E667 | Should You Take Business Advice From Your Accountant

In this episode of our podcast, we delve into the crucial topic of hiring the right accounting professionals for your business. We emphasize the importance of both a bookkeeper and a CPA (Certified Public Accountant) and discuss their roles in detail.

We start by highlighting the significance of outsourcing bookkeeping as one of the first steps for any business. By doing so, you can save countless hours each month and streamline your ongoing financial record-keeping. A bookkeeper will ensure that expenses are properly categorized and maintain organized financial records, which ultimately helps in saving money when it comes to filing taxes with an accountant.

Speaking of accountants, we then shift our focus to CPAs and their role in filing tax returns and providing tax strategies. While they can offer valuable advice on minimizing taxes and taking advantage of deductions, it is important to remember that their expertise lies solely in the realm of taxes. We caution against seeking general business advice from a CPA, as they may not fully understand the intricacies of your specific industry or business stage.

We shed light on the potential pitfalls that can arise when a CPA ventures beyond their tax expertise and offers advice on non-tax business decisions. Growth businesses, for example, may face a temporary dip in profit margins due to necessary overhead increases. However, a CPA without direct experience in that field may suggest cost-cutting measures without considering the broader growth cycle of the business.

Furthermore, we caution against relying on a CPA's approval before making major business decisions, as their knowledge of running a specific business may be limited. Instead, we recommend seeking their expertise solely for tax filing and compliance advice. It is also important to consider if your advisors have achieved the desired financial independence themselves, as this demonstrates their ability to provide effective recommendations.

To summarize, this podcast episode emphasizes the need for accounting help, while also stressing the importance of keeping bookkeepers and CPAs focused on their respective specialties. Business owners should avoid outsourcing major decisions and should carefully consider any non-tax advice provided by accounting professionals. Tune in to learn more about the significance of hiring the right accounting professionals for your business!  Definitely dig into this if you are starting a physical therapy clinic!

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Podcast Transcript

Danny: Ask your financial advisor if they are financially independent. Like why are they doing this if they're so good at finance? If they're so good at investing, why are they working with you to do this? Like maybe they already, set and they don't have to do this anymore. Most likely it's their job.

So if they're really that great at investing and finance, why are you taking advice from them if they're not even in a place that You want to be in, wouldn't you want to talk to somebody that's already accomplished what you're trying to do? Hey, are you a physical therapist looking to leverage your skill set in a way that helps you create time and financial freedom for yourself and your family?

If so, you're in the right spot. My name is Danny Matei and over the last 15 years, I've done pretty much everything you can in the profession. I've been a staff PT, I've been an active duty military officer, physical therapist. I've started my own cash practice. I've sold that cash practice. And today my company physical therapy business helped over a thousand clinicians start growing scale their own cash practices So if this sounds like something you want to do listen up because i'm here to help you

What's going on guys doc danny here with the pt entrepreneur podcast and today we're talking about a very specific Type of professional that you need for your business, but also when you talk about the scope of practice in which this person works with you as a business owner, because I see mistakes being made with businesses we work with in this arena all the time, and that is your accountant.

So when I started my own business, I didn't really know much about accountants. I thought that they worked for like big companies and they help keep things organized and it definitely is. A element of what accountants do, but to, there's two sort of subprofessionals that you really need to have in your little business team, if you were to look at it.

One of those is you need somebody that does bookkeeping. I think that's one of the first things you should be outsourcing. It could save you hours every single month for a couple hundred bucks and somebody's gonna do a much better job than you. And if they know what they're doing and they can really help categorize things effectively.

I really hope you maintain very well put together financials that also it's ends up saving you money with your accountant whenever they file your tax. So basically bookkeeping is done on an ongoing basis. Your accounting or your CPA, usually certified public accountant is the one that's going to file your tax returns or the ones you're going to get advice from on.

Things that you can do from a tax standpoint to mitigate your risk. Maybe you're going to reinvest in something. Maybe you're looking to buy a piece of equipment, maybe there's a deduction that is new that they can talk to you about that applies to your business. There's lots of things in which they can help you understand decisions based off of the taxable implications of whatever it is that you're doing or not doing right.

And it's really target because it depends on your goals. It depends on what you're trying to do with your business. For instance, let's say you can get a bunch of deductions against your income and it brings your income down for the year, but let's say you're trying to buy a house or maybe you don't want to do that because you want to show income so that you are lendable so that you can actually.

Buy a house and get a mortgage. So these are the things that we have to keep in mind along with the professionals that you're working with. Bookkeepers, like I said, that's probably the most the earliest outsourcing that should be done to have somebody do that and take care of all that for you and keep you organized there that I would say that is, it's important to do that correctly, but they're going to have a lot less sort of influence with you as a business owner.

Now, if you go to your accountant, they may or may not stay in their own lane. And here's what I mean by that. I have now seen on a number of different occasions, an accountant that physical therapists that we work with are using as like a business advisor. And I think this is actually a terrible idea.

And the reason that I say that, and I've seen this go bad a number of times to where you are getting advice from somebody on business, that they actually have no experience running that business. So the other thing you have to keep in mind from an accountant standpoint, there's a big difference between an accountant and somebody that's a certified, like a chief financial officer that is going to be able to look at many different variables of finance.

And has experience within that business. So when you're talking to somebody that is your accountant, their goal is to save you as much money as they can on taxes, right? Is to help you maintain as best profit margins that you possibly can and pay the least amount of taxes. That's really the goal of an accountant or what you should look for.

The challenge is when a. novice business owner and a seasoned CPA, get get connected and form a relationship with, that person being their CPA. Oftentimes that person will look at their business and give them business advice based on their history of working with other businesses.

Now, this may not be necessarily a bad thing, but the really. Difficult thing to keep in mind. And for them to understand is all industries are different and all phases of business are very different. And if they're any good at what they do, they should be focused solely on saving you as much money on taxes as they legally can not learning about It's marketing and selling and any of these other things that, you might need to get some support on your CPA is not the person for that.

And every time that I hear somebody tell me that they need to talk to their CPA before they make a business decision, I cringe because I think to myself, what in the world. Are you asking advice from somebody that has no idea how to run the business that you run on what you should do as the business owner.

You're the business owner, not your CPA, not your accountant. I had an accountant early on. It's the first one we had to try to give me business advice. He basically was spitballing with me and he was like, yeah, you need to buy a van. You can do mobile treatments of this and that. And it wasn't like a terrible idea, but it was the absolute last thing that I wanted to do a sit in traffic in Atlanta.

And, go around and work with people in a sprinter van. And, the, one of the reasons that guy's not our accountant anymore is because he spent more time thinking about business, ideas than he did actually focusing on the tax code, which changes frequently, and they need to be really clear on what.

What it is that you can do and can't do because if you get audited, that's going to come back on them and you're going to have to explain everything you did. Why? And make sure that you are legally compliant. Make sure your CPA and your accountant is focusing on taxes, not on your business in terms of giving you advice or what you should or shouldn't do.

That is a really. place to take advice from a business owner. The other thing you have to keep in mind is does this accountant have the life that you want, right? Are they financially independent? This is actually something that I had this question posed to me from a mentor one time because I was working with a financial advisor and he goes, Ask your financial advisor if they are financially independent, like, why are they doing this?

If they're so good at finance, if they're so good at investing, why are they working with you to do this? Maybe they are already, set and they don't have to do this anymore. Most likely it's their job. So if they're really that great at investing and finance, Why are you taking advice from them if they're not even in a place that you want to be in?

Wouldn't you want to talk to somebody that's already accomplished what you're trying to do? And that was a really strange thing for me to think about because I'd never thought that, right? And you start talking to these people and it's no, did you like, you have a middle, middle class income and, you have a pretty good job and all that.

And it's but this person is literally giving you financial advice for your hard earned savings on what you should do with it. And yet they actually don't even have financial freedom themselves. That's like a strange thing for us. So we don't question whether you should take that person's information or not as a, really great advice even though they haven't accomplished a thing that they're trying to help you with.

And that's such a, like a strange thing to accept information from somebody that hasn't done what you're trying to do when you look at it that way. And the same thing can be said for your CPA or your accountant, if they're trying to tell you about what you should do with your business and they've never actually run a business like that.

Now, they may have their own firm and that, in my case, I actually liked that a lot more of an entrepreneurial CPA. They're hard to find. Usually that's not the case. Usually they're very conservative and they're going to make decisions based on saving as much money as they can. What really throws them off and what I tend to see is growth cycles.

So if you're going through a business growth cycle and they start to see profitability going down, they think something is wrong when in actuality, when you're scaling a service based business. You don't have a choice, but to take on more overhead and cost of people. And there's going to be a period of time where your profit margins go down before they go back up.

And they're even bigger because your top line revenue, your gross revenue is more. And this is where I see people step in and they get bad information from their accountants about. Saving money on things because their profitability is dipping when in actuality, they're just going through a growth cycle, but they don't understand it because they've never actually run one of these businesses.

So just keep that in mind. Be careful who you take advice from. Make sure that you are asking the right questions. Have you done what I'm trying to do? Why, is this advice valid? Is this a person that I should listen to on this topic? And if you know so much about business, why are you a CPA?

Why aren't you doing something else that is more in line with that? Versus if you're focused so much on business. Are you keeping up with the tax code? Are you keeping up with what you're supposed to be? You know a subject matter expert in because if you are how can you like know about all these other industries that you work with?

It seems like it would be very hard to be able to be good at all of that and I want a cpa That is An absolute tax ninja and they obsess over the tax code. Give me that one. Don't give me the one that's going to give me general business, watered down advice. So be careful who you're listening to when it comes to business advice and make sure you're asking the question, have you done what I'm trying to do?

And if you haven't, please compartmentalize that response as maybe information that you shouldn't follow or take as strongly as somebody who has already done what you're trying to actually accomplish.

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