1539 – Examining Your Expenses with Wendy Barlin

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0:58with us right now it's wendy barlin wendy you are a profit consultant cash flow strategist tax advisor you're every business owner's best friend wendy uh you're also the founder of about profit on the web at aboutprofit.com and then you've got your personal website and that's wendybarlin.com wendy welcome to the show thank you so much all things money Yeah. So tell us more about who you work with, what you do, the impact you have on the world. I work with business owners who are looking for answers and they have nowhere to turn. The World Wide Web is so full of misinformation when it comes to taxes, as do their friends on the golf course or their buddies at dinner.

1:44So I'm the place where people come where they're frustrated. They want to find out how do I pay less in tax? How do I keep more of my money? I work so hard and my life isn't getting any better. That's when they come and find me. And our entire focus is to get our service-based businesses up to a 50 % profit level. Wow. How do we do that? And why isn't every business that profitable? Because I think many business coaches, bless them, working hard as they can, have businesses focused on driving revenue. Grow your revenue, get to a million, get to 5 million, get to 10 million. And nobody talks about the expenses it takes to get there, how many people you need, how much you need to spend on marketing.

2:29So everybody's focused on their bragging rights of their revenue number and nobody's looking at the profitability. Nobody's looking at what you take home after taxes. And that's where I stepped in and said, wait, come on, you guys are working so hard and yet your lives aren't getting any better. And truth be told, that was me five years ago. So I know how it feels. I crushed my revenue goal and then it came to December and I had nothing to show for it. And I sat down and cried and said, come on, there's gotta be a better way. Yeah, so is this, obviously there's kind of the tax side of things, which obviously you're very keen on.

3:13is what are the other kind of main areas that we're looking at to increase profitability? Are we looking, obviously, I would hope looking at our products and pricing and that sort of thing, but give us a one-on-one on this about finding more money. What's the machine that does the work? What's the machine that does the work? If you're in the service-based business, you've probably got people doing the work or you're doing the work. And what's the cost of service? Very often people go, oh, we don't use timesheets because we're service-based. We offer flat fees. We offer value. I don't care. What is the cost of a dollar?

3:49What does an hour cost you? How can we put metrics in place to make sure that you're taking home of half of everything you bring in? So some of it is pricing appropriately. Some of it is how you're getting the work done. And then Some of it is just plain old overspending. You know, people say to me, oh, I spend 10 % of my revenue on marketing. Like, who told you that? Well, I read that on the internet. You should spend 10 % of your revenue on marketing. I'm like, but if it's falling on deaf ears, then is that really a good use of 10 %? I'd rather use it to pay my golf club dues. So it's really important to look at your expenses and see which ones are supporting the revenue and which ones are just expenses for should sake.

4:35And then we look to minimize those. Yeah. And how did you step into this work? What was your background? So I'm a CPA by training. I'm originally from South Africa. I came here with nothing but a bag of dirty clothes 25 years ago. And through the school of hard knocks, I learned how to manipulate and use the American money system. So everything I have today is what I've learned myself. And then I spent about 20 years building my CPA firm. And during that time, I never had time to answer these questions for business owners. So over the last two years, my entire focus is on educating business owners about finding more tax deductions and managing their cash.

5:22Because for 20 years, I was just pumping out tax returns. And now I've said, you know what, my real purpose is to help people find the answers. Right now, the American economy is being run by small business owners. And it's our goal to help everybody do better. Yeah. Speaking specifically of taxes, so here we are, you know, we're recording this episode. It's kind of toward the beginning, you know, the first half of 2023. What are some tax rules or laws that every business owner, listen, you need to take a look at this. Yep. I think what everybody can walk away with today is that anything is deductible for your business that is ordinary and necessary.

6:08That's all the law says. The IRS code says anything is deductible for your business that is ordinary and necessary. It doesn't say if you're this kind of entity or that kind of entity, or if you're in this industry or that industry. No, ordinary and necessary expenses. So I want everybody to look at every dollar they spend and say to themselves, could this be an ordinary necessary expense for my business? And if so, you found yourself a tax deduction. There are three no's, no clothing, no gym dues, and no country club dues. But outside of that, ordinary and necessary is a deduction. And the second piece of that, you must have a receipt.

6:51A bank statement and a credit card statement are not a receipt. And in the unlikely event that you get audited, a bank statement and a credit card statement will not support your deduction. So even if you really did buy pens and paper from Target, but you don't have the receipt showing the date and the amount and what you purchased, your tax deduction could be denied it is that serious wow wow okay do you ever do you recommend any well here's what i do i keep a big box and i throw all the receipts in that box for the year and at the end and this is what i'm doing and then at the end of the year i empty the box into a big bag uh and then i throw the bag in a closet and i write the year on it uh heaven help me if I get audited and I have actually haven't helped the auditor Josh because you're going to show up with your big bag and go the receipts in here I promise uh but is what is there a better way uh to organize it does not have to be beautiful again IRS law does not say it has to be alphabetically filed it has to be a jpeg it has to be a piece of paper they don't say how you keep your receipts just that you have them so for me I usually take a photo with my phone yeah of all my receipts and then put them in a little yellow folder that says 2022 or 2023.

8:15And then in the unlikely event that I was audited, I would just email that over to the auditor and say, all the receipts are in here. Because if you think about it, there are very few people working at the IRS, right? We all know that. We've all tried to call. There's nobody there. So if you do get audited, that auditor does not have a lot of time. Generally, what they'll do is look and see if you have receipts and they'll spot check. So they're not going to go through every receipt. They're not going to alphabetize your bag. What they're going to do is spot check. But in my experience in doing this for over 20 years, in an audit where a client shows up and has no receipts, then you kind of don't have a leg to stand on.

8:56Where a client shows up and has some receipts, we can negotiate. So you really just want to be that person that's showing that you are doing the very best you can do. None of us has 100 % of our receipts. I don't either. Like life happens. But do the best you can do and know that there is no receipt jail. So if you don't have your receipts, no one's going to take you away in the middle of the night and put you in tax jail. What would happen is in the event of an audit, you may find that some of your deductions are denied. So not a great situation, but again, no receipt jail. Just I highly recommend that as part of your daily practice, you keep track of your receipts and you deduct anything that in the broadest sense can be ordinary and necessary for your business.

9:42That's what makes my job so much fun. You also have a book and it's called That's Deductible, Simple Tips and Tricks to Find More Business Tax Deductions. I would highly recommend, again, I think it's just one of those things as a business owner, this is adulting. These are things you need to know at least the basics here. and also have somebody that's, you know, kind of keeping eyes and ears on this and certainly advising it. Because there's, you're absolutely right. Like, you know, claiming the right to, you know, what was it? Like, for example, the Augusta rule. Like, if you're not doing that, I mean, come on.

10:18That's so easy. And that is so significant. But Wendy, I want folks, you know, who've come across this podcast, you know, maybe they're checking you out and they found us, you know, when they go to your websites, there's aboutprofit.com and then wendybarlin.com. What would you recommend kind of that next step? And, you know, how can you specifically, like what does engagement look like? So the book is the easiest, right? 10 bucks on Amazon. It'll give you broad strokes what you need to know. Then at wendybarlin.com, there are a lot of free resources and downloads for business owners. Home office deduction calculators, auto calculators, Go to the website, poke around.

11:01There's a bunch of free stuff. And then you can always reach out to me. I am not in the business of doing one more tax return. I am in the business of helping you get the answers you need. So if I can't help you, I'm going to find someone who can. Not everyone needs a CPA. Very many people who are risk averse may, in fact, just file their own tax return with the numbers they have. You only want to hire a professional if you want to learn. you want to get educated and or you want to play in that gray area of ordinary and necessary and bounce some ideas back and forth, then you're looking to pay an advisor.

11:38It's not for everybody. And so I love to have conversations with people and find you the best solution for your specific needs. Yeah. So again, which website do we send them to? Wendybarlin.com. Yeah, that's B, Wendy with a Y, B-A-R-L-I-N.com. Wendy, this has been a great conversation. I wish we had more time because I'd like, I suspect that you probably, in addition to the book, you probably have like, yes, you got a blog. You've done lots of other podcast interviews. There's like, if you go to Wendy's website, you're going to find lots of good stuff here. Thank you so much. Yes. And if there's one thing we leave people with, please take a home office deduction if you're entitled to it, you will not get audited.

12:26That is a myth that has been living around in the ether for 20 years. And it's simply not true. If I have to hear that one more time, I'm going to get another gray hair. Yeah, it's normal. How many businesses are being run from home? Right? And people call me and they say, my accountant told me if I take a home office deduction, I'm going to get audited. I'm like, where is he under a rock? Come on. Yeah, nope, nope. All right, Wendy Barlin, again, your website, wendybarlin.com, your profit consultant, cashflow strategist, tax advisor, and professional speaker. Wendy, thank you so much for the conversation.

13:00You're welcome.

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