Episode Transcript
[00:00:00] Speaker A: Sam.
[00:00:30] Speaker B: Welcome to Balancing Acts, where we share real stories, strategies and solutions that help businesses grow and thrive. I'm Linda Hamilton, a CPA exit planning advisor and business coach and your host today, and we're diving into an inspiring journey story today. My guest, Temby Malalazi, is a South African trained accountant who made the bold decision to start start over in the United States, earning her accounting degree, passing the CPA exam, and building a thriving practice here. So let's hear her story and some of her tips as a CPA for our audience dealing with taxes and finance. Welcome, Temby.
[00:01:12] Speaker A: Thank you. Thank you, Linda, for having me.
[00:01:16] Speaker B: So I think many of our audience can understand leaving behind your career, your credentials, your country, and starting over from scratch is difficult or frightening at least. Right. So that's what you did. What inspired your move from South Africa?
[00:01:36] Speaker A: So I'd always dreamt of living and working in the US Before I moved here, I actually used to come and visit quite often. I had family and I'd come visit often.
So it was during those visits that I would imagine myself living and working here, and not just for the professional opportunities, but also for the challenge of building a new life.
[00:01:58] Speaker C: Right.
[00:01:59] Speaker A: So South Africa gave me a very strong foundation, but I wanted to test myself in a bigger market and also get international exposure.
So it was about growth, not just in my career, but also growth as a person.
[00:02:15] Speaker B: And that's wonderful. And, and it is a much bigger market. And so sometimes that, you know, there are many different aspects of relocating and doing business in the US Is the accounting profession much different in the United States than it is in South Africa?
[00:02:33] Speaker A: So the fundamentals of accounting are the same, like a debit is debit, credit is a credit. Right. Whether you are in South Africa, in the US or in Australia or the, the fundamentals will be the same. But the U.S. the United States of America has a, an entirely different regulatory and tax environment.
So you'll find at home in South Africa, where I was trained, we use the international financial reporting standards, whereas the United States uses the Generally Accepted Accounting principles.
And so that is the main difference that I can think of as far as the core functions of accounting are concerned, preparing financial statements, doing auditing, those remain the same whether you're here or back at home. And, and you'll find that most of the accounting firms that are in South Africa are also here in the US as an example, I was trained at Arthur Anderson and at kpmg. In both of those firms that existed, well, Arthur Anderson existed then in South Africa. And both in the US And KPMG still exists to this day. So the main difference is really in the, in the environment, tax and regulatory.
[00:03:42] Speaker B: Yes. And some of the rules. That's interesting. And I was also, I was trained at Coopers and Lybrand in the US which is now merged into Price Waterhouse. So all those big firms changed. But, you know, they gave us, I think, a certain training to bring our expertise to the smaller business market. Right. To be able to think in terms of the quality of standards those firms offered us in our training.
[00:04:07] Speaker A: Absolutely. The training was amazing, right? Yes.
[00:04:11] Speaker B: So tell me about challenges you faced in re earning your degree. And our first segment is about your story. So it may be a little bit technical, but There are maybe CPAs and professionals listening as well. But anyone trying to change and re earning a license or a degree in a new country will face challenges. What were yours?
[00:04:32] Speaker A: So, yeah, honestly, it was humbling. There were several challenges, but I'm going to mention a few. And the first one is that I already had lots of years of experience.
[00:04:42] Speaker C: Right.
[00:04:42] Speaker A: And I had a lot of credentials already. But coming to a new environment, new country, I had to, first of all, I had to explain all the time what each other chartered accountant is.
So most people here are not familiar with chartered accounting. So every time someone. What is that? Or.
And the second one is that I had to start from, start from the bottom again. Like, I had to prove myself again. And for me, I had to. I decided that I wanted to take the CPA exam. Well, I got tired, really, of explaining what a chartered accountant is. So I took the four CPA exams and I had to also redo my Masters in text. I went back to law school and I did my legal studies in text. Because of what I said earlier, the United States has a very different tax environment.
And I found that balancing work and studying and trying to adapt to a new country had its own challenges. But I am glad that even though it was overwhelming, that experience taught me a lot of patience and it also taught me to be resilient.
[00:05:59] Speaker B: Well, I want to congratulate you on that accomplishment because it is, you know, for an adult to start over and to do all the studying that is required, and it takes perseverance. And so really, it's an amazing accomplishment. And congratulations. And I did go to school at night, so I went 10 years at night to do the accounting degree. And that's nothing compared to coming and starting over when you've already succeeded. So, wonderful, wonderful. It's an inspiring story.
[00:06:36] Speaker A: Thank you.
Thank you.
[00:06:38] Speaker B: So was there a defining moment that made you feel like, yes, I made it. I'm done?
[00:06:46] Speaker A: Yeah. The day I got my CPA license, it was an emotional moment for me. It wasn't just a certificate.
[00:06:54] Speaker C: Right.
[00:06:54] Speaker A: It was actually validation that, you know, all those long nights, all the inconveniences that I went through, all those sacrifices that I had to make, it was validation that all of those were worth it.
[00:07:09] Speaker C: Right.
[00:07:10] Speaker A: And the other thing, the other time, I would say after I started my firm, like, a few months after I started my firm, I got my initial clients referring new clients to me. And that for me also was like, wow, I'm doing something good here. Because it helped me realize that I had built a network in a place where I didn't know anybody when I first got here.
So those are the two things that I think stand out for me.
[00:07:37] Speaker B: And again, so much pride, I think, in doing that and changing and then starting your own business, which is a lot of what our show Balancing act is about, is balancing business and life. Right.
So for our audience who are not, maybe in our profession, some might be, there could be lawyers starting new businesses, coming from other countries. What advice would you give to anyone else who wants to start fresh in a new country or any new industry for that matter?
[00:08:10] Speaker A: So I would say just let go of the ego and embrace learning again. It's something that I call a teachable spirit. One needs to have a teachable spirit.
[00:08:22] Speaker C: Right.
[00:08:23] Speaker A: And you also need to be patient with yourself and patient with the process.
Like, don't try and take shortcuts. Just be patient. And another important thing is for one to surround themselves with supportive people. You want to have people around you that will encourage you on the dream that you have on the journey that you're on. So have people that will motivate you. So, for example, starting in a new country, you probably have to do the night thing that you're saying, studying at night. I had to do that. You had to do that. And that means denying yourself a lot of other social activities that are happening at that time. And you want to associate with people that will encourage you to do that and not encourage you to go and attend the social events instead.
[00:09:08] Speaker B: That is so true. I do remember being studying for exams while everybody else was watching the football game or something. It lasted forever. So, yes, when you really want something and you know you have that commitment.
And in our last few minutes of this segment, you have such a great story, and I think added to it is that you actually started your own Practice as opposed to.
So let's talk about that. What made you actually to start your own practice?
[00:09:42] Speaker A: So excuse me. Before I came over to the US I was already running my small practice back in South Africa.
So moving here I knew I first needed to lend the ropes, which is why I went into corporate America while I was studying. And once I was done with my studying and I felt comfortable that I know how things are done here, that's when I decided, you know what, I want to go back to running my firm again. And then I started running my firm because I have the passion of helping small businesses with a lot of the things that they struggle with. Most people are good at what they do, good at running their businesses, but they struggle with the financial side of the business. They struggle with their taxes, they struggle with staying compliant. That was one of my biggest motivators in driving and I find joy in helping the small businesses. When a business person's face lights up because their tax issue has been resolved or they now have clarity on their numbers, that gives me a lot of joy and fulfillment.
[00:10:47] Speaker B: And that is really a great reason to start your own pre practice. And you're right.
I know. I think a lot of us feel that way who are serving business owners because this is a service industry. Right.
In tax, how can people find follow you online or learn more about your firm?
[00:11:09] Speaker A: Sure. So I am on LinkedIn Tembi on LinkedIn you'll find us also my firm name arctex advisor CPA is also on LinkedIn and on Instagram you'll find us Arctics Advisors or on our website architectsadvisors cpa. So that not CPA is important because some people will put dot com in the chemistry. So it starts CPA and if you want to send us an email hello@textadvisors CPA.
[00:11:37] Speaker B: And you want to spell that acc.
[00:11:42] Speaker A: Acc t a x A D V I S O R S so it's ACT Tax Advisors. It's a short of accounting and tax advisors.
[00:11:52] Speaker B: Thank you.
You had an incredible journey of resilience and reinvention.
I'm as I say, I'm amazed and inspired by that. And your story I think shows that starting over isn't the end. Right.
It's often the beginning of something even greater and I hope that inspires others listening. Thank you so much for sharing that story. Stay with us. When we come back, temby's going to and I are going to talk about navigating tax resolution and reliefs when that IRS comes knocking on your door and you're worried about it. TEMBY has some solutions for you. Stay with us.
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And all the content is bilingual in English and Spanish and it's from business and news to life and culture and everything in between. So search NOW Media TV on your Roku or your favorite podcast and never miss a moment.
Welcome back to Balancing Acts. I'm your host Linda Hamilton, a cpa, and I'm talking with Tendi Malalazi, a South African trained accountant who is practicing as a CPA here in the US if you love what you're watching, we want hope you can catch balancing acts 24. 7 on on your favorite podcast app on you can stream live on Roku or Apple and it's a fully bilingual channel both in English and in Spanish and from business, news, lifestyle and culture and everything in between. So tune in to NowMedia TV. You can watch it right on the platform or as I said, download Search Now Media on Roku or Apple.
So we're going to talk about, you know, that dreaded letter you get from the irs. And I know taxpayers that I've worked with over the years, sometimes they don't even want to open the envelope. They just have chills just from seeing IRS on the label. So there's a lot of panic there.
But TEMBY sees it as like solving a puzzle. So temby, let's talk about your work in tax resolution.
What made you want to help taxpayers in that area?
[00:14:50] Speaker A: Sure. So I started off in traditional tax preparation and accounting, but I kept meeting clients that were already in trouble with the irs, and some of them were overwhelmed or they were scared or some were even ignoring the letters. It is at that point that I realized that there was a need for somebody who would go beyond the number crunching, beyond just the tax prep, somebody who was going to fight for these people and help resolve some of the issues that they had pending for several years. So that's what led me into going back to school again to specialize in this particular area of text called tax resolution.
[00:15:36] Speaker B: And so that now that kind of, you know, it's about resolving their problem. Right.
So what is a common mistake that you see taxpayers make when they first get their letter?
[00:15:49] Speaker A: So the biggest mistake, and the most common one, is that taxpayers see the letter and they see the IRS on the envelope, like you said, and they park it on the side like they ignore it. And that is one of the most common mistakes that taxpayers make.
[00:16:04] Speaker C: Right.
[00:16:04] Speaker A: So putting the letter aside or ignoring it actually makes the problem bigger or makes the problem worse. Because most of those letters that come from the IRS either have a deadline or some of them actually don't even are not even as scary as people think. But you will not know until you open the letter, right?
Opening the letter and seeking help is actually the right way to address any letter that you receive from the irs. It's actually the, the smarter option instead of hiding your head in the sand and hoping that the IRS is going to disappear.
[00:16:38] Speaker B: Because they never disappear, right? I mean there's no. Once they send you that letter, if they want to get an answer for something, they will keep asking. Right.
Until they get it. That's interesting.
So let's, before we move on to related about some cases, can you share like two or three types of letters that people get that may be, you know, maybe from the simple or to more challenging one? What kind of notices are there?
[00:17:08] Speaker A: Okay, so the first one, a very easy, straightforward, non threatening letter, is a letter that the IRS will send to you seeking clarity of information. Maybe they've seen a discrepancy between what you put in your tax return and what other third parties have reported. Maybe a payroll company or a bank or something else. So the IRS will write a letter and say we have this amount and on your tax return there was this amount. So then they are requesting you to confirm or clarify why your amount is different from what they have. So it's purely them requesting for information.
[00:17:47] Speaker C: Right.
[00:17:48] Speaker A: And another letter that the IRS will send is if you have not filed your tax return, they will notify you, send you a letter, your tax return from 2023 is outstanding. And by that they're actually reminding you and prompting you to to comply with the requirement of filing a tax return. So those two letters are letters that you can easily address. They are not life threatening, if I may use those words.
So it's just simple, straightforward letters that you can open and get somebody to help you address that issue if you're not sure how to respond to the letters. And the third one is a letter that you will get if the IRS is doing an examination or an audit on your account. So you have been selected by the irs, they are auditing your file. They will notify you that they're auditing and then they'll send you another letter to say we require abcd, all the documentation that they need for them to be able to conduct this audit.
So, yeah, those are three letters that I can think of right now.
[00:18:48] Speaker B: Thank you, temby. Yes, there's. You know, I think it's great for taxpayers to understand there's a wide range of notices that you can receive. Many of them are just looking for information. The best thing to do is open it and reach out to your own tax advisor or if you prepare your own return, you know, to reach out to someone like Temby and other accountants in your local neighborhood that can help you solve something before it becomes a bigger problem.
[00:19:13] Speaker A: Right.
[00:19:13] Speaker B: Right now I want to move to maybe more challenging ones. You talked about an audit or, you know, it could be a very large tax balance due.
Can you share a success story where you turned a challenging case around?
[00:19:29] Speaker A: Sure.
So one of my first tax resolution clients was a lady, a taxpayer, that reached out to me. They had received an IRS letter that the IRS was auditing them for 20, 21 and 2022 tax years.
So this taxpayer did the right thing, picked up the phone and called me. So she was not my client before that, but she realized from my website that I do tax resolution.
So I got hold of the letter that she had received. So I calmed it down, and I told her, okay, this is just an audit. Let's just submit the documentation that the IRS needs and we'll take it from there.
[00:20:09] Speaker C: Right.
[00:20:10] Speaker A: So she was terrified, obviously, because she knew she was owing a lot of money, like a lot of money, almost more than a hundred thousand.
So I allayed her fears, and then I focused on on us collecting as much information as she had based on what the IRS had put on the document. So the IRS will list for you, we need receipts for this, we need invoices for that, and they give you a deadline.
[00:20:34] Speaker C: Right.
[00:20:35] Speaker A: And so the first thing I realized that we were not going to be able to make the deadline that the IRS had given us. So what I did, I went back to the IRS and I negotiated an extension.
[00:20:46] Speaker C: Right.
[00:20:46] Speaker A: For us submitting that information, that was one of the best decisions that we did because I then found out that this taxpayer didn't have all the source documents filed properly, or she didn't even have all the source documents. Let's just say that. So the bookkeeping was in a mess. So I then worked with her to create all the files that the IRS had. So we had to go to the banks and request credit card statements from prior years and then prepare the schedules for submission to the irs.
Well, by the end of. So the IRS would get the documents and audit and then come back to us. I need additional this. I need additional this. It took a few months, right. But by the end of all of that, we were able to validate most of the expenses that she had claimed. And the amount that she was owing was reduced by almost half because we're able to submit the documentation that the IRS requested to validate the expenses of that she had claimed. And so after reducing that balance, I was then also able to help her to negotiate an affordable payment plan to pay off the balance that was outstanding. And, yeah, the client went from sleeplessness to having peace of mind.
[00:22:01] Speaker B: And that is brilliant, and I think shows the true value of hiring a tax professional, a cpa, to handle something that you should not go alone or with someone inexperienced in tax resolution. Not all accountants do tax resolution. So it is important to find someone who has experience.
How do you help? You mentioned that she didn't have sleepless nights, and you helped her through that. So how do you help clients stay calm and make smart decisions when they're really under a lot of pressure there? Right. They're talking about money, that fear of the irs. There's just all kinds of. Of emotions when they're dealing with that.
[00:22:42] Speaker A: So I think the. The main thing is for them to understand that the IRS is not out to get you. IRS is not an enemy. It's not out to destroy you.
[00:22:51] Speaker C: Right.
[00:22:51] Speaker A: And America runs on a lot of these small businesses, so it. It will be counterproductive for the IRS to focus on just destroying businesses.
[00:23:00] Speaker C: Right.
[00:23:01] Speaker A: So I help them understand that and help them understand that taxes is a system of rules.
[00:23:07] Speaker C: Right.
[00:23:08] Speaker A: If you understand the rules, if you get somebody who understands the rules to work with you, you can actually work within those rules to your benefit.
[00:23:16] Speaker C: Right?
[00:23:16] Speaker A: So my. My role when I partner up with a small business is to take the weight of their shoulders, the weight of stressing about the IRS or stressing about rules that they don't know about. My role is to learn those rules and help customize those rules to my customer and help see how we can benefit the customer by using the text rules that are in existence. And so I explain the options clearly to the client, and then we create a roadmap to say, okay, if you do this, this rule allows us to do xyz. So if you do this and you do this, this is the result that we're going to have.
So once clients see the roadmap and they see that I am calm, I'm not even stressed as much as they're stressed about the iris. It helps them also drop their guard a little bit and it helps them to move forward knowing that you know what temp is going to handle this and I can focus on just running my business.
[00:24:16] Speaker B: Wow. So practical, reassuring. Exactly the kind of insight that turns tax troubles into a manageable step forward. Temby, thank you for sharing that insight. Tell us how people can follow you or find you online.
[00:24:33] Speaker A: So our website Acts Advisors cpas so spelled ACC T A X A D V I S O R s cpa. That's where you'll find us. That's our website. And on LinkedIn where there's Architects Advisors CPAs, Acctax Advisors CPAs on Instagram you'll find us under the same name also. Or you can find me on LinkedIn is 10B litu our email address hellocticsadvisors CPA and that spelling again Architects Advisors is Accta X A D V I S O R s thank you.
[00:25:12] Speaker B: Wonderful. Stay with us. When we come back, Timbi and I are going to talk about what a fractional CFO is and how it can add big value for your business.
Stay with us.
Love what you're watching. You can catch Balancing Acts and all the other Now Media shows live and on demand anytime at NowMedia TV.
You can download the free app the Now Media app on Roku or Apple and all the content is bilingual in English and Spanish and it's from business and news to life and culture and everything in between. So search NOW Media TV on your Roku or your favorite podcast and never miss a moment.
[00:26:14] Speaker A: Foreign.
[00:26:23] Speaker B: Welcome back to Balancing Acts. I'm your host Linda Hamilton, a CPA and exit planning and business advisor.
I'm speaking with Temby Malalazi of Account Tax Advisors and we've been talking about her journey from starting over in the US from South Africa. We just talked about tax resolutions, solving those scary notices you get from the irs. And now we're going to dig into how most businesses can't afford a full time CFO or CFO at all. But what if you could get the same strategic guidance at a fraction of the cost? And Temby is going to walk us through how that works in her practice.
So how would you describe fractional CFO services for a business owner who's never heard of them?
[00:27:18] Speaker A: Okay, thank you Linda. So I usually say that it is think of a fractional CFO as getting the expertise from a chief financial officer, but on a part time or in a flexible basis basis. So you are getting the strategy, the financial Guidance and things like cash flow planning or forecasting, you are getting all of that, but at a fraction of the cost because you are not paying the full cost of a chief financial officer. It's like having a financial co pilot, helping you to make smarter and faster decisions.
[00:27:59] Speaker B: Right. So that, that helps people understand, you know, what that is.
So CFOs often look at, you know, what is the health of a business.
When you go in and look at a business, what's the first thing you look for to determine whether that's a healthy business or financially healthy business?
[00:28:17] Speaker C: Right.
[00:28:18] Speaker A: Yeah. So when we assess the financial health of a, of a business, the first thing that would typically look at is your cash flow. We also look at the margins.
[00:28:27] Speaker C: Right.
[00:28:27] Speaker A: If the money that's coming into the business doesn't align with the money that is going out of the business's cash outflow, then I know that there's a challenge. Or if the profitability is too tight, like the margins are really thin, then I know that's a red flag. Those are the things that I'll typically look at first. And I also look at something that is usually undervalued. I look at how reliable their financial reporting is. Because anything that a CFO does, any advice or any strategic decisions they need to make needs to have the strong foundation of proper, accurate accounting records. Right. So I, I look at that, I look at the bookkeeping. Are there numbers that are coming from the bookkeeping, numbers that we can rely on to make our budget? Are they numbers that we can rely on to do our forecasting? Are they numbers that we can rely on as we make any other strategic decisions for the business? So it's, it's very important that the, the foundation of bookkeeping is solid for a cfo.
[00:29:36] Speaker B: Yes, yes. The clean books in particular, because if you're making decisions right. On, on data that's incomplete or inaccurate, the solution will be completely wrong. Right.
So that's so critical. So most businesses that we talk to, I'm sure both of us in our practices, they want to grow, grow, grow. Right. And everything is about bringing in more revenue.
How do you help your clients balance maybe their growth, their aspirations to grow with cash flow stability?
[00:30:12] Speaker A: Yeah. And yeah, growth is exciting, especially for business people, right?
[00:30:16] Speaker B: Yes.
[00:30:17] Speaker A: Yeah. So I, I help clients map out the, the expansion. So we discuss first, what is, how does the client want to expand?
[00:30:26] Speaker C: Right.
[00:30:27] Speaker A: Whether it's purchasing new equipment or it's hiring new stuff, or whether they want to expand their marketing, we look at how that type of expansion is Going to impact the cash flow.
So what we'll then do is we look at the different scenarios. How will each scenario impact cash flow? If you're planning to hire now, is this the best time to hire now, or should we wait until maybe three months down the line?
We look at the equipment that you want to purchase. How much does it cost? Is that going to be a huge cash outflow? Now, if you're buying the equipment for cash, or maybe you need to consider leasing the equipment so that you manage the cash flow monthly. So we look at all those scenarios and we help the client make the best decision for the business.
The key is pacing the growth and keeping some reserves.
[00:31:25] Speaker C: Right.
[00:31:26] Speaker A: You don't want to hire somebody today and then have to let them go after five months because now suddenly you cannot pay them.
So it's important that we pace the growth.
[00:31:37] Speaker B: That's really important information. And I think, as you just explained, if their books aren't right, you don't really know how much revenue is coming in or when clients will pay. It might be harder to map that out without complete information.
So I just want to deviate a little bit in talking about how do you help people who come to you. Maybe their books aren't clean, they aren't accurate. How do you help them get things on the right track before you start planning these decisions?
[00:32:08] Speaker A: Right. So the. The first thing for me is to help the clients understand the importance of having clean books. So it's more about teaching them and helping them appreciate. So you help them understand that there is no business if the books, if the accounting records are not clean. So you can be sitting there thinking that you have a lot of money. Meanwhile, you. You don't have any money at all in the business. So once the client understands and appreciate that, we help them clean the books, get caught up, and then we help them put controls in place so that they are able to see how the business is doing every month. If it's bookkeeping that they need done, we help them get to a point where they have regular bookkeeping done and reviews are done, and that information is communicated to management so that before management makes any decisions, that they first look at what the numbers are saying. Because numbers don't lie.
[00:33:03] Speaker B: That's true.
Yes. Those num. The numbers matter. And I always say the story behind the numbers matters as well. So when they're. When they're current, you know your numbers are telling you if you're profitable or not.
[00:33:16] Speaker A: Absolutely. And sometimes you have to. To pull down or taper down the Expectations from the business people and say, let's not make emotional decisions. Let's look at the numbers and maybe wait one, two or three months before we take on this next step.
[00:33:33] Speaker B: So it's not. No, it's not yet, right?
[00:33:35] Speaker A: Not yet. Yeah. Yeah.
[00:33:38] Speaker B: So how about.
I'm thinking if there's any opportunities we can share maybe where you helped uncover an opportunity or maybe a risk that someone else missed.
[00:33:52] Speaker A: So I had a client that was pushing sales growth like they were driving sales growth. That's all that they wanted to do, focused on growing and growing and growing. And they didn't realize that the expenses that they were incurring are also creeping up actually even faster than they were getting this new revenue from the sales growth. So we had to dig into the numbers and we discovered that they had a few contracts that contracts and some subscriptions that were actually draining the cash. You know how you subscribe to something and you forget about it? It's running off the credit card and nobody ever checks that. Even the bookkeeper just records, subscription gone. Nobody looks at what are you subscribing for? Are we still using this software? Do we still need this? So we dug into all of that and we helped them cut out some few expenses that actually resulted in them being more profitable. And it also freed up some money that they use to reinvest in the sales drive that they were on.
[00:34:58] Speaker B: Subscriptions are. Since almost everything you buy today seems to be on a subscription with an auto renew, it's pretty easy, right, to. To get. To get into that. Right.
So I think that's a great service you offer them.
[00:35:13] Speaker A: What.
[00:35:14] Speaker B: Let's talk about the systems that will help, you know, with this information, with the financial reporting, with the bookkeeping. What are three financial systems, you know, you believe every small business owner should have in place?
[00:35:27] Speaker A: The first one is what you have mentioned, accurate bookkeeping.
Every small business owner should have that. So I'm just, I'm not just saying bookkeeping. Accurate bookkeeping, that's very important. That's critical cash flow management.
We cannot overemphasize that.
[00:35:43] Speaker C: Right.
[00:35:44] Speaker A: You need a system to forecast your cash flow, to monitor your cash flow, your ins and outs, so that you don't have surprises, so that you don't derail your operations.
[00:35:55] Speaker C: Right.
[00:35:56] Speaker A: And the last one that I'll mention is a system that helps you with budgeting and performance tracking. So once you've managed your cash flow, you now have your budget. Let's see how our daily operations are faring against the budget that we prepared.
[00:36:12] Speaker C: Right.
[00:36:13] Speaker A: So you need to be able to have at least those as a minimum.
[00:36:17] Speaker B: And so those systems, you know, some of them, bookkeeping, the clients often have their own bookkeeping or they either do their own or if their officer does it and they might not have these other systems, are these things they only work with if they work with an accountant or a professional bookkeeper, or are these things they can put in place on their own?
[00:36:40] Speaker A: So depending on the size of the client, Right. Cost benefit analysis. For some clients, if they have the capacity and the finances, they're able to get an accountant, a senior accountant. A senior accountant should be able to handle your cash flow management. They'll be able to handle your budgeting and performance tracking. But for those that are not able to, because you're still maybe small, those clients can outsource those services. A firm like mine can be able to help them. I have a few clients that I help with that already with their budgeting, with their performance tracking. And they are two of my clients that have recently helped to hire in house senior accountants who will be able to handle these for them. So I go in there as maybe once a quarter just to review what the bookkeepers and the senior accountants are doing. So it really depends on the client and whether they can afford to have the services in house or outsource.
[00:37:39] Speaker B: That's really wonderful. And so fractional CFO services, they can transform the way a business operates, bringing clarity, stability and strategy without the full time price tag. So firms like Temby's can really bring a great service to make you successful. Temby. How can people follow you or find your firm online?
[00:37:59] Speaker A: Okay, thank you. Tembi Mlalazi on LinkedIn. You'll find me on LinkedIn. You'll find my firm also on LinkedIn. Actex Advisors ACC C T A X A D V I S O R S CPAs. We're on LinkedIn. We're on Instagram and you can go to our website. Also visit us on our website. ArchAdvisors CPA. That's important. CPA. It's not dot com, it's not dot something else. CPA arctics advisor spelled acc t a x A D V I S O R S Or you can send us an email. Hello@arcticsadvisors CPA. Hello@acctax a d v I s o r s dot CPA. Thank you.
[00:38:40] Speaker B: Thank you Temby. And stay with us. In our next segment we're going to close out talking about tax planning as a growth strategy. Stay with us.
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Welcome back to Balancing Acts. I'm your host Linda Hamilton, a CPA and exit Planning advisor and I'm talking with Temby Malalazi about this segment will be about tax planning as a growth strategy. But if you love what you're watching and catching Balancing acts on every NOW Media TV show live or on demand, anytime, download the free NOW Media TV app on Roku or Apple for instant access to our bilingual content in English and Spanish. From business and news to lifestyle and culture, it's all streaming 24. 7 Search Now Media TV on Roku or your favorite podcast and never miss a moment. TEMBY let's talk about tax planning. It's not just a cost of doing business, right.
It can be a powerful growth tool if you understand the rules and how to plan.
So how do you shift the client's mindset from compliance to strategy?
[00:40:49] Speaker A: Right?
So back to my issue of educating the clients like growing with the client, taking the client with on on this journey. So clients need to understand that compliance is about reporting the past, right? What happened in the past, right? And tax planning is shaping the future like you are being proactive about the future.
So I help clients understand that difference and also realize how that difference is an advantage to them once they realize that taxes are a form of a controllable business expense. If you may say then that taxes are not just a deadline, right? Or a pain.
That's something that you just look forward to once a year.
I help them appreciate that it's something that you can actually help control, right? And if you control that, then you can determine how much of the expenses related to taxes or how much of the tax deductible expenses you have in your business.
And okay, within limits of the tax code, of course once they know that they are then open to me discussing more strategy and other tech strategies that that they use. And the other point is to start off with basic strategies, not to intimidate them with big tech strategies. Start off with basic strategies, something as simple as calculating and paying your estimated taxes, your quarterly estimated taxes. That's a simple tax planning strategy that some small businesses are not doing yet. So if you start there, then you can build up on that and that.
[00:42:33] Speaker B: Has great impact on your, in your cash flow. Right, right, right. Spreading it out, smoothing it out.
What is a tax planning move that really can deliver big impact for small business owners?
[00:42:47] Speaker A: So I'm thinking of the, the right choice of the entity structure, like deciding whether you're going to be in just an LLC or you want to elect to be an S Corp or you're going to be something else. Whether it's a partnership or something else, that choice of an entity structure can have significant tax benefits for you. So for example, if somebody has an LLC decides that they want to elect the S Corp, they then have the advantage of being able to take a salary.
[00:43:23] Speaker C: Right.
[00:43:23] Speaker A: And be able to get deductions for those wages. And in that way they are cutting or reducing their self employment taxes which they would have paid if they had remained as an ordinary LLC that doesn't have the S Corp election. So the choice of entity is very important and it significantly affects the tax result that you would have.
[00:43:47] Speaker B: Yeah. And it also, it affects the non tax results too, the operations.
[00:43:52] Speaker A: Right, right.
[00:43:53] Speaker B: Operating agreement. And so it's such an important thing to do with your cpa. I think it's great that, that you do work with your clients on picking, helping them select the right entity. What if they've already been in business and they have an entity, can they change an entity? Do you help people with that?
[00:44:11] Speaker A: Absolutely, absolutely.
Two months ago I helped a client who's been in business for a few years to actually do the ESCOP election.
[00:44:21] Speaker C: Right.
[00:44:21] Speaker A: And I have perfected that service. We have not had a single backdated S Corp application denied by the irs. So yes, we can ask somebody who's been in business if they want to change the entity. They can certainly do that. So maybe even somebody has been running as a sole proprietor for a few years and they now want to register an entity. We can assist them with doing that. So it's not too late. Never too late.
[00:44:50] Speaker B: That's great. That's wonderful.
So I'm thinking, you know, most of these clients either have long term goals or should have long term goals about maybe exit planning or growth and expansion as we talked about earlier.
So how do you align tax planning with some of those long term goals?
[00:45:12] Speaker A: Right. So actually every, I would like to think that every major, every business decision has some tax effect.
[00:45:18] Speaker C: Right.
[00:45:19] Speaker A: And so if a client is thinking, let's say of exiting.
[00:45:23] Speaker C: Right.
[00:45:24] Speaker A: So we would then look at tech strategies that will Help them to minimize the, the capital gains.
Because when you exit, they are faced with capital gains taxes.
[00:45:35] Speaker C: Right.
[00:45:35] Speaker A: And we'll look at what are the tax strategies that will best help them to minimize that liability when it eventually comes. If somebody is looking at expanding, we will help them look at what additional deductions are they going to get from this expansion, what credits are they now eligible for if they need any financing.
Strategies would also help them consider that and any thing that will help them to free up some cash that will then be available for them to be able to execute in this expansion process.
So when a taxpayer or when a client comes over to me, I like to say I offer them a full package. Right. So full package. So we look at the accounting, their taxes and we work with them to see how are they planning to grow and then we help them with strategies that help them in that direction that they want to grow also.
[00:46:32] Speaker B: And I think that's also, you know, not all practices do what you do in terms of looking at the whole picture. And you know, it's not always simple and it comes through conversations. Kind of a diagnostic of understanding the business owner. What are their goals and how can you help them. But until you understand them, it's hard to, you know, it's not a quick answer that they're going to get on AI or Google. Right.
[00:46:58] Speaker A: Yeah, yeah.
[00:47:00] Speaker B: So you mentioned deductions.
What, what are some overlooked deductions or strategies that often surprise.
[00:47:09] Speaker A: So one that's often overlooked is the Augusta rule, which is very beneficial, actually. The Augusta rule, in short, allows you to rent out your home to your business and you can do this tax free. Actually, if your business rents out your home and has their business meeting in your home or whatever business meeting you have there, the tax code allows you to do that tax free.
[00:47:34] Speaker C: Right.
[00:47:34] Speaker A: The other one is hiring your children. If you hire children in the business, you get to deduct the salary that you're paying your children.
[00:47:41] Speaker C: Right.
[00:47:41] Speaker A: As a business deduction, which is a good thing. And your children can also get tax free income.
[00:47:50] Speaker C: Right.
[00:47:50] Speaker A: And the other thing that I'm thinking of maximizing your, your retirement contributions, that's one of the things that we overlook a lot.
People don't underestimate the value of just trying to maximize your retirement contributions. And I'm thinking also of health insurance deduction. Some entity structures allow you to deduct the health insurance that we pay. Health insurance is a significant expense for any business person and their employees. So if you're able to deduct that, that's a big plus.
And I'm thinking all four of the new one, the R& D, the research and development credits, they have recently been boosted by the new tax act that came in that now is applicable even to non tech businesses.
[00:48:41] Speaker C: Right.
[00:48:42] Speaker A: So those are some of the deductions that clients may overlook if they're just doing a Google search or just deciding to use AI for their tax preparation.
[00:48:54] Speaker B: And I think it's, you know, all of those strategies and deductions you mentioned, there's a certain method or way you should implement them in an act, you know, kind of start acting on them in your business. And which is why you shouldn't do it alone. You should actually speak to an advisor so you do them correctly. Otherwise they backfire. There's no point in doing a tax strategy if it's not going to hold up. So you want to get good counsel on that.
What can a business owner start doing today?
Let's leave our audience with that. To make tax planning a habit.
[00:49:32] Speaker A: So the easiest one that I can think of is just to start small like set recurring date, right? To review your income, review your expenses, look at your projections and just have a feel of what your numbers are. Discuss this with your CPA and they will then advise you get when we get to the quarterly dates to make a certain payment towards your quarterly estimated payments. So that review, that regular review of your numbers is very important. And I think the other, the other discipline that they can have is putting money aside. Like cash, real cash aside, maybe in a different bank account, put it aside towards paying off your tax liabilities as they come due. That's one discipline that small businesses can do. That you can do today, you can implement today actually.
[00:50:30] Speaker B: And let us let. I think you've shared some great insights with our audience. I know tax planning is not just about like saving money this year. You want it to become a habit so that you know over time that you build these habits, build a stronger and more profitable business over time.
Because taxes are a big part of your business, but they're not everything. So you want your accountant to be able to look at your whole business, tell our audience how they can find you. Thank you so much for sharing your insights with us.
[00:51:01] Speaker A: Sure. You're welcome. So they can find us on, on LinkedIn tendi on Malazi or the firm name is also on LinkedIn Architects Advisors CPAs. So Arctics Advisors is spelled ACC.
So the ACC is a short for accounting.
[00:51:15] Speaker C: Right.
[00:51:16] Speaker A: So it's ACC tax A D V I S O R S CPAs so we are on LinkedIn. We are on Instagram on our website. Also, you can reach out to us arctexadvisors cpa. So that's important. CPA at the end. So it's arctextadvisors and the email address. If you want to send us an email, you're welcome to hello@actechsadvisors CPA. Hello. C T A X A D V I S O R S cpa.
[00:51:49] Speaker B: Thank you.
Thank you so much, Temdi, for being with us today. I think it was a great conversation that will help our audience. And just remember, tax planning is a habit and can help you save money over time.
Come back next week for another episode of Balancing Acts. I'm your host, Linda Hamilton, the founder of Growprofitscale.com.
see you next week.
