048 Mastering Your Finances: Empowering Business Owners with Strategic Decision-Making
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Join financial expert Regan Bashara as she helps business owners determine when is the right time to make the election to be taxed as an S Corporation. Avoid tax season chaos with a Fourth Quarter Fling. Get an evaluation done of your bookkeeping and a checklist and workbook for the ultimate tax season prep.
In this episode, you will be able to:
Unlock the full potential of your business with accurate financial records.
Supercharge your tax season deductions and savings with a Fourth Quarter Fling.
Experience the benefits of regular bookkeeping for a financially healthy business.
Make strategic decisions with confidence by leveraging accurate and insightful financial data.
You have the power to run your business, don't let your business run you. Take the time to evaluate your financial records, make adjustments, and be prepared for tax season. It's time to be in control of your finances and set yourself up for success in the new year. - Regan Bashara
Available ONLY in the fourth quarter each year: book a Fourth Quarter Fling before time runs out.
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00:00:00
You. This week on the podcast, I want to talk about deciding when is the right time for you to make the election to be taxed as an S corporation. So before we get started with that topic, I want to remind you that right now we are currently in the fourth quarter of 2023. You may be listening to this at another point in time, but just know that the fourth quarter of every year is the best time to get your shit together for tax season. If you have not been keeping up with your bookkeeping and records management for your business, tax season, January through April of every year is not an ideal time for you to try to scramble to get it all together.
00:00:54
The best thing that you can do is, of course, to maintain accurate financial records and keep your bookkeeping up to date month by month, all year long. But if you find yourself towards the end of any year but this year, especially 2023, not having a good handle on your finances and on your records and your bookkeeping is several months behind on reconciliation, if you find yourself in this position, I want you to get on a fourth quarter fling with me. This is an appointment, basically, where I take your business on an accounting date, and then we have a virtual call. So here's what you need to know about the fourth quarter fling. This is not me doing your bookkeeping for you.
00:01:42
This is for folks that have the capacity and the desire and the yearning to learn how to manage their finances and they want to do it themselves. I have so many clients that I work with who do their own bookkeeping. It is not just me stepping in and kind of taking over those tasks for my clients, although I do love having clients that want the done for you bookkeeping services. But the fourth quarter fling is not that. This is really me getting to know your business and helping you figure out where there are holes in your information, in your financial records, where there may be inaccuracies that could cause you to pay more in taxes than you actually owe.
00:02:36
And this is for folks that maybe already do manage their bookkeeping on a regular basis. I just had a fourth quarter fling with a client last week, and she's been my client for a couple of years now. I originally did a training with her on QuickBooks Online because she manages her own books and she really just needed somebody to point out what she was doing wrong. So the first interaction that we had with me and her as my client was her kind of showing me what she's doing and me showing her where her information is incorrect, why it's incorrect, like what she did that caused those inaccuracies. And then I showed her not only how to fix it, but how to do it the right way.
00:03:25
Moving forward, right? So she gets on a fourth quarter fling with me every year. She's doing her books all year long and she really just wants somebody to kind of go over her books at the end of the year before she goes and files her tax return. So I had a fourth quarter fling with her again last week and she has come so far from the first time that we interacted. The first call with her was a training on QuickBooks Online and I told her, your bookkeeping is so tight and you stay on top of it and you do such a great job that there wasn't a lot for me to fix or discover.
00:04:07
But there are several things that I'm helping her deal with but that aren't really her fault at all. And it is a relief for her to kind of sit down with somebody who's going to take that deep dive into her bookkeeping and do that evaluation for her so that she has plenty of time before the end. Of the year if she has plenty of time before she needs to file taxes next year to kind of make those adjustments and to make corrections and to know kind of where she stands as far as what is going to be her income. Because as a business owner, your income is whether or not your business makes a profit. If you are making a profit in your business, it is very likely that that will add to your income and therefore you may end up owing more money if you are at a loss that reduces your income.
00:05:03
So it was helpful for her in so many different ways because she's doing it right, she's keeping it up to date. But looking at your reports at the end of the year or towards the end of the year in the fourth quarter is a great way to know how things are going to kind of shake out in tax season and you can be prepared for that. So I say all of that to encourage you to not waste any more time. Get on a fourth quarter fling. Visit the link in the show notes of this show.
00:05:35
You can go to any of my social medias, you can go to my website. You can reply to any email from me. Let me know you want to get on a fourth quarter fling because that clock is ticking. This is the only time of year that that offer is available to you because it is a specific process that I go through that is exclusive to the fourth quarter, to the year end, kind of close out of your bookkeeping. I don't want you to hesitate on this anymore.
00:06:06
You know that you need to do this before the end of the year, otherwise you will wind up in the same position. January 1. Not having a system, not having your bookkeeping up to date, trying to play catch up, chasing daylight, possibly paying more in taxes than you really need to be and that you actually owe. Nobody wants that anymore. So the first step is to go get booked for a fourth quarter fling.
00:06:30
You can pick a day later this year, but I want you to go book that now because you need to book it a couple of weeks in advance. It is set up so that you choose a time in a couple of weeks. That way I have time to look at your bookkeeping or whatever records you need me to look at. And then of course, it's only available through the end of the year. Listen to me, I am taking time off because I am modeling the fact that I am a small business owner and it does not run my life.
00:07:02
I run my business, it does not run me. I will be taking time off at the end of the year. That means that there's only a couple more weeks for you to get on a fourth quarter fling. Take this seriously. Get on there now.
00:07:18
Don't delay. Don't hesitate anymore. The procrastination ends whenever you go sign up because that is going to get the ball rolling. That is where we map out what it looks like for you to get your bookkeeping up to date, to get ready for taxes next year. Start 2024 fresh.
00:07:43
That is how we do this. When it comes time to get it together for tax season, when we get to the new year, it is so much more beneficial for you to have a plan in place to do your bookkeeping on a regular basis, to have that habit already built into your life, into your schedule, if we start now. So that is why it's only offered in the fourth quarter. That's why I'm telling you to go sign up right now. Pick a day in December, pick a day in November, pick a day later in October.
00:08:18
That's what is available right now. You can decide when you want to do it, but make that decision now to go get signed up. Please take this seriously, y'all. I don't want anybody else to feel left behind, to feel out of control of their finances. I am here for you.
00:08:38
So go get on a fourth quarter fling. Sign up at the link in the show notes. Now let's talk about today's topic. It's going to be pretty quick. After we discussed fourth quarter flings.
00:08:50
And I'm doing this episode on this topic specifically because this came up on a fourth quarter fling with my client last week, we discussed the fact that they're probably going to have to make that election to be an F corporation next year. They are extremely profitable and we know that they're extremely profitable. We know that they can make that election. We know that they're ready and the business can afford to pay them a salary. As the owner of the business, we know that all from their reports because their bookkeeping is up to date.
00:09:24
They can look at those reports and make that empowered decision. They can make that choice based on the actual data. They are not living in the dark about their business and making the S Corporation election as an entity, as a business, to be an S Corp is a big step, but we sussed out that it's probably going to be the best decision for them. And the way that we looked at that is, first of all, pulling their profit and loss statement for this year to date, we pulled up their numbers to kind of see how things are going. Hey, we're at a big profit this year.
00:10:08
These folks have only been in business for a couple of years, and they found out, as most business owners do, that are immediately profitable. That that usually comes with a high tax bill, especially if you are not making estimated payments all year long. You're not tracking things. And then you wait until the end of the year to kind of take a look at where you're at for taxes. And this is why we do the fourth quarter fling.
00:10:36
You all it's so that you can have that system set up to track it regularly. Because when you're waiting until the fourth quarter of the year to make that assessment, decide whether or not you need to make estimated payments to figure out where you stand for your taxes, that is how you wind up with the big tax bill. Nobody wants that. I'm not saying that is the case for everyone, but most of the time it's the folks that are waiting and putting it off that wind up in that position of having to pay a lot and they weren't expecting it. So we pulled the profit and loss statement.
00:11:12
We looked at, hey, this business is really making a profit. We already know what happened for last year in terms of taxes. We ended up owing because business was profitable. But this is a new experience because it's a new business, it's a baby business, right? But they're making a profit.
00:11:29
So what happened was we looked at that profit and loss statement. We looked at what are their regular payroll runs like. We've got a lot of people on their payroll. They have a pretty big payroll every couple of weeks. That has not negatively affected their cash flow.
00:11:47
They are still having positive cash flow. And we know that by pulling the statement of cash flows. Both of these reports are vital to look at regularly for any business. But they're both available automatically in QuickBooks online. So if you're using an accounting software, pull up your profit and loss statement and statement of cash flows.
00:12:10
If you recall from my podcast episode about what I think is the bare minimum for your accounting software, it's that you have that ability to pull those two reports. It's actually three reports, but those two are part of the package, right? So in QuickBooks Online, you don't need to customize a report. They're automatically in there. You can pull them immediately.
00:12:31
All you have to do is change the dates. You don't have to play around with numbers. You don't have to play around with formulas. You don't have to plug things in. Your date is already at your fingertips.
00:12:42
It's already automated. So why would we not want to be doing that, right? When we look at the statement of cash flows and the profit and loss side by side, we can see the business is not a profit, which is how we know that that's going to affect their taxes. That is going to be the reality of their tax return, for the most part reflected on the profit and loss statement. But when it comes to electing to be taxed as an S Corporation, that means that the business will make that election and be a different type of entity according to the IRS.
00:13:16
And the IRS says that the rules are we need to have owners that are taking a salary. If you're owning and operating an S Corporation, if you're working in that business every day, if you're providing services to the business like you're working full time in that S Corp. That means that you need to be paid a salary instead of just taking draws as an S Corporation owner employee or a shareholder employee. That can include things like health insurance, premiums, benefits, blah, blah, blah. But for the most part, that would just be a salary.
00:13:58
Wages paid to the owner for their services that they provide to the business. We've kind of talked about this before that that salary really needs to be commensurate with industry standards. If you're going to hire somebody else to work that position, whatever it is that you do in your business, if you were to hire somebody else to work that position, what would you have to pay them? Just because you're the owner, you're probably thinking, I could just take a smaller salary than what I would have to pay somebody else, because it's just me doing it and I'm okay with that. That is not how we want to look at it.
00:14:32
We want to look at what you would have to pay somebody else to work that position in your business. And we need to kind of have a salary that is commensurate in line with that and also with your education and level of experience and duties and responsibilities to the organization. So all of these things are what we have to consider when we go to make that S Corp election. But the way that we evaluate whether or not it's the time to do that at the beginning of the year, because that's when you make the election is at the beginning of a fiscal year. The way that we evaluate our numbers is by looking at our reports, specifically the profit and loss statement to see what kind of profit we're at this year.
00:15:15
Because if we're a sole proprietor or a single member LLC or even in a partnership most part or all of that profit, if it is profitable, is what we have to claim as income on our taxes. It's a little bit different if you are taxed as an S Corporation. But S Corporation owners need to take a salary, which means that you're getting a paycheck just like your employees do. And whenever you get that paycheck, taxes are withheld from it. So you can either stay on top of your bookkeeping all year long and make estimated payments as a sole proprietor or a single member LLC.
00:15:55
Pay into your tax liability that way. Or you can do the S Corp. Election but you need to put yourself on a salary and therefore have taxes withheld from your salary and receive a paycheck because you're an employee owner or an employee shareholder of the business. So that's what we looked at on my client's fourth quarter fling last week about making that election. So that is really like the fourth quarter fling isn't really just for people that don't have it together and have nothing to show for finances, for record keeping, for bookkeeping.
00:16:33
It could also be for the business owners that are on top of their should that do stay up to date with their books, they pay somebody else to do it or they do it themselves and it's tight and all the data is there. But this is an analysis and an evaluation call where we could sit down and talk about what you need to do to get your books up to date or we can take the bookkeeping that is up to date and is accurate and correct and talk strategy. That's what the fourth quarter fling is all about. Making the S corporate election is not for every business at every stage of business. So the way that we evaluate it and figure out if you're able to do that requirement for a salary for the owner or if it's not the right time yet, when might it be the right time?
00:17:24
We can make projections. So all of that comes from looking at your reports, looking at your data. So you got to have the data in the first place. And if you don't already have your data together, if you don't have a set of books that is reconciled and accurate, get on a fourth quarter fling with me, get on a consultation with me. But the fourth quarter fling is for the folks that know that they can do it themselves and really need to know where to start.
00:17:50
Like what does the roadmap look like for them to get their shit together? So visit the link in the show notes. I cannot wait to meet you and see you before the end of the year. Hope you have a great week.