
also allow you to invest in materials
16:06
ahead of time or any
16:08
other equipment that you may need for
16:09
the spring rush that’s coming up
16:12
awesome it’s a lot of good points there
16:14
to break down i’m sure cody you’ve got
16:15
some questions here i’ll let you hop in
16:16
in a sec
16:17
but one thing i want to touch base and i
16:19
think that was really a good point that
16:20
i think
16:21
especially if you’re doing landscaping
16:23
design build um you can hear the
16:24
pounding in the background here we’re
16:25
getting a pretty good-sized landscaping
16:27
job done at the house i’m working here
16:28
uh but the contractor was really smart
16:30
about it um
16:31
he dialed in what exactly was included
16:33
in it in each phase and he required a 50
16:36
deposit and then as each part of that
16:38
phase hit a certain threshold of like 25
16:41
50 75 100
16:43
um there was basically a percentage of
16:45
the remaining 50 percent that you knew
16:47
cash flow-wise so that covered his fixed
16:50
and variable costs and materials
16:52
and basically probably part of his
16:53
profit but he knew predictably when that
16:55
cash flow was going to happen so i think
16:56
that
16:57
you know living that on a consumer end
16:59
it was nice to see it laid out in full
17:01
transparency but also being on the
17:02
business end seeing that
17:04
that’s going to keep the wheels greased
17:05
and going um the other question i had
17:07
for not to put you on the spot but it’s
17:09
very interesting that
17:10
um a lot of times so like in the
17:14
northeast like a lot of people are
17:16
nervous of doing a subscription because
17:19
they’re going to try to annualize
17:20
a 12-month contract for work they’re
17:22
doing from april to october
17:26
so is there anything that you’d
17:27
recommend as a professional at least
17:29
contractually or
17:30
in some way what happens when the
17:32
consumer’s paying that installment from
17:34
april through october
17:36
and they’re like yeah we’re done we’re
17:38
firing you but you still haven’t caught
17:40
the last four months of that
17:41
installment for the work that’s already
17:43
been previously due do you front load
17:44
the installment for the season start
17:46
or do you just say it’s your installment
17:47
while we’re working um because i know
17:49
that’s usually a big question in the
17:50
services survey we like the idea of
17:52
installments but how do we protect
17:53
ourselves
17:54
yeah so that that is a major question
17:57
because once we come to the winter
18:00
months then the clients like oh well
18:02
you’re not really
18:03
providing like the services that you
18:05
were providing before so
18:07
it could be broken down um during those
18:10
six months only so just breaking them
18:13
down
18:14
during the months that you’re actually
18:16
performing um
18:17
the work um and then keeping it within
18:20
that realm
18:21
so that the client doesn’t feel like
18:23
okay they’re paying like
18:25
12 months but okay what’s happening
18:27
during the winter months and they don’t
18:29
feel that
18:31
okay what are you guys performing you
18:34
know
18:35
and i love it but at least in that six
18:37
or eight months it’s consistent
18:38
predictable cash flow especially if you
18:40
have a drought
18:41
a lot of times people will be like well
18:43
just skip the lawn mowing for the next
18:44
three weeks
18:45
and then you’ve lost a whole month’s
18:46
worth of revenue once it’s gone it’s
18:48
gone
18:48
right if you subscriptionized i don’t
18:50
know if that’s really a word but we’re
18:51
going to throw that in there’s
18:52
subscription
18:55
you’ve at least created predictable cash
18:56
flow for those months no matter what the
18:58
inclement
18:59
uh issues going out with the weather
19:01
it’s you know it’s not as bad as being a
19:02
farmer but let’s face it
19:03
there’s been years where we’ve had
19:05
tremendous drought and
19:06
um in our business we actually somewhat
19:09
of a scription ideas we
19:10
we charged 50 if people skipped it so
19:13
that caused covered our fixed and part
19:14
of our variable cost
19:15
um just keep that spot on the schedule
19:17
so there’s some interesting ways of
19:19
doing that i’m glad you brought that up
19:20
because very
19:21
very insightful how do you keep that
19:23
cash flow going um
19:25
in that seasonal business cody i’ve been
19:27
doing a lot of talking here so you any
19:28
questions for carlo if i was
19:30
up to this point so my
19:33
my biggest concern in moving to a
19:35
subscription model is exactly what
19:37
you’re already hitting on
19:39
which is like once i’ve done the work
19:41
for you
19:42
how do i keep you on are you seeing any
19:45
of your clients
19:46
that are like plugging in interesting
19:48
services
19:49
into the fall and winter to keep
19:51
themselves in front of their clients
19:53
yeah yeah for sure we want to i mean
19:56
we’re gonna have that cushion that we
19:59
talked about that savings account for
20:01
those slow months but that doesn’t mean
20:04
okay forget about revenue right
20:06
so we want to provide some leaf cleaning
20:09
in the
20:10
in the fall we want to provide maybe
20:12
some holiday lighting
20:14
you know um some snow plowing services
20:19
so we do try to bring some other revenue
20:22
streams
20:23
introduce something else so we can keep
20:25
that revenue
20:26
flowing through those winter slash fall
20:29
months
20:30
for sure yep so then how does this
20:33
impact
20:34
your initial selling season because it’s
20:36
kind of
20:37
like for some of these companies this is
20:39
turning into like we’re a
20:40
full-service outdoor home maintenance
20:44
sort of company are so how is that
20:47
impacting
20:48
marketing in the spring how is that
20:51
impacting marketing in the spring
20:53
so i would say that maybe in the spring
20:56
we want to focus
20:57
more in on like the regular
21:01
maintenance and installation services
21:03
rather
21:04
than um the ongoing
21:07
uh scheduled services so
21:10
the things that they’re already used to
21:12
you know getting
21:15
if that makes any sense you completely
21:17
obviously want to put you on the spot
21:18
but being the expert i had
21:20
faith faith you definitely would give us
21:21
the right answer and you know
21:23
drop some knowledge and obviously you
21:24
are so really appreciated to be candid
21:25
about that
21:26
um but now we’re kind of looking at it
21:28
at the big picture carl i’ve got this
21:29
entity i’ve
21:30
broken down now i’ve got some
21:31
predictable cash flow through
21:32
subscriptions and trying to offer
21:33
additional
21:34
ancillary services to raise that client
21:36
lifetime value in the lower season
21:38
yeah um but now i’m talking about cash
21:40
flow
21:41
how am i looking at my my revenue my
21:44
chart of accounts and my expense
21:46
so is there um certain naming
21:48
conventions or maybe
21:49
different uh numbers in the front of
21:51
each account just certain chart accounts
21:53
we should be looking at far as expenses
21:55
income long term liability far as loans
21:58
and things like that for equipment
22:00
investment
22:02
what does that look like when we’re just
22:03
starting out over really refining that
22:05
in our business so maybe we’re in 2020
22:06
right now but
22:07
as we go into 2021 we may want to kind
22:10
of streamline and optimize some things
22:13
um in those chart of accounts and i
22:15
don’t know if it’s applicable
22:17
uh for this talk but maybe you want to
22:18
hit on if you’re using quickbooks
22:20
classes
22:20
based on the ability to separate those
22:22
things out yeah
22:24
and so a lot of our clients all of our
22:27
clients use quickbooks online and i
22:29
think
22:29
you know what whichever accounting
22:31
software you’re gonna have a chart of
22:32
accounts and
22:33
in this industry it’s so important to be
22:36
on top of it and organize within your
22:39
chart of accounts because
22:41
i see a lot of clients that i receive
22:44
you know
22:45
they have chart of accounts but you know
22:47
their assets
22:49
are are not in place they’re being
22:51
treated
22:52
as an expense um so
22:55
if they purchase you know trailers or
22:59
sprayers you know for the people that do
23:01
pesticide um
23:03
you know they’re they’re getting treated
23:04
as expenses but they’re really not
23:06
expenses
23:07
their their assets and um
23:10
that’s what value that we bring in in
23:13
being specialized in this industry is
23:15
that we know not to just throw it in
23:17
the expense account we know that this is
23:19
equipment that people are using
23:21
every single day and that’s going to
23:23
benefit the business
23:25
throughout its lifetime and having
23:28
a organized chart of accounts in place
23:30
is really going to help you get that
23:33
correct and accurate financial picture
23:36
geared toward this
23:37
green industry so like i said i talked
23:40
about fixed assets a little bit um
23:42
having those assets on your chart
23:45
accounts
23:45
um recorded correctly such as trucks
23:48
trailers
23:49
sprayers whatever other equipment that
23:51
you may be using
23:53
um cost of services so anything
23:57
you know we hear it in product um
24:00
services all the time cost of goods sold
24:01
right
24:03
we’re selling a service cost of service
24:05
so anything
24:06
that is directly related to um
24:10
giving that client um that service
24:13
should be in cost of services so any
24:15
materials
24:18
fuel machine gas or gas that you’re
24:20
using to get to the
24:21
client should be in cost of services
24:25
any contractors or employees that you’re
24:28
using should be in
24:29
cost of services other operating
24:32
expenses such as
24:33
advertising office expenses um your
24:36
admin
24:37
uh people people um those things should
24:41
be separate that should be in operating
24:43
costs
24:43
and having that broken down is really
24:46
going to give you a clear picture
24:48
at the end of the day in your financial
24:50
statements for example
24:52
having your your revenue broken out so
24:55
are you providing weed control services
24:57
how much are you getting from that
25:00
are you providing lawn maintenance
25:01
service how much are you getting from
25:03
that so having those different line
25:05
items
25:06
in your profit and loss is really going
25:07
to give you a clear picture
25:10
of okay maybe i should focus in on this
25:12
installation services because
25:14
i’m making a lot of money i have a lot
25:15
of clients in this realm so should i
25:17
invest more advertising into doing this
25:20
or
25:20
we control i’m really good at this
25:22
should i advertise in doing that
25:24
so i think that having your
25:28
chart of accounts set up the correct way
25:30
is going to
25:31
going to give you that picture as far as
25:33
making the important business decisions
25:35
uh moving forward
25:41
i gotta unmute myself here i got the uh
25:42
i hear the saws in the background but
25:44
anyways
25:45
carlos i’m thinking you’re painting this
25:47
beautiful picture of to me almost looks
25:49
like a profit loss i’ve got my gross
25:50
profit i’ve got my net profit i’m
25:52
breaking it down per service
25:54
um and then i’m also figuring out my my
25:56
depreciation on my equipment
25:58
um over that five year or whatever that
26:00
span is or maybe you’re accelerating
26:02
that depreciation um obviously
26:04
you want to talk to your accountant what
26:05
the best uh you know move is and
26:08
one thing my account earlier told me
26:09
like you know you can accelerate that
26:11
but eventually at some point you’re
26:12
gonna have to pay that back i didn’t
26:13
quite
26:14
understand it till we actually end up
26:15
selling the business and lo and behold
26:17
there’s some implications of when you
26:18
actually accelerate and don’t accelerate
26:20
that depreciation uh so once again
26:22
he knew what he was talking about he
26:23
just wasn’t talking mike language at
26:25
that in the early years so
26:28
you know bring it down just a simple man
26:30
that mows lawns but i need to know what
26:31
that implication is
26:32
um but and a little off the topic but as
26:35
you’re
26:36
painting this beautiful picture of chart
26:37
of accounts here and i’m just loving it
26:39
i can envision this
26:40
now are you recommending or do some of
26:42
your clients i guess you know
26:44
if you recommend or not um do you use a
26:47
budgeting feature in quickbooks online
26:50
uh based on that so you have your actual
26:53
verse your budget
26:54
in there with the uh forecasting reports
26:56
or is that something you use in a
26:57
separate software
26:58
what are your thoughts about using
26:59
budgeting in quickbooks online or even
27:01
desktop for that matter
27:02
desktop’s a little more robust but at
27:04
the end of the day it kind of
27:06
it paints the same picture and i feel
27:08
like most service businesses that we
27:09
deal with
27:11
their first problem is and this is
27:12
probably something you don’t hit on
27:13
carla but they don’t know their costs
27:15
to operate so what their cost is their
27:18
true break even before they make a net
27:19
profit so are
27:20
our totally loaded cost breakeven per
27:23
man hour
27:24
and then obviously they usually figure
27:26
it out themselves or go to a consultant
27:27
that does financial consulting they
27:28
figure out
27:29
i need to charge x amount of dollars per
27:31
an hour and this is what it’s costing us
27:34
so maybe you do that but where does that
27:36
come from that kind of that data
27:38
and then the budget and then your
27:39
account how does that all
27:41
in your opinion come together and it may
27:43
not even something you do but i was just
27:44
curious if you had some insights on how
27:45
does all those three knowledge
27:47
kind of balance out yeah i understand so
27:50
i think that as far as budgeting goes
27:54
i’m not huge on budgeting and i’ll tell
27:57
you why
27:58
um budget is something that you set up
28:01
at the beginning of the year and you say
28:04
you know this is what we’re expecting
28:06
this is the expenses we’re expecting and
28:09
here you go and it’s something that
28:11
you compare like you said this is what
28:13
we have now this is what we were
28:15
expecting
28:16
okay that’s great i don’t really like
28:19
um budgeting because it’s so
28:21
retrospective you’re looking at the past
28:23
all the time and you’re saying oh okay
28:26
that was great we didn’t hit that or we
28:29
did hit that
28:30
um but i focus on
28:33
cash flow forecasting so we’re always
28:37
looking ahead we’re not looking at the
28:39
rear
28:40
mirror all the time as for budgeting
28:43
we’re always looking behind we’re always
28:45
saying oh this is what we expected this
28:47
is what we did
28:48
but what forecasting does is this is
28:51
what we’re going to do
28:52
this is what our number should look like
28:55
and
28:56
this is how we’re going to plan for it
28:57
so do we want to hire
28:59
that extra uh field employee do we want
29:02
to hire that extra sales person
29:04
does that make sense what kind of
29:06
revenue are we looking at how much
29:08
are we going to advertise what can we
29:10
get back from that
29:11
so that’s why i look for forecasting
29:15
more than budgeting as far as
29:17
forecasting and quickbooks online
29:20
i use a different software for
29:22
forecasting cash flow forecasting
29:25
um but they integrate with quickbooks
29:27
online and it just makes it easier to
29:29
compare and contrast like use that
29:31
um it makes complete sense i was just
29:34
curious kind of where that
29:35
and i thought they’d probably be outside
29:36
of the scope but yeah most accountants
29:38
don’t do that but
29:39
i love the fact that you’re forecasting
29:41
ahead i’m assuming that’s going to tie
29:42
into your projected quarterlies
29:44
um and cody’s probably heard this story
29:46
but i’ll tell you i’ll never forget the
29:47
story of driving down the highway
29:49
uh when the lawn care business was was a
29:51
pretty good-sized business and uh greg
29:53
the accountant
29:54
uh you know god bless him again hey mike
29:56
what are you doing i’m driving down you
29:58
know 390 the highway
29:59
where about sorry you goes oh there’s a
30:00
restaurant next exit trada
30:03
you might pulling off over the parking i
30:04
thought we were maybe having an
30:05
afternoon cocktail at the end of the day
30:07
on friday to review the taxes all right
30:08
that’s great let’s go
30:09
some of the parking lot you want me to
30:10
come in and meet you goes uh no i’m at
30:12
the office
30:13
what do you want he goes well are you
30:15
parked in the parking lot yeah
30:16
he goes well you owe about 45 000 of
30:19
taxes this quarter
30:21
in two days now we obviously did it but
30:23
obviously that
30:24
that projection of cash flow would have
30:26
been pretty instrumental so
30:28
our conversations changed significantly
30:30
at that point and i agree with you 100
30:32
that cash flow projection and
30:34
forecasting is is essential
30:37
yeah because i mean there are
30:40
less surprises like you said you know
30:43
you got that big surprise
30:45
um but i i i think of it as a
30:48
you know you’re you’re planning a trip
30:50
with your family you know you’re
30:52
you’re driving out um and
30:55
you’re you’re you map it out you know
30:58
when
30:59
where you’re going from a to b but
31:01
there’s always things
31:02
uh you know you might have a newborn you
31:04
pull out to the side you have to stop
31:07
now you have to call the hotel i’m gonna
31:09
be late
31:10
oh no the wife always needs to go to the
31:12
bathroom a hundred times so you’re gonna
31:14
make those stops
31:15
okay life is not predictable you might
31:18
have told the hotel
31:19
you know we’ll arrive at five but really
31:21
it’s eight o’clock
31:23
so that’s how i like to describe it life
31:26
is not predictable i mean look at what
31:28
happened with uh coronavirus
31:31
so that forecasting is really gonna help
31:34
you
31:34
because you can change it it’s dynamic
31:37
it moves with you
31:39
um and that in turn gives you
31:42
less surprises when it comes to
31:44
quarterly taxes
31:46
and what we can expect um in the future
31:49
so
31:50
awesome so i know your time is obvious
31:51
very compressed schedule i appreciate
31:53
you spending time with us but
31:54
one more thing i want to hit on before
31:55
we let you go um you’ve been awesome
31:57
just dropping some really candid
31:59
knowledge and actual knowledge too as
32:01
well um but bookkeeping so now we’ve got
32:04
all this set up we figured out our
32:05
entity we figured out our cash flow
32:06
we’ve got the chart of accounts
32:07
we’re forecasting out where we need to
32:09
be and it’s a fine-tuned machine
32:12
but you know i’m still out in the field
32:14
right now or my team’s out in the field
32:16
i’m too busy managing him
32:17
how do i keep up with my my bookkeeping
32:20
so i’m assuming
32:21
this is only good if your books are up
32:24
to date
32:24
um and i know that’s one thing in the
32:26
early years of callahan’s lawn care
32:28
uh we were a little negligent we you
32:30
know we’d wait to the end of the month
32:32
or
32:32
two months to totally reconcile
32:34
everything now it’s simple growth
32:36
i’m literally paying my internal
32:38
bookkeeper to update everything weekly
32:40
so i know within five to seven
32:42
days literally to the penny where we’re
32:44
at
32:45
and the ability to see where we’re at
32:48
and where we’re going
32:49
um and that’s going to reflect that cash
32:51
flow and the chart of accounts and
32:52
everything else you’ve talked about it
32:53
kind of
32:54
without that it kind of all falls apart
32:57
so
32:57
yeah would you mind just dropping some
32:59
knowledge or just some ideas about
33:01
bookkeeping how to keep it up to date
33:02
how to stay consistent and what’s what’s
33:04
a good frequency so
33:06
obviously it’s simple growth like every
33:08
week may not be applicable for a lawn
33:09
care landscaping company
33:10
it probably isn’t um you know obviously
33:12
owning one for a long time but what
33:14
would you recommend is
33:16
current enough but not too crazy that
33:17
it’s going to cost you too much money or
33:19
drive you crazy yeah i think that
33:23
you know falling behind on your
33:24
bookkeeping is such an easy thing to do
33:27
especially if you’re out on the field
33:29
and you have so much work
33:30
um there and it can it can fall behind
33:33
but
33:34
it’s just so costly when it falls behind
33:36
not only on tax purposes but
33:38
then when you go and hire a bookkeeper
33:41
and then they have to do all that
33:42
cleanup work it just becomes
33:44
one lump sump of just bills
33:48
so i think that exactly when you
33:52
first start out and you’re doing your
33:54
bookkeeping on your own
33:56
i think that maybe you don’t need it up
33:58
to date every week
33:59
or every month but you would like to
34:02
have it up to date enough where
34:04
okay um i know exactly where i stand so
34:07
maybe every three months or six months
34:09
maybe that’s applicable to you but
34:11
it really depends on where you are in
34:14
that process
34:15
so um we normally recommend you know
34:19
every week or every month
34:21
you know to have it up to date so
34:24
there are so i have a lot of you know
34:27
clients that come in and their
34:28
bookkeeping
34:29
is um not up to date and
34:33
um just to give you a little bit of
34:35
background i have one client
34:37
uh she came in her bookkeeping was not
34:40
up to date
34:40
um you know more than a year and
34:44
she had lost out on a lot of tax savings
34:48
and it is just so detrimental to the
34:52
business because
34:54
it obscures the big picture so it
34:56
obscures your financial statements you
34:58
don’t know where you stand
35:00
you lose out on important tax deductions
35:02
for example
35:03
payroll and paying out your you know
35:05
10.99 and
35:07
if you don’t do that you’re losing out
35:10
on those expenses
35:11
um so when i took over
35:14
and i got her on track okay this is the
35:17
tax deductions we should be
35:19
um you know reaching and we should be
35:22
paying out the 1099s and you should be
35:23
on an ira
35:24
and different things like that then
35:28
yes there’s a cost to obtaining a
35:31
professional to do it
35:32
but the benefit outweighs the cost
35:36
um and being behind on it like i said
35:39
you don’t know if you can afford x y and
35:42
z because you don’t know what your
35:43
financial statements look like you don’t
35:45
know where you’re stand
35:46
and that is one of the major concerns
35:48
that my clients come with
35:50
um and so getting them up to date and
35:53
having
35:53
their financial picture in place
35:57
tying in with that cash flow trying in
35:58
with our chart of accounts we’re good to
36:00
go we know exactly where we stand
36:02
we can make those important business
36:04
decisions moving forward
36:10
awesome great advice and i guess one of
36:11
the things too is i’ll just bring up is
36:13
a lot of times when we’re working with
36:14
businesses by no means do we do
36:16
financial consulting but
36:18
for some reason it always gets back to
36:19
the financials um
36:21
especially if you’re just starting out
36:22
off-road sales tax credit
36:24
is is a big one a lot of people don’t
36:26
have that buttoned up
36:28
so on on-road and off-road fuel tracking
36:30
that i mean and you can go back i think
36:32
you’d correct me right you go back about
36:33
three years and re-uh redo your taxes
36:36
and
36:36
refile for those um but i mean we’ve
36:40
we’ve literally found eight to ten
36:42
thousand dollars of literally
36:43
tax credits back um for clients
36:46
literally we’re going into some overhead
36:48
recovery numbers and they’re like well
36:49
you know hey it looks like everything’s
36:52
lumped in this one some like do you guys
36:54
file that credit well no we didn’t know
36:55
it existed and they’re like oh well
36:57
wow we we’ve got a lot of extra money to
36:59
actually pay you to help us do some
37:00
other stuff now because we had no idea
37:02
it was there so
37:03
to carl’s point yes it may look a little
37:05
more expensive but if even if you’re a
37:07
smaller business
37:08
you may be you know stepping over
37:10
dollars to save pennies like it
37:11
is probably beneficial to hire a
37:13
professional like carla
37:14
over at cycle cpa um on facebook she’s
37:17
under the
37:18
landscaping accounting facebook page but
37:21
i mean
37:21
to bring an expert in and just demystify
37:23
some of that stuff is really a benefit
37:25
to your business and it allows you to
37:27
concentrate on what you do good
37:28
maybe it’s sales maybe it’s marketing
37:30
maybe it’s being out in the field doing
37:31
the work
37:32
but a lot of expert in my opinion do
37:34
what they do and drive that business
37:36
success
37:37
uh exponentially and i just can’t thank
37:40
you enough coming on carla just uh
37:42
a lot of knowledge really appreciate it
37:44
um cody any closing thoughts questions
37:46
before we uh
37:47
wrap it up here yeah i want to grab uh
37:50
dave voina’s question from the
37:53
comments here carla earlier you were
37:55
talking about a tool that you use for
37:57
forecasting
37:58
that integrates into qbo
38:01
do you know the name of that offhand
38:04
yeah
38:04
give me one second
38:09
there are a couple you’re as bad as me
38:11
i’ve got them all in there but i have no
38:12
idea what name they are just
38:17
so there’s the uh float app there are a
38:20
couple of them
38:21
um the float app is um integrates with
38:24
qbo and i think that that’s a good
38:25
resource
38:26
as well so cool awesome
38:30
yeah uh so carl if people are interested
38:32
in your expertise around accounting
38:34
especially in the green industry and
38:35
landscaping
38:36
how do they reach out to cycle cpa or
38:38
how do they find
38:39
um the landscaping accountant on
38:41
facebook i know you’ve got a great group
38:43
there where you answer questions as well
38:44
as they come up throughout the year
38:46
so uh if somebody’s interested in
38:48
finding a service how do they actually
38:49
reach out and
38:50
contact you i think the most easiest way
38:53
to reach out is
38:54
through facebook on the group it’s
38:57
called
38:58
landscaping accounting or you can reach
39:01
me through email
39:02
at carla p at cyclecpa.com
39:06
awesome carla can’t thank you enough
39:08
essay weekly talk show coming back with
39:10
another heavy hitter
39:11
next week um going to be jeremy atkinson
39:15
and he
39:15
is um basically over at contracting pro
39:19
he was
39:20
a service autopilot user him uh and his
39:23
brother tripp
39:24
grew and scale uh probably just under
39:26
just over a seven figure lawn care and
39:28
landscaping business
39:29
and actually sold it and then got into
39:31
general contracting so jeremy and
39:33
potentially trip are gonna be joining us
39:36
in dropping some knowledge how they
39:37
utilize service auto pilot
39:39
automations and built a business to sell
39:42
and i have a feeling carla he’s going to
39:43
be talking about a chart of accounts
39:45
and a solid foundational uh financial
39:48
plan where they
39:48
exited the industry and then got into
39:51
uh some larger contracting so always fun
39:55
to see uh you know friends of the sa
39:57
family coming back and dropping some
39:58
knowledge and checking in on them so
40:00
gonna be hanging out with jeremy
40:01
atkinson potentially his brother tripp
40:03
um dropping some knowledge on the sa
40:05
weekly talk show next friday 1 p.m
40:07
eastern 12 p.m central
40:08
myself cody owen and uh jeremy and
40:11
potentially tripp atkinson so carla once
40:13
again
40:14
thank you so much make sure you guys
40:15
check out cycle cpa
40:17
landscaping count on facebook or hit her
40:19
up on her email
40:21
um if you have some questions around
40:22
accounting closing up q4 here
40:24
thanks again guys having me
40:27
if you like this show you might want to
40:29
check out our resources at
40:33
www.startsimplegrowth.com
40:34
while you’re there enter to win an
40:36
estimator chat bot
40:38
mike callahan is available for private
40:40
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