218. Business Cash Flow: How to Pay Yourself (and the IRS) Consistently with Erica Goode
Cash flow planning helps us look forward and know what you can plan out in your business to make those good investment decisions, hiring decisions, pay yourself more, or plan for taxes. Erica Goode, CPA and host of the Coaches, Consultants, and Money podcast, helps business owners manage their money. She also runs a virtual accounting firm that supports coaches and consultants with bookkeeping, tax planning, and CFO services. Goode, a former director of finance at Walgreens, started her career as an editor at KPMG. "I love talking money, getting hold of money in a mental kind of way," says Erica. "Getting our mindset wrapped around money so that we can feel empowered and confident in our decisions as opposed to uneasy and confused about what we should do next." As a business owner, Erica says there is so much noise about paying zero taxes. There are legitimate ways that companies pay no taxes, but they are really specific tax credits for really specific industries. If you want to build massive housing, solar farms, or microchips – you'll have better luck with not paying taxes. "I think there's this concept because we hear about these really unique situations, we assume they apply to everybody, and they apply to us," says Erica. "And I'm doing something wrong if I'm paying tax, when in reality, in a service-based business … the goal is to pay tax because tax means you made a profit." Erica wants to plan with her clients so there are no surprises come tax time. She looks at their real-time profit each quarter and ensures they are paying the correct withholding and estimated taxes. So even if you have to pay $30,000, you break it up into four chunks, and you're not writing that full check with penalties at the end of the year. At the end of the day, Erica works to block out cash flow planning for each moving part rather than focusing on the balance in your bank account. While everyone might know the amount they want to see in their bank, Erica works to talk through the cash flow of a client's tax contribution, their 401K, etc., so those pieces aren't a surprise later. For those who've left corporate jobs, financial comfort was in knowing what would hit your bank account at the end of the month. You knew when you were going to get a bonus. It was consistent. You didn't have to worry about making the mortgage payment. When you strike out on your own, that's one of the biggest mindset shifts you have to work on. How scary and uncomfortable that can be as you acclimate to the idea that running a business doesn't mean a consistent income. Cashflow planning helps turn that focus to look forward and how to allocate the money you are bringing in. Erica likes to hold a monthly sit down with clients; you tend to know how much your expenses cost, so it becomes very clear what you can and can't afford. "Sometimes, we don't feel like we can pay ourselves because we don't have a clear view," says Erica. "I love to look forward because I think when we can build out the confidence of the future, we make better decisions today." Connect with guest Erica Goode: https://www.ericagoode.com Follow Erica on Instagram: https://www.instagram.com/erica.goode.cpa/ and LinkedIn https://www.linkedin.com/in/erica-goode-cpa-00205616/ Other GOG episodes you might want to check out: The Secret to Your Business Numbers Will Change Everything with Lauren Colson https://sarahwalton.com/understand-business-numbers/ What Women Need to Know to Manage Their Money With Lisa Crosta https://sarahwalton.com/money-management-women/ You can check out our podcast interviews on YouTube, too! http://bit.ly/YouTubeSWalton Thank you so much for listening. I’m so honored that you’re here and would be so grateful if you could leave a quick review on Apple Podcasts by clicking here, scrolling to the bottom, and clicking “Write a review.” Then we’ll get to inspire even more people! (If you’re not sure how to leave a review, you can watch this quick tutorial.) #CashFlow #Taxes #MoneyManagement #WomenAndMoney #WomenInBusiness #AskExpert #SalesCoach