What Your CPA Wants You to Know
A podcast for entrepreneurs! We are a husband and wife team running our CPA firm together. We know just how difficult it can be to take your business dream to a reality. Our mission for this podcast is to guide, empower, and educate entrepreneurs in an easy-to-understand way! We want business owners to have the information that they need when they need it, AND without the hefty accounting invoices from a CPA! Follow along for practical advice, tips, and tricks from a CPA who knows what it is like to run a business, and strategies to keep your business thriving from an MBA! We will also show you how to run a business while keeping your family and sanity intact along the way!
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What Your CPA Wants You to Know
71. It's Time To Have A Quarterly Review Meeting: How We Track Our Goals & Growth in Our Business
In today's episode, we take off our "accounting" hats and put on our "business owner" hats to share how we do a quarterly meeting in our business and how you can do it too!
Ever wondered how tweaking your pricing strategy could work wonders for your revenue? That's just one tip we share as we guide you through the art of conducting a quarterly business review to supercharge your growth.
We explain how we review our financial reports every quarter to uncover growth trends, optimize expenses, and set achievable goals for our small business.
In this episode we discuss using automations in business, cutting costs, planning for upcoming months, and saving for taxes. A quarterly review is a must for all business owners!
Stay with us, and you'll learn how to make every quarter count, laying the groundwork for a financially sound and thriving business.
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We knew some point along the way that we had, our prices were way too low and they were way too low for way too long. So our plan was to up our prices, even if it's by $10 or $20, that makes a huge difference on your overall revenue. So just little things like that. You need to talk about what your strategies are in your business for your specific growth goals in your business for your specific growth goals.
Speaker 2:Welcome to what your CPA Wants you To Know.
Speaker 1:Tax and accounting help can be expensive, so we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.
Speaker 2:I'm Carson Sands.
Speaker 1:And I'm Taryn Sands.
Speaker 2:I'm a CPA with over 10 years of experience helping people start and grow their businesses.
Speaker 1:And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck and we want to make sure you don't pay more than your fair share.
Speaker 2:We're here to share everything your CPA wants you to know in a fun and easy to understand way. Let's get started.
Speaker 1:Let's do it. We have an exciting episode today, or at least I think it's exciting. We are going to shift a little bit from our normal content of tax and accounting laws and things like that and we're going to talk about running a business and the things that we do inside our business. So we're going to be talking to you from our business owner standpoint instead of accounting CPA standpoint. So I think it's exciting. I think it'll be a little bit more of a fun episode to look at these types of things in your business.
Speaker 2:They're all fun. Taxes are a joy, Talking about them, reading about them, paying them so much fun.
Speaker 1:Yeah, actually, people always think that accountants are like yeah, yay, irs, we love taxes, but especially if you're an accountant that has a business, you definitely don't feel that way. So we feel your pain, especially just filing tax returns. And then we've had property taxes in the last couple months and those estimated tax payments. We are feeling it too.
Speaker 2:So if you haven't planned ahead, if you didn't sit down on January 1st and write out a whole business plan for the year, that's okay. Sometimes that can be overwhelming, but you're far enough into the year for 2024 that you probably have a good idea of what's gone on, what's going to happen going forward. So this is a great time to make a plan for the rest of the year.
Speaker 1:So that's why today's episode is about checking in for quarter one of 2024 and what we do in our business. And if you're like, okay, I want to do that, but what exactly do I look at? If I have this meeting in my business, what are the things I should start reviewing? And we did talk about this a little bit on episode 49. That was last year. In that episode, we had a goal setting coach on and we talked all about setting and achieving goals in your business. So if you have these goals where you want to be in a year, where you want to be in five years, what should you do and what systems should you use to make sure that those goals are actually achievable? So one of the things she suggested was to make sure that you have a quarterly meeting every single quarter.
Speaker 1:So the quarter has ended. Let's look at things that worked well. If you have a goal, like, what are you doing to make sure that you're making progress in that goal? And just answer all of these questions? So we are going to share the questions that we ask, and I think this can apply to pretty much any business. We're going to try to make sure that it does. So we're going to go through that meeting today.
Speaker 2:One of the first things you should look at is your profit and loss report.
Speaker 2:The easiest way to do this, if you use QuickBooks, is to just print a copy of your profit and loss report or just pull it up in the software. But if you don't have one of those, then you could use whatever method you use to give your tax preparer your numbers for your business, your income and your expenses. You could do that just kind of a miniature version of that to get a profit and loss report of your own to see how you're doing for the year. And some of the main items you would want to look at on there are your gross revenue. That would be all the income that you've brought in. Compare that to the first quarter of the previous year to see what kind of growth you've had, see how much better you're doing. Or if you fell short, maybe you could think about why. Have you done less advertising? Have you been pounding the pavement a little bit less? Or have your efforts been fruitful and you have a lot more revenue than you had in the previous first quarter?
Speaker 1:working. We want to see what's working, what's not. What are you pouring money into that's not worth it, or time that's not worth it? So this is a really good time to do that, so that a year or two doesn't fly by and you are wasting your time or money. Now, a lot of times, people will not know what a P&L is. So I just wanted to backtrack just a hair.
Speaker 1:You're going to start the meeting by pulling that report. Like Carson said, that's easy to do on QuickBooks not hard at all. But if you do not use QuickBooks or you use some other software, the P&L is just going to give you the total revenue that you made for the quarter your expenses. It will list those out into different categories so you can easily see what did you spend on advertising, what did you spend on payroll, all those things, and then we'll tell you what your net number is for the quarter. So we're just looking at quarter one right now. So, however, you need to get that report. You can do that. Just don't let the word P&L freak you out. It really just means what is your profit and you can easily see the categories broken down on all of your expenses.
Speaker 2:So the next number you should look at is all the way at the bottom. We're skipping from the gross revenue at the very top to the net profit at the very bottom of your profit and loss report. The reason we want to skip down here is that all the numbers in between will make a lot more sense if you have a great handle on what the net income is, and that just means, after all of your expenses are taken into account, how much money did you make? So, did you hit your goal? Are you making as much money as you want to, or did you make more money than you did in the first quarter of the previous year? These are important questions to ask. And if you did hit those numbers, then great, you're doing everything right. Try to do even more of what you're doing.
Speaker 2:If not, now we go back and look at all the numbers in between, because if your net income is too low, is it because your sales weren't high enough, or did your sales increase and then your net income still didn't? Now we can go dig into the expenses and see where did my expenses increase. Look at the same expenses from the previous quarter or from the first quarter of last year and see okay, did we have a lot more payroll, did we spend a lot more on cost of goods or did we advertise too much and it's not getting the bang for the buck that we were hoping it would get? These are the kinds of things you can look at to see where you might try to tighten things up and get those expenses down.
Speaker 1:I think for a small company, it's easy to review your overhead. We do this often just to make sure there's an expense that isn't getting out of hand or something that we can cut, that we don't necessarily need anymore. But as your business grows, if you do have employees especially ones with company credit cards or things like that that is when you really need to pay attention to those expenses, because you don't want something like that to get out of control and not be looking at it. So look through all of those expenses. Everybody's going to have different ones, but for us it's pretty easy just for us to go through things. One example on our list was like our QuickBooks was getting a little out of hand. We'll come to find out. The billing was a little bit off, so we noticed that and we're able to fix that. So that's just an example of something that would come up during this type of quarterly meeting.
Speaker 1:Carson also talked about does the number that you're looking at is? Does that seem right? Is that where you want to be? So, of course, you need to know what is. What was your goal? Are you trying to grow? Are you trying to basically meet what you did last year? So that is a huge thing that you need to review in these quarterly meetings is your growth. What is your growth goal and what is your growth strategy if you are trying to grow. If not, that number might look different. So it might be the goal that you want to either meet or beat what you had last year. So that is, first and foremost, the question that you need to ask is are you planning to grow In our business?
Speaker 1:How that looks is we were growing, growing, growing. But now we are seven years in, or eight years, I don't remember but we are not growing anymore. So we used to look at it and be like, okay, we grew 20% from last tax season and we are happy with that growth. And then we would have a goal moving forward how much we want to grow for the rest of the year. So those were our growth goals and, working backwards, we had to be like what do we want to make sure to do to hit the growth goal? So we couldn't just say, hey, we want to grow and we want to grow by this much. What were we doing to grow? And we had a list of things that we were going to try to get that growth up. So now our growth is much different. We want to make sure that we basically stay about the same and what we've been doing is slowly cutting back on some expenses and things like that. But we're basically staying the same with our revenue because we're not taking any more new clients.
Speaker 2:And while you're not always going to be planning to take new clients and keep adding more and more clients forever, because that could become a really big problem for your personal life, you are never going to completely stop growth mode.
Speaker 2:So now our growth mode is slightly different. As certain clients that are, you know, less profitable for us maybe phase out a little bit from the business, whether they retire or move on, then we will replace them. So we won't be adding clients, but we'll keep the same number of clients and as we replace the less profitable clients, we'll replace them with, hopefully more profitable clients by picking people that want to become clients that also fall into line with the kind of services we provide that are the most profitable for us. Now that's not something you can do. When you first start out, you kind of have to take everything that you can get. But when you reach the point where you are kind of capped out on clients, then, as you have one go out the door and one come in the door, you can start to be very selective about who comes in the door and you might find that your revenue still continues to increase even though your number of clients doesn't.
Speaker 1:Yes, I'm not sure exactly who said this, but we always say this to each other. You know you're gonna be trying to get rid of the bottom five 10% of your clientele as you continue to grow, because the clients maybe that we got in the very beginning are definitely not always ideal. Also, some people fall off. Maybe their business just didn't work out as planned and they don't necessarily need CPA services. There's so many different reasons for different companies, but that is something that we continue to do, even though we're not in super growth mode.
Speaker 1:Another thing that would be like a small change is that we knew some point along the way that we had our prices were like way too low and they were way too low for way too long. So our plan was to up our prices, even if it's by 10 or $20. That makes a huge difference on your overall revenue. So just little things like that. You need to talk about what your strategies are in your business for your specific growth goals.
Speaker 1:One other thing that definitely comes up is when you're looking at that and you have different components to your business, you can often see that maybe one of them is not performing well and the other side of your business is actually supporting that. We see that a lot with clients and I know sometimes that's completely fine. For example, we have a podcast that currently basically makes nothing and so of course our business supports the podcast, so we're able to do that. But there is a point in a business where it's time to just cut that off and move forward with a different plan if it continues to take money from the profitable side of your business. So that's definitely something to look at if you have different aspects of your business.
Speaker 2:That's true. We see this a lot with businesses that have a service side and a supply side. Sometimes the supply side seems like it's doing very well because the revenue is so high, but they're not actually making a profit because the cost of the items they're selling are so high that it turns out just the service side is better. Now, that's not always the case. We see plenty of people on the supply side that make really good money, but that's just an example of one of the things that people need to really look at Not how much revenue am I making, but how much profit am I making on this specific product.
Speaker 1:The next big thing to look at in this meeting would be what costs could you cut or things you could change to be more efficient? There's so many different ways you could do this, but over the years we've thought about it and we've changed our processes here and there, tweaked them just to get them just right, and I feel like we've done a really good job of that. One example is, especially in a service-based business, you can either hire someone to sit there and field phone calls and set up meetings and do all of that, and if you have a lot of work for that person, it may make sense to have someone on salary or full-time hourly or something like that. But for us it just wasn't making sense because we're really really busy a few months out of the year and then we're not getting as many phone calls and things to do during certain times of the year, so it was very off. It just felt like that's a lot of money to spend for something that we're not using as much.
Speaker 1:So then we tried to implement doing something else for booking meetings and calls and we're using a service called Calendly that just books everything for you. You can send a link to your clients and they look at your calendar and book it. So we tried that. That has worked out phenomenal for us. So we're saving an entire salary for someone who was just sitting there with not that much to do, and it actually works out a lot better for clients to book it themselves because they can see what all is available and they can see what works for them and book it right then. So that has worked out really great for our business. And if we wouldn't have been sitting down having these meetings that's something maybe we wouldn't have changed as quickly as we did.
Speaker 2:When you're thinking about filling a need because you've become busier and there's just a need for something there, the first place I would go is an application or program. Can you use Monday or Calendly? You know, calendly is something we're using, like Taryn mentioned, to schedule things. You don't have to have someone sit there and answer the phone to do that If you can automate that through a program. That's number one. Number two would be contracted out Almost always.
Speaker 2:That's going to be more convenient and cheaper if you can just find a service. It might not be a program, but it might actually still be a person. But they're not going to be an employee. It's not as big of a commitment. You can just use them as much as you need them. And then the last option would be you know, if you have enough work to fill up a full-time person, then it might be cheaper to just have that employee than to contract out 20 different things that they might be able to do. But still try to walk through those steps to make sure that you're not hiring someone that's going to get paid 40 hours a week to do 10 hours of work.
Speaker 1:Yeah, we've kind of learned that the hard way. We have tried things, and I think every business owner has to try things. But these meetings are a great opportunity to say, hey, that's simply not working. We're pouring too much time and money into this and we could do it a different way. So we decided I don't know, it's been probably two years to implement Calendly and it's been so good for our business. So this would be the time where we look at it and say, yep, that's working great. Let's look at other aspects of the business. But if it hadn't been, you know, we would be trying it out for a quarter and just reassessing is it working or do we need to do something else? So this is a great time to do that in your business as well.
Speaker 2:That goes right along with Overall streamlining. What can you cut, what can you skip to become more efficient? And this could mean so that you can have less expenses, so that your profits higher. Or this could also just mean that the same amount of work takes you less time, which allows you to take on more work for the same amount of time and make more money, or not, take on more work and just have more time with your family.
Speaker 1:Exactly. You have to see what are your priorities in your business. For us, we've had to work less because our home life is so busy right now, with three kids and sports, and it's very important for us to be there, so we've had to be very good at being efficient when we're in the office and trying to do things that were taking us a lot of time. We're trying to cut time wherever we can and I feel like we've done a really great job being more efficient because we put things into place, and I do know we want to do an episode all about some of the things that we've done, so stay tuned for that one. We won't go into a lot of detail on this, but seeing what you can do to be more efficient and putting your personal life and things that are important to you at the top of the list to make sure that everything just works together.
Speaker 2:Right, and and you know, I know that we are more streamlined because we had more clients, more tax returns to do this tax season than we ever have before, and yet we worked the same amount or less than we did in previous years, so we were able to really make things a lot more efficient around here.
Speaker 1:Yes, not to toot our own horns, but I feel like we had a phenomenal tax season and it really boiled down to us just fine tuning everything over the last few years and getting systems in place, and we did really good with the amount of time we had with picking up kids and sports and all of that. So we definitely seen all of these things we're talking about really really benefit our business. A couple more things to go over when you're doing this meeting. One of those is just planning for the year ahead. So if you've already talked about all your goals and you know what your income was and your expenses and all of that, do you have any purchases ahead for the year or is there anything that you know is coming down the pipeline that you need to prepare for?
Speaker 2:Things that you could put on that list are large purchases, assets or equipment that you may need for your business. You know, plan ahead for that. That costs money and if you don't want to finance it, or even if you do, you need to plan ahead and be ready for that.
Speaker 1:Also another thing to plan ahead for and I know we have struggled with this in the past and some of my friends that are business owners I see this coming up and that is vacation time. Owners I see this coming up and that is vacation time. So if you are a solopreneur or someone like us we have a very small team Then when you go on vacation whenever that is and if you're not taking vacation, you absolutely should be. But if you do go on vacation, you know that those months that you take a week off, or maybe you take two weeks off, however you set it your revenue will definitely suffer, especially if you're a service-based business. So that could look like you not taking vacation because you're too stressed that those numbers are going to fall, or that could look like planning for it.
Speaker 1:Know what's happening and know these are the months that it's not going to look as great, and that's okay. It's not because we were doing something wrong. It's because we weren't here doing anything at all. Now some businesses will make money when you're out, but if you're service-based, it's not that you won't make a dollar, but it will definitely decrease, and I've seen that a lot with my friends in service-based businesses too.
Speaker 2:That's true, you know, even if you are not service-based because, yes, of course, the service-based people are going to make basically zero while they're on vacation, especially if they're a solopreneur. But even a retail store, for example, while you're gone, you probably need to make sure, in addition to the normal people that you have there, if you're going to be gone, you need to have your number two person there almost all the times that you were going to be there and an extra retail person to cover what that number two person normally does when they're there. And so you're talking about your wages for those that week or two being quite a bit higher. So even that can be a pretty big hit to your P&L. Most retail stores, their biggest expense besides inventory is payroll. So be prepared for that extra hit.
Speaker 1:Exactly and just plan for it ahead. We know in July we generally take one of our longest vacations because we've wrapped up tax season. So July doesn't always look so great, but we have in the past years done things at the beginning of July to up that revenue before we leave. And then in December we always take a couple of weeks off before tax season starts and December is usually our most terrible month. We know that. We plan accordingly. It is worth it for us to spend that time with our family, but we always didn't plan ahead in the past, so we've learned that and we also do some extra special things the beginning of December just to get revenue up and then close down for the year. So look ahead at vacation time, plan for that and plan for that in your revenue and then we save the best one for last. We're going to talk about taxes.
Speaker 2:Yes, we put this last because, of course, we have to talk about taxes and it's a big part of this meeting but also because every single thing we talked about before this affects the taxes. So when you pulled the P&L and you see that your revenue's up and your net income's up, you need to decide how that's going to affect your taxes. Or don't decide, calculate how that's going to affect your taxes, or ask your tax planner and they'll help you do that. So next, of course, if you are going to cut an aspect of your business and become more profitable, same thing that's going to affect how much you owe in taxes.
Speaker 2:Your growth goals once again, you're going to grow. That's going to affect how much you owe in taxes. Your growth goals once again you're going to grow. That's great. But a piece of that's going to the IRS, so be prepared to pay that. But, of course, the purchases that helps you in the other direction. If you're going to hire people or you're going to get new assets, new equipment, that's going to help offset some of that growth. So at least make sure you take that into account and that will help you put less into taxes so that you have a little bit more money for cash flowing your business.
Speaker 1:And the biggest question to ask yourself here is that you look at your P&L and see you've profited $100,000 for the first quarter. Do you have enough set aside to pay taxes for that? Have you made estimated tax payments or withheld enough to cover those taxes?
Speaker 2:And don't ever forget that we have a graduated tax bracket system and that's a very complicated way of saying that. Not only do you pay more taxes when you make more money, because it's a percentage, but the percentage you pay goes up. So if you make 50% more than you did the year before, don't think that you're just going to pay 50% more in taxes. You might pay 80% more in taxes for only 50% more in profit, because you're now in a higher tax bracket. Now in a higher tax bracket. So just keep that in mind and make sure you're doing your projections properly. Even if you're a math nerd and you're just looking at it yourself, you still might want to talk to a tax expert, because it's really easy to say oh, I owe 10,000. I made 50% more, now I'm going to owe 15. Nope, probably going to be 18 or 20. So just get ready for that.
Speaker 1:And I know this conversation because we've talked about and I know because I've talked to plenty of. Simply put, if you had a hundred thousand dollars in profit and you kind of project what you're going to make for the year, if you look at that and you see that you haven't even set aside like 20% for taxes, that's an easy way to be like okay, things need to change. I need to really focus the rest of the year on taxes, whether you're upping your withholding if you have payroll for yourself or paying into more on estimated taxes, something so you can easily look at it. You can't easily calculate it, like Carson said, but you can easily look and say, no, like I'm in this bracket. So even if I if I know I don't even have 15 or 20%, I know that I need to do something to make sure that I don't get a huge tax bill at the end of the year.
Speaker 2:And please take this part seriously, because if you have growth year over year, it's not as big of a deal. Because, yes, it's disappointing when you get to the end of the year and you made a lot of money but you didn't set aside the taxes and now you have to pay a big chunk and that hurts. But what hurts even more is you have a great year and you don't set the money aside, and then the next year you don't, so you don't have the money to pay it, and now you're not making as much money as you were before. The money's all gone. That's a really scary feeling. But you can make yourself kind of a recession proof as long as you're setting aside the taxes as you go.
Speaker 1:Exactly. It's not a fun topic to talk about, but it's better to talk about it now, right after quarter one, than at the end of the year, being like I really didn't plan ahead for taxes, because if you've done that before, you're not alone. We see this happen all the time. So just make sure that you're setting aside for taxes, however you do it, and this is a great time to make sure that you're on track for that.
Speaker 2:For service-based people it's a little bit easier. You can just, hey, just keep living off of what you made last year and if you make more money you could set it all aside until you figure out how much your taxes are, at least, and then the rest is yours to keep. But for the retailers and the suppliers this can be harder, because these are the kind of people that see everything they buy in inventory is 50%, 30%, whatever their markup is on it. That's money they could make. So as their business is growing, they just want to keep reinvesting back into inventory. That's great, I'm totally cool with that. After you set aside the money for taxes, first reinvest the rest back into your inventory. Reinvest the rest back into inventory and keep on growing.
Speaker 1:All right, I think that is everything we made a list for you guys, because this is what we go through after quarter one in our business.
Speaker 1:Now, that's not to say that we don't look at other metrics all the time I do. I'm a huge nerd, so I'm looking week to week in tax season, like what's our week, what's our billing, like, was this better than last year? But you don't have to be crazy like me, but it is a great idea to do it at least once a quarter to make sure you're on track and to put things in place to meet your goals. I think these episodes are so much more fun than all the other ones that we do, though they are very necessary. So if you like this style of episode where we talk more about business ownership and other things we do in our business, definitely let us know. We do have a few episodes coming up with that type of information for you, but we want to know what you like and what you're enjoying, so you can always send us a message on Instagram and let us know what type of episode you want to hear.
Speaker 2:Or, if you like, hearing me drone on about taxes for hours on end, just let us know. And hey man, I'll get in front of a microphone and we'll have a good time.
Speaker 1:No one, absolutely no one, wants to hear that, not even me actually Probably not even other tax CPAs.
Speaker 2:No, I don't think so.
Speaker 1:Until next time. Thank you so much for listening to.
Speaker 2:What your CPA Wants you To Know Podcast. Epa wants you to know podcast. This podcast is intended to provide accounting and tax information for educational purposes only. All tax situations are unique and should be handled with the assistance of a tax professional.