Daniel Fava: Your practice is making money, but your account doesn't seem to know it. If that sounds familiar, this episode is for you. My guest is Emily Bowie, a partner at Thorn Advisors, where she helps business owners turn profit into cash and keep more of it at tax time. She works with therapists who are trained to be great clinicians and left to figure out the business side on their own. In today's episode, we talk about where the money actually goes. Emily walks through the cash leaks she sees most often, why pricing is usually the biggest one, and what your balance sheet is telling you that your profit and loss isn't. She also shares a story about one client who overpaid for 30 years because of a single piece of bad advice. But before we get into it, let's hear about our sponsors. Hello and welcome back to another episode of the Private Practice Elevation Podcast. I feel a little bit like I'm out of the routine, like pretty much all summer. So sometimes I'm a little start and stop with the podcast stuff. So trying to get back in the flow, back to, you know, used to doing these recordings, doing these intros and stuff like that. but it's been a great summer as I record this kind of first week back from vacation a road trip. We took our boys on a big road trip. We went two nights to Louisville, which is my happy place, which is where all the bourbon is, and I got to show the family the Buffalo Trace distillery, which is just a cool historic place that has some of my favorite bourbons. Really loaded up on quote unquote souvenirs there. And then we did two nights in Chicago and you can see behind me here my awesome new Nimbus two thousand poster if you're watching the video of this. We went to the Harry Potter store in Chicago, which I didn't even know was there. We just happened upon it, which was super awesome and nerdy. And just we got to visit some old family we haven't seen in a long time on my wife's famil side of the of the family. Did an awesome river tour of Chicago and yeah, it was just a really cool city. And we took the train to we were in rush hour commute with our boys, with our two boys, and so that was a lot of fun. And then we ended on four nights in Michigan, right by Lake Michigan, South Haven, Michigan. and that was just a beautiful place. It was a little smoky because of the fires in Canada, which I I didn't even know what was going on. Woke up one day it was just smoke everywhere. but we still had a great time and it was much more relaxing than the other. Two places we were in, so it was a really good time. So just trying to get back into the groove of things this week, and you know, here we go with this episode. Today we are talking with Emily Bowie from Thorn Advisors, and she's a CPA and cash flow strategist with more than 15 years of experience, including her time as an audit manager in Big Four Accounting. She's the CFO, CFO at Thorn Advisors, an accounting and advisory firm for high-earning women who want to feel confident. About their money instead of confused by it. Emily works with entrepreneurs, psychologists, and other service-driven professionals, helping them see where their cash is leaking and build tax plans that match their actual goals. Outside of work, Emily leads her church's financial ministry, is a mom to three young kids and enjoys a good DIY project almost as much as a well-organized set of financials. So here is my conversation with Emily where we get into really the cash leaks in your private practice, that feeling of I'm profitable, but I'm still broke. Where's the money going so let's get into it Hello and welcome back to another episode of the Private Practice Good morning, Emily. Welcome to the Private Practice Elevation Podcast. How are you today?
Emily Bowie: Good morning. Thank you for having me. We're doing all right, you know, crazy summer mornings.
Daniel Fava: Yes. Yep. We were just talking about that before we hit record. Sounds like you're in a similar boat of multiple camps and multiple d directions for for the children
Emily Bowie: Yeah.
Daniel Fava: and just kind of the juggling act, right? Yeah.
Emily Bowie: For sure. It's you know, it's the beauty of owning your own business, but also
Daniel Fava: Yeah.
Emily Bowie: can be hindering of how things go, you know.
Daniel Fava: Yeah, yeah, I'm I'm definitely looking forward to when the kids go back to school and just getting my routine back 'cause I'm such a big routine person. which down here in Atlanta they go back the first week of August. So that's really just
Emily Bowie: wow.
Daniel Fava: a week and a half away for us. Yeah.
Emily Bowie: Wow, that's early. We don't go back until the last week of August.
Daniel Fava: Okay. Yeah. And I grew up in New York, which it was after Labor Day, you know, you go back. So it's just all over the place. But yeah.
Emily Bowie: Wild. Yeah.
Daniel Fava: All right. Well let's I'm excited about our topic today, you know, 'cause we're we're gonna be talking about being profitable but still being broke or feeling broke in a private practice,
Emily Bowie: Mm.
Daniel Fava: which I think is a you know a common symptom of some things, you know, financial health of a business and certainly something that I've experienced in my own seasons of growing a business. but before we get into that, why don't you just Just let our audience know a little bit more about yourself. what do you do? How do you serve small businesses and therapists? And how did you get into what you're doing now?
Emily Bowie: Sure. So my name is Emily Bowie. I am one of the partners at Thorn Advisors where we really focus on helping business owners turn profit into cash, reduce that tax strategically, and then build wealth today and tomorrow. I think the reason we got into this, both my business partner and I came out of public accounting. And if you know anything about public accounting, it's rather demanding and not super fulfilling. And so we
Daniel Fava: Mm. About
Emily Bowie: were really encouraged to go small business once we knew you could really do that. I think we always thought there was one path and it was to the money. I mean, I honestly that was what we were taught in school is
Daniel Fava: Yeah.
Emily Bowie: like go get that big four job and
Daniel Fava: Hm.
Emily Bowie: run with it. And it was great, built lots of discipline, taught me so, so much, saw so many different things. But at the end of the day, it wasn't very fulfilling because most people saw me. I would came mainly in auditing as the enemy. And so I
Daniel Fava: boy.
Emily Bowie: but because I understood how their business worked, I was able to give them suggestions to improve. And I just brought that to a smaller scale because most small businesses can't afford to have that. CFO position within the business. And so
Daniel Fava: Yeah.
Emily Bowie: we thought that it would be a great opportunity to have that fractional role where you can help with looking
Daniel Fava: Yeah.
Emily Bowie: at financials while doing something very practical for the business owner, which is finding cash in their business and then teaching them how to keep it within the rules of the tax code. So like
Daniel Fava: Yeah.
Emily Bowie: we kind of do that dual purpose where a lot of people in this industry really just do tax or they just do the financial analysis or they just do business strategy, you kind of get the whole thing when you work with us.
Daniel Fava: great. Yeah, and that's probably super beneficial. You can have that whole picture and someone that, you know, these small businesses can lean on 'cause like you said, it often is difficult. You you need to be a pretty large business to have that that role of an accountant and and bookkeeping and CFO, you know, within it. So I think it's such a
Emily Bowie: Mm-hmm.
Daniel Fava: such a great service.
Emily Bowie: Yep. And you know, why we started working with therapists specifically is because we saw the need there. We saw that with the clients we did have, that often they were set up to learn how to be great clinicians, but they were
Daniel Fava: Mm-hmm.
Emily Bowie: not set up to like how know how to run a business. And
Daniel Fava: Yeah.
Emily Bowie: then also a lot of them will. build solo practices and then go into a group practice and it's a totally different ball game, you know, financial wise. And so what we really kinda had a heart for it is because a lot of people were paying a lot of taxes and it was hindering their growth so dramatically.
Daniel Fava: Yeah.
Emily Bowie: And we were like, there's gotta be a better way we can serve in this capacity. And just kind of be that expert they have in their back pocket to be like, should I do this? Should I not? What does this look like for me? And especially solar practitioners, they they're the the ones that get it hit the hardest from the tax side because they don't have as many expenses. So
Daniel Fava: Mm-hmm.
Emily Bowie: then they are paying astronomical taxes.
Daniel Fava: Yeah.
Emily Bowie: We actually save somebody. not that long ago about like 120k in taxes because we did an S-corp transition that made sense for them and then from
Daniel Fava: Mm-hmm.
Emily Bowie: there helped them with like actual tax strategy. And he had been paying this amount of taxes for like 30 years because one
Daniel Fava: no.
Emily Bowie: person at one point early in his career said, you don't need to look at an S-corp. It doesn't make sense. And so
Daniel Fava: Hmm, wow.
Emily Bowie: And he took, you know, he took the advice he was given and just didn't have access to more information, you know.
Daniel Fava: Yeah, yeah, absolutely. I'm hearing about like two or three other podcast episodes that we could do here in the future, you know, going from
Emily Bowie: For sure.
Daniel Fava: solo to group, benefits of an escort, but let's I'll try to stay, you know, in the lane that we kind of carved out here. So
Emily Bowie: Mm-hmm.
Daniel Fava: let's you know, when someone comes to you and they say, you know, I'm making good money in my practice, but there's really not enough. It always feels like there's not
Emily Bowie: Mm-hmm.
Daniel Fava: enough in my account. Like where do we kind of start with this conversation of being profitable but still broke? Like what's What's usually going on?
Emily Bowie: Yeah. So what I've always found step one is if someone has their books done or not. So meaning have they been maintaining their bookkeeping on a monthly basis? So normally, and this is extremely normal, people just don't do their books until they have to do their taxes. And
Daniel Fava: Mm.
Emily Bowie: when you do that, you find yourself having to kind of grapple with the decisions you made five or six months ago. And
Daniel Fava: Yeah.
Emily Bowie: you know, having this like spiral of what I could have done versus what I where I'm at now. And so what I always recommend to practitioners is outsource your books. Do what you do best and let someone else do your books because you accounting's not super intuitive. I mean, other than the fact like don't spend more than you have, other than that, that's about as intuitive as it gets. But bookkeeping
Daniel Fava: Yeah. Yeah.
Emily Bowie: is a lot more you know, strategic and how you set up your chart of accounts, what the numbers mean, all of that. I always recommend that to be the first thing they outsource. So then you get good numbers so you can make good decisions. Because then
Daniel Fava: Yeah.
Emily Bowie: that also leads into like the first kind of cash leak that I see almost everybody have, and it's in their pricing.
Daniel Fava: Mm, okay. Yeah, I think that's really good advice and like just I'm I'm thinking through sort of my history and my business, like it probably took me a good six years before I got a bookkeeper and I'm I'm ashamed to admit that. because once I did it it was it was huge. It because it really does it
Emily Bowie: Game changer.
Daniel Fava: helps you have somebody number one, you know, setting up those categories for, you know,
Emily Bowie: Mm-hmm.
Daniel Fava: how you for your expenses and write offs and all that, but also to having somebody kind of almost hold you accountable, like, hey, what's this expense?
Emily Bowie: Hundred percent.
Daniel Fava: And like you're kinda like, maybe that's not necessary or yeah, we don't really need to use that software anymore. And so like I'm reviewing those things at a more regular basis to make those decisions. Like what do we actually need to like increase, you know, profit and like are we spending more than we need to on certain softwares and stuff like that.
Emily Bowie: Hundred percent. Yeah, I feel like that is, you know, the awareness always helps with just making better choices in general. And I think
Daniel Fava: Yeah.
Emily Bowie: having someone do your books, have them get them to you by like the 10th or the 15th, you then can make the decisions you need to change if you know you're going in the wrong trajectory. But
Daniel Fava: Yeah.
Emily Bowie: I think even for myself, I have a bookkeeper do my books because like why am I spending my time doing that?
Daniel Fava: Yeah. Right. Mm hmm. Right.
Emily Bowie: And I will put it off because I'm in client delivery. And and we all know if you're in client delivery, you focus on the client way more than you focus on yourself. Yeah. Yeah. Yeah.
Daniel Fava: Yep. Yeah. Amen to that. Yeah, it happens. So you you you mentioned pricing, so you s you kind of started in into that topic. So take us into that. Like you said that that's one of the biggest cash leaks you see?
Emily Bowie: absolutely. So often we'd price either based on the market or we will price based on how we feel.
Daniel Fava: Yeah.
Emily Bowie: And so I think that is usually where most people start. So it's very normal that pricing is the area that cash leaks the most because you're probably undercharging and you don't realize that you're undercharging for whatever it is. and so the reason the books are imperative is because you need a certain percentage from those books to know if you're undercharging. And so if we're looking at a profit and loss statement, which is also known as like an income statement, it's the statement that starts with revenue, takes out all your expenses, ends in a net income.
Daniel Fava: Yeah.
Emily Bowie: And so the number that's imperative to us when we're looking at pricing is. The expense line in comparison to your revenue line. So
Daniel Fava: Mm-hmm.
Emily Bowie: these are your expenses that are not directly related to generating revenue, but are still expenses nonetheless.
Daniel Fava: Yeah.
Emily Bowie: And so we call those overhead expenses or like indirect costs. And
Daniel Fava: Mm-hmm.
Emily Bowie: that percentage, when you take that number divided by total revenue, that gives you a percentage to say, hey, this is how much every time you bring a dollar in. is allocated to keeping the lights on for a lack of a better way of saying it.
Daniel Fava: Yeah. Yeah.
Emily Bowie: And that percentage almost never gets factored in when people are looking at their prices. Usually people look at their prices and they say, it's gonna cost me this much for this clinician to do this session or whatever
Daniel Fava: Right.
Emily Bowie: the case may be. And if there's any kind of tools that are necessary, you know Anything that's directly related is a lot easier to factor into pricing, but that percentage
Daniel Fava: Mm-hmm.
Emily Bowie: really is what will help you determine if you have predictable margins or not.
Daniel Fava: Yeah. And is there like a sort of a standard percentage that or like a range that you hope for private practices to kind of fall into when you're looking at that?
Emily Bowie: Honestly, it would probably be somewhere between 30 or 40%.
Daniel Fava: Okay.
Emily Bowie: it just really depends on how much it costs you to deliver a session. So if you are paying other people to do the session, if you take insurance or don't take insurance, like all
Daniel Fava: Yeah.
Emily Bowie: of those things come into play. But with 30 to 40 percent there, you really can have a good net income margin after. But
Daniel Fava: Yeah.
Emily Bowie: I will tell you most people are fifty and above, especially if you've never looked at it.
Daniel Fava: Yeah, yeah. And then over time that is that would definitely lead to feeling like there's not enough money in the bank.
Emily Bowie: hundred percent. And I think a lot of times too, because of when we're talking therapists, they are doing a service for somebody. And if they
Daniel Fava: Yeah.
Emily Bowie: can't make ends meet, there's resentment that can build up for doing the service. They, you know,
Daniel Fava: Mm, yeah.
Emily Bowie: there's a lot that comes into it. So it's more than just the money piece of it. It's like
Daniel Fava: Yeah.
Emily Bowie: really being able to serve well. And
Daniel Fava: Yeah.
Emily Bowie: so what I encourage therapists to do if you do find yourself needing to raise prices, start with your new patients first. That's the easiest.
Daniel Fava: Mm-hmm.
Emily Bowie: And then if you have old patients, rising the fee by five, ten dollars, whatever you can kind of get behind is a great
Daniel Fava: Yeah.
Emily Bowie: way to kind of build that gap and like bridge that gap.
Daniel Fava: Yeah, yeah, and that's great advice and that's That's the approach my wife has taken in her private practice where
Emily Bowie: Mm-hmm.
Daniel Fava: she she tends to, you know, she thinks more like three, six months out and so it's like, Hey, January first, new clients, they're gonna be at this rate and then come
Emily Bowie: Mm-hmm.
Daniel Fava: March I will have brought my old clients up and you know, and sometimes there needs to be conversations and and some people do sliding fees and stuff like that. If a client
Emily Bowie: Mm.
Daniel Fava: can't meet that new that new pricing. but for the most part, I don't think she's ever gotten much pushback at all.
Emily Bowie: I and I feel like more people need to hear that. And I
Daniel Fava: Yeah.
Emily Bowie: think about it because the one thing I always say, because it is a common objection, I'm like, I literally my therapist changes prices twice a year. I have never once been like, absolutely not. We can't do that. I'm like, no, I'm invested into
Daniel Fava: Mm-hmm. Right, right. Yeah.
Emily Bowie: the care and the value I see in therapy, you know.
Daniel Fava: Yeah, yeah, absolutely. I had a similar similar process with with my coach that I work with and it
Emily Bowie: Mm-hmm.
Daniel Fava: was like, yeah, like but you're totally that I get that value. Like totally I totally get it. Yeah, yeah.
Emily Bowie: Yeah. I'm here for it, right?
Daniel Fava: Okay, so yeah, we talked about fees, but like are there any other things that are kind of impacting the story of why is there not that much in the in the accounts here?
Emily Bowie: Yeah, I think you touched on it earlier about essentially reviewing your expenses. So
Daniel Fava: Mm.
Emily Bowie: one thing I encourage all business owners to do, doesn't matter what industry you're in, is
Daniel Fava: Yeah.
Emily Bowie: at least annually. To me, I think you should do it quarterly. But if it's anything in
Daniel Fava: Mm-hmm.
Emily Bowie: between, doing an expense audit and just going through it with kind of three questions like, what is this? And do I need it? To
Daniel Fava: Yeah.
Emily Bowie: do I have something else that can fulfill this purpose? And then
Daniel Fava: Mm-hmm.
Emily Bowie: third would be like, am I getting a return? And
Daniel Fava: Yeah.
Emily Bowie: I think that's usually the harder one to decide because it's not just quantitative, it's
Daniel Fava: Yeah.
Emily Bowie: also qualitative. And so I know I've fallen victim to this where I've stayed in like founding prices for things because I might use it, or I've been in like a coaching membership.
Daniel Fava: Yeah.
Emily Bowie: And I haven't actually attended anything in months. And I'm like, yeah, but it's gonna go up. And what if I
Daniel Fava: Right.
Emily Bowie: do need it? And you know, all of those things.
Daniel Fava: Yeah.
Emily Bowie: But I think when you kind of get in a standard practice of actually looking at these expenses, you start to detach the emotions from it. And it just becomes
Daniel Fava: Yeah.
Emily Bowie: like a data decision. Like, hey, you said three months ago you were gonna use this and you have not used it. It needs to go, you know.
Daniel Fava: Yeah. Yeah.
Emily Bowie: Type of thing.
Daniel Fava: Mm-hmm. That's great advice. And and to be honest, I love doing this. It actually makes me
Emily Bowie: Mm-hmm.
Daniel Fava: so happy when I'm like, no, we don't need to use that. Or, you know, like I've got my team and at Private Practice Elevation we use a lot of different softwares because, you know, we're we're we're dealing with websites
Emily Bowie: Yeah, I'm sure.
Daniel Fava: and SEO and you know and all that stuff. So things come and go, software's come and go, and it's like, hey, are we still using this? Is this still serving us? we just
Emily Bowie: Mm.
Daniel Fava: went through the process with a software that helps our clients review their websites before we make it live or they can add feedback. And it was kinda clunky. It wasn't working so great. And we found a better and cheaper option. And so then it became that decision, okay, we're gonna switch over to this platform. But there's been other things too. You know, like you said, like, we're paying for this and this and they both kinda do the same thing. Let's eliminate
Emily Bowie: Mm-hmm.
Daniel Fava: one and just go with the other and and we just kinda, you know, focus the team around that and making sure that everybody can use it and still get that return, like you said.
Emily Bowie: For sure. And I think the one thing you kind of pointed at is like there's also this like operating procedure piece of things that do
Daniel Fava: Yeah.
Emily Bowie: help with eliminating some of these cash leaks that will tend to happen. I think one SOPs in general, which are standard operating procedures, are helpful because they increase operational efficiency in general because you're not keeping it in your brain anymore.
Daniel Fava: Mm-hmm.
Emily Bowie: but also standardizing expense audits, standardizing looking at a process and saying, This is clunky. How do we improve
Daniel Fava: Yeah.
Emily Bowie: it? And how can we save on it too, you know?
Daniel Fava: Yeah. Yeah, absolutely. That's probably the part of it I struggle the most, like setting the time aside each year to review
Emily Bowie: Yeah.
Daniel Fava: the SOPs and review, you know, everything. But I I like what you said about quarterly, you know, getting
Emily Bowie: Mm-hmm.
Daniel Fava: into looking at your your profit and loss and your expenses and making sure that, you know, everything is really working for you.
Emily Bowie: One thing I'll say to ease the SOP review process, I have like a standard way of doing it. You only review and do once a year, but you have a parking lot list. So every time
Daniel Fava: Mm-hmm.
Emily Bowie: something stutters or stumbles or doesn't
Daniel Fava: Yeah.
Emily Bowie: work, you throw it into the parking lot list, and then you have like an executive team meeting of sorts, like whoever
Daniel Fava: Yeah.
Emily Bowie: is like process owners. And you say, okay, what from the parking lot list has to be done this year? And then
Daniel Fava: Yeah.
Emily Bowie: you set them off to go do it and you have a very defined end date because with procedures, you could literally
Daniel Fava: Mm-hmm.
Emily Bowie: work on them all the time and they
Daniel Fava: Yeah.
Emily Bowie: still wouldn't be the most up to date. But you
Daniel Fava: Yeah.
Emily Bowie: kind of like put those boundaries in place. It helps a lot.
Daniel Fava: Mm-hmm. Yeah, that's great. That's great advice. Now, one thing that I noticed, you know, in in the notes that I was reviewing before you before our conversation here, you talked a little bit about people not really looking at their balance sheet. And so we talked about the profit and loss. So
Emily Bowie: Yes. Yes.
Daniel Fava: take us through what the balance sheet is and how does that work together in this conversation of you know, making sure that you are profitable and you got money in your account.
Emily Bowie: Yes. So balance sheet, I'm sure all of you, if you have a bookkeeper, they send the balance sheet with the income statement or the profit and loss.
Daniel Fava: Mm-hmm.
Emily Bowie: And you have no idea what it means or why it's important. And
Daniel Fava: Mm-hmm.
Emily Bowie: I think that's completely normal. But the way I like to look at it is a profit and loss teaches you what the activity looked like for the past month, half a year, depending on how you pull it. And then the balance sheet tells you the health of your business.
Daniel Fava: Mm.
Emily Bowie: And so that first portion is your assets and it's normally your cash. So the way I try to explain it to people is that if you are a sole proprietor, meaning you have not elected to be an S Corp or anything like that, and you pay yourself just by transfers out of your account, that net income number from your profit and loss should match that cash balance plus how much you've distributed to yourself.
Daniel Fava: Mm-hmm.
Emily Bowie: If it doesn't, you likely either have debt or something else is amiss in awry and means you need to kind of look at it. Then
Daniel Fava: Yeah. Mm-hmm.
Emily Bowie: if there's a big difference, that's when you start kind of like pulling back the layers. Do I need to do an expense audit? Look at my debt. Am I keeping track of things? Then if you are, if you have elected to become an S-corp. You pay yourself via a payroll or a W-2 employee within the business. So that's captured on your profit and loss. So when you get to that net income number compared to your cash, the only difference would be in those owner's draws. So
Daniel Fava: Mm-hmm.
Emily Bowie: other than that, it would be related to debt. And so debt tends to be one of those things where It creates timing delays. So you recognize the expense when you put it on a credit card, but you don't pay for it until later. So
Daniel Fava: Yeah.
Emily Bowie: that could be one of the things. Or you only, if it's a loan to you only recognize the interest on your
Daniel Fava: Mm-hmm.
Emily Bowie: income statement, but then you're paying down the principal as you go because everything that you've paid for with said loan is already been on your income statement, profit and loss for so long.
Daniel Fava: Yeah.
Emily Bowie: So there are timing deliver like differences that you're gonna run into. And sometimes there are just like problems with how the math is working. But
Daniel Fava: Yeah. Yeah.
Emily Bowie: this is why when you get to a certain point, it's so important to just hire the experts to come in and they're gonna be able to whittle that down to what the actual
Daniel Fava: Yeah.
Emily Bowie: problem is. And then you go work on the problem, not necessarily have to like do the full scope thing yourself. Cause like
Daniel Fava: Yeah.
Emily Bowie: Who has the time to do that?
Daniel Fava: Yeah, and it's helpful to have somebody kind of like diagnose a professional diagnose. You know, you 'cause you can see, you know, if you get used to looking at that balance sheet, okay, something's not right here. What do we
Emily Bowie: Mm.
Daniel Fava: do next? What do we that's the most important thing that we need to kind of dig into and then you know, maybe it's some of the things that we've already discussed, but
Emily Bowie: For sure.
Daniel Fava: but yeah, having a professional you can lean on I think is huge.
Emily Bowie: The other thing I think business owners run into as well as practice owners is mixing personal and business expenses, which
Daniel Fava: Mm.
Emily Bowie: we know we all know it's a bad idea, but is a very common practice, right? And
Daniel Fava: Yeah.
Emily Bowie: I think for you know therapists it's actually a bigger issue for them because that then can compromise their personal finances if they were to ever get sued or have any other issues. And especially if you have people come inside to a place and like there's all these other layers of liability and risk. So it's really important to take any kind of like business or personal expenses and make sure they're separate because I will see a lot especially on business credit cards. They say this is a credit card for just the business and then there's
Daniel Fava: Yeah.
Emily Bowie: like a personal Amazon charge and it goes to owner's drawless. But then you just really don't have a good feel for what your business is doing or
Daniel Fava: Yeah.
Emily Bowie: it could just set you up for more liability to.
Daniel Fava: Yeah, no, that's good advice. It can get it can get a little messy that way for sure.
Emily Bowie: For sure.
Daniel Fava: Well you you touched on owner draws a little bit
Emily Bowie: Mm-hmm.
Daniel Fava: and so for for folks who are, you know, S Corp and doing the owner draws, like is there any advice you have for those folks, like how do we structure those and what that should look like?
Emily Bowie: Yeah. So if you are an S Corp, you have to set yourself up with a reasonable compensation. And what that means is that if you were to go hire somebody to do your job for the same amount of hours you do it, that's what your W 2 should be. Now, that doesn't mean that's all you get to pay yourself. That just means it minimally needs to be at that rate. Now, When you do tax strategy, this is where a tax strategist would come in and say, Hey, there are tax advantageous ways to pay yourself what you need to be paid without having to prepay all the payroll taxes that are associated with a W-2. And so those are often done via owner's draws. But there are definitely different vehicles. There's things called an accountable plan, there's the Augusta rule, there's a bunch of different ways that you can utilize the tax code for you because
Daniel Fava: Mm-hmm.
Emily Bowie: of the those monies are taxed differently when you become an S Corp. And so those vehicles would be tax free dollars. And there's definitely parameters and reasons and why you should do it this way.
Daniel Fava: Mm-hmm.
Emily Bowie: But that's another common cash leak for business owners is compensation structure issues. That would be a great example for the owner. But then when you start paying people and then you're trying to move a contractor into a W-2 position, not factoring
Daniel Fava: Mm-hmm.
Emily Bowie: in benefits, not factoring that you're prepaying taxes, all those things can hinder your cash flow tremendously, especially if you didn't plan for them.
Daniel Fava: Mm. Yeah. Yeah. Yeah. I think like really the lesson here is just hire a professional. Yeah.
Emily Bowie: Yeah. I mean I I it's so hard because you can know all of this, but and I think you should know all of this, right? Like
Daniel Fava: Yeah. Right.
Emily Bowie: we're very big on education at our firm. So like we're not afraid that you're gonna go do it yourself. We want you to
Daniel Fava: Mm-hmm.
Emily Bowie: be empowered and encouraged to make those
Daniel Fava: Yeah.
Emily Bowie: decisions yourself. But we also know there are things you don't know. And
Daniel Fava: Right.
Emily Bowie: so When we have these conversations, it's so hard to not always end with well, you should probably just hire somebody because
Daniel Fava: Yeah. Yeah, but I mean this is definitely not my forte, you know, and so every time when I get into the financials in the books, I'm like, I need somebody on the outside
Emily Bowie: Isn't
Daniel Fava: looking in who can without emotion help me make decisions and review these
Emily Bowie: For sure.
Daniel Fava: things, tell me how to structure things and stuff like that. but at the same time I want to be educated so that, you know, at the end of the day it's still, you know, our call as the busin as the business owner, you know. but yeah, I think that especially when it comes to things that can save you money on your tax. Taxes, like let's hire a professional for sure.
Emily Bowie: Mm-hmm. Well, and and I think if there is another cash leak out there, it's reactive tax decisions, right? So
Daniel Fava: Mm.
Emily Bowie: if you can plan properly throughout the year, if you know and you can run different scenarios each time you're
Daniel Fava: Yeah.
Emily Bowie: gonna make a big decision, that makes a huge difference. One thing I do wanna like touch on is the difference between a tax strategist and a tax preparer. I think a lot of people believe the person who does their taxes every year should be able to give them advice on how to save on taxes. And that's not always the case. Those are two
Daniel Fava: Yeah.
Emily Bowie: different skill sets, in my opinion. Some people
Daniel Fava: Mm-hmm.
Emily Bowie: do both, we do both. We'll do your taxes, we'll do your tax strategy. But it's a kind of a different lever in your brain to turn it on because
Daniel Fava: Yeah.
Emily Bowie: you're looking at the tax code and then you're looking at a person's. personal situation to say, hey, you can leverage this or that. Here's the difference. Now you choose to make
Daniel Fava: Mm-hmm.
Emily Bowie: which one makes the most sense for you based on your goals, you know.
Daniel Fava: Yeah, yeah. That's a great point. Well, as we're kind of, you know, landing this plane in this conversation, I guess my my last question would be kind of bring us full circle. You know, if someone's listening to this and and they're kind of hearing, there's some things that I need to check on or things I need to be doing that I'm not doing. What do you advise is kind of like the place to start? What do they do first?
Emily Bowie: I would say the best thing you could do is if you're not having your books done for you already, that would be the first thing I would look into is getting
Daniel Fava: Mm-hmm. Yeah.
Emily Bowie: to outsource that because it's it's helpful, helpful on every level. But
Daniel Fava: Yeah.
Emily Bowie: then if you are having your books done for you, have them pull an expense report for you so you can go vendor by vendor and just see the impact of each of your expenses. That's a very practical. thing you can do today to make
Daniel Fava: Mm.
Emily Bowie: sure you're not leaking cash that's unnecessary.
Daniel Fava: Awesome. Awesome. Well thank you so much for your time, Emily. This is always it's always so educational for me when I get to talk to folks who are in the financial space and and taxes and all that stuff. So
Emily Bowie: Mm.
Daniel Fava: where can people find you if they want to learn more about your your your business and what you do?
Emily Bowie: Sure. If you want to find me personally, I'm on Instagram at Emily V Bowie, B-O-W-I-E. And then if you want to find the for firm, we are at Thornadvisors.com and that is Thorn with an E. we also have a podcast called Prosper and Get Paid. My business partner and I do these like five to ten minute episodes of like things you can go and get done right away. So if you're ever interested in just having that like quick hit of information and something you can go do, we hang out there every week.
Daniel Fava: Awesome. And we'll put all of that stuff in the show notes. So if you're listening, you can head there and find it. And thank you so much, Emily. This has been a great conversation.
Emily Bowie: Thank you so much for having me.
Daniel Fava: Great. And if anyone's listening to this and you are looking for help with your online marketing, your online presence and reaching your ideal clients, please head over to private practiceelevation.com slash kickoff and let us know where you're at and what you're looking to do and we can hop on a call and find a way to help you out and move you forward. So thanks for listening and go elevate your practice.
Emily Bowie: Good morning. Thank you for having me. We're doing all right, you know, crazy summer mornings.
Daniel Fava: Yes. Yep. We were just talking about that before we hit record. Sounds like you're in a similar boat of multiple camps and multiple d directions for for the children
Emily Bowie: Yeah.
Daniel Fava: and just kind of the juggling act, right? Yeah.
Emily Bowie: For sure. It's you know, it's the beauty of owning your own business, but also
Daniel Fava: Yeah.
Emily Bowie: can be hindering of how things go, you know.
Daniel Fava: Yeah, yeah, I'm I'm definitely looking forward to when the kids go back to school and just getting my routine back 'cause I'm such a big routine person. which down here in Atlanta they go back the first week of August. So that's really just
Emily Bowie: wow.
Daniel Fava: a week and a half away for us. Yeah.
Emily Bowie: Wow, that's early. We don't go back until the last week of August.
Daniel Fava: Okay. Yeah. And I grew up in New York, which it was after Labor Day, you know, you go back. So it's just all over the place. But yeah.
Emily Bowie: Wild. Yeah.
Daniel Fava: All right. Well let's I'm excited about our topic today, you know, 'cause we're we're gonna be talking about being profitable but still being broke or feeling broke in a private practice,
Emily Bowie: Mm.
Daniel Fava: which I think is a you know a common symptom of some things, you know, financial health of a business and certainly something that I've experienced in my own seasons of growing a business. but before we get into that, why don't you just Just let our audience know a little bit more about yourself. what do you do? How do you serve small businesses and therapists? And how did you get into what you're doing now?
Emily Bowie: Sure. So my name is Emily Bowie. I am one of the partners at Thorn Advisors where we really focus on helping business owners turn profit into cash, reduce that tax strategically, and then build wealth today and tomorrow. I think the reason we got into this, both my business partner and I came out of public accounting. And if you know anything about public accounting, it's rather demanding and not super fulfilling. And so we
Daniel Fava: Mm. About
Emily Bowie: were really encouraged to go small business once we knew you could really do that. I think we always thought there was one path and it was to the money. I mean, I honestly that was what we were taught in school is
Daniel Fava: Yeah.
Emily Bowie: like go get that big four job and
Daniel Fava: Hm.
Emily Bowie: run with it. And it was great, built lots of discipline, taught me so, so much, saw so many different things. But at the end of the day, it wasn't very fulfilling because most people saw me. I would came mainly in auditing as the enemy. And so I
Daniel Fava: boy.
Emily Bowie: but because I understood how their business worked, I was able to give them suggestions to improve. And I just brought that to a smaller scale because most small businesses can't afford to have that. CFO position within the business. And so
Daniel Fava: Yeah.
Emily Bowie: we thought that it would be a great opportunity to have that fractional role where you can help with looking
Daniel Fava: Yeah.
Emily Bowie: at financials while doing something very practical for the business owner, which is finding cash in their business and then teaching them how to keep it within the rules of the tax code. So like
Daniel Fava: Yeah.
Emily Bowie: we kind of do that dual purpose where a lot of people in this industry really just do tax or they just do the financial analysis or they just do business strategy, you kind of get the whole thing when you work with us.
Daniel Fava: great. Yeah, and that's probably super beneficial. You can have that whole picture and someone that, you know, these small businesses can lean on 'cause like you said, it often is difficult. You you need to be a pretty large business to have that that role of an accountant and and bookkeeping and CFO, you know, within it. So I think it's such a
Emily Bowie: Mm-hmm.
Daniel Fava: such a great service.
Emily Bowie: Yep. And you know, why we started working with therapists specifically is because we saw the need there. We saw that with the clients we did have, that often they were set up to learn how to be great clinicians, but they were
Daniel Fava: Mm-hmm.
Emily Bowie: not set up to like how know how to run a business. And
Daniel Fava: Yeah.
Emily Bowie: then also a lot of them will. build solo practices and then go into a group practice and it's a totally different ball game, you know, financial wise. And so what we really kinda had a heart for it is because a lot of people were paying a lot of taxes and it was hindering their growth so dramatically.
Daniel Fava: Yeah.
Emily Bowie: And we were like, there's gotta be a better way we can serve in this capacity. And just kind of be that expert they have in their back pocket to be like, should I do this? Should I not? What does this look like for me? And especially solar practitioners, they they're the the ones that get it hit the hardest from the tax side because they don't have as many expenses. So
Daniel Fava: Mm-hmm.
Emily Bowie: then they are paying astronomical taxes.
Daniel Fava: Yeah.
Emily Bowie: We actually save somebody. not that long ago about like 120k in taxes because we did an S-corp transition that made sense for them and then from
Daniel Fava: Mm-hmm.
Emily Bowie: there helped them with like actual tax strategy. And he had been paying this amount of taxes for like 30 years because one
Daniel Fava: no.
Emily Bowie: person at one point early in his career said, you don't need to look at an S-corp. It doesn't make sense. And so
Daniel Fava: Hmm, wow.
Emily Bowie: And he took, you know, he took the advice he was given and just didn't have access to more information, you know.
Daniel Fava: Yeah, yeah, absolutely. I'm hearing about like two or three other podcast episodes that we could do here in the future, you know, going from
Emily Bowie: For sure.
Daniel Fava: solo to group, benefits of an escort, but let's I'll try to stay, you know, in the lane that we kind of carved out here. So
Emily Bowie: Mm-hmm.
Daniel Fava: let's you know, when someone comes to you and they say, you know, I'm making good money in my practice, but there's really not enough. It always feels like there's not
Emily Bowie: Mm-hmm.
Daniel Fava: enough in my account. Like where do we kind of start with this conversation of being profitable but still broke? Like what's What's usually going on?
Emily Bowie: Yeah. So what I've always found step one is if someone has their books done or not. So meaning have they been maintaining their bookkeeping on a monthly basis? So normally, and this is extremely normal, people just don't do their books until they have to do their taxes. And
Daniel Fava: Mm.
Emily Bowie: when you do that, you find yourself having to kind of grapple with the decisions you made five or six months ago. And
Daniel Fava: Yeah.
Emily Bowie: you know, having this like spiral of what I could have done versus what I where I'm at now. And so what I always recommend to practitioners is outsource your books. Do what you do best and let someone else do your books because you accounting's not super intuitive. I mean, other than the fact like don't spend more than you have, other than that, that's about as intuitive as it gets. But bookkeeping
Daniel Fava: Yeah. Yeah.
Emily Bowie: is a lot more you know, strategic and how you set up your chart of accounts, what the numbers mean, all of that. I always recommend that to be the first thing they outsource. So then you get good numbers so you can make good decisions. Because then
Daniel Fava: Yeah.
Emily Bowie: that also leads into like the first kind of cash leak that I see almost everybody have, and it's in their pricing.
Daniel Fava: Mm, okay. Yeah, I think that's really good advice and like just I'm I'm thinking through sort of my history and my business, like it probably took me a good six years before I got a bookkeeper and I'm I'm ashamed to admit that. because once I did it it was it was huge. It because it really does it
Emily Bowie: Game changer.
Daniel Fava: helps you have somebody number one, you know, setting up those categories for, you know,
Emily Bowie: Mm-hmm.
Daniel Fava: how you for your expenses and write offs and all that, but also to having somebody kind of almost hold you accountable, like, hey, what's this expense?
Emily Bowie: Hundred percent.
Daniel Fava: And like you're kinda like, maybe that's not necessary or yeah, we don't really need to use that software anymore. And so like I'm reviewing those things at a more regular basis to make those decisions. Like what do we actually need to like increase, you know, profit and like are we spending more than we need to on certain softwares and stuff like that.
Emily Bowie: Hundred percent. Yeah, I feel like that is, you know, the awareness always helps with just making better choices in general. And I think
Daniel Fava: Yeah.
Emily Bowie: having someone do your books, have them get them to you by like the 10th or the 15th, you then can make the decisions you need to change if you know you're going in the wrong trajectory. But
Daniel Fava: Yeah.
Emily Bowie: I think even for myself, I have a bookkeeper do my books because like why am I spending my time doing that?
Daniel Fava: Yeah. Right. Mm hmm. Right.
Emily Bowie: And I will put it off because I'm in client delivery. And and we all know if you're in client delivery, you focus on the client way more than you focus on yourself. Yeah. Yeah. Yeah.
Daniel Fava: Yep. Yeah. Amen to that. Yeah, it happens. So you you you mentioned pricing, so you s you kind of started in into that topic. So take us into that. Like you said that that's one of the biggest cash leaks you see?
Emily Bowie: absolutely. So often we'd price either based on the market or we will price based on how we feel.
Daniel Fava: Yeah.
Emily Bowie: And so I think that is usually where most people start. So it's very normal that pricing is the area that cash leaks the most because you're probably undercharging and you don't realize that you're undercharging for whatever it is. and so the reason the books are imperative is because you need a certain percentage from those books to know if you're undercharging. And so if we're looking at a profit and loss statement, which is also known as like an income statement, it's the statement that starts with revenue, takes out all your expenses, ends in a net income.
Daniel Fava: Yeah.
Emily Bowie: And so the number that's imperative to us when we're looking at pricing is. The expense line in comparison to your revenue line. So
Daniel Fava: Mm-hmm.
Emily Bowie: these are your expenses that are not directly related to generating revenue, but are still expenses nonetheless.
Daniel Fava: Yeah.
Emily Bowie: And so we call those overhead expenses or like indirect costs. And
Daniel Fava: Mm-hmm.
Emily Bowie: that percentage, when you take that number divided by total revenue, that gives you a percentage to say, hey, this is how much every time you bring a dollar in. is allocated to keeping the lights on for a lack of a better way of saying it.
Daniel Fava: Yeah. Yeah.
Emily Bowie: And that percentage almost never gets factored in when people are looking at their prices. Usually people look at their prices and they say, it's gonna cost me this much for this clinician to do this session or whatever
Daniel Fava: Right.
Emily Bowie: the case may be. And if there's any kind of tools that are necessary, you know Anything that's directly related is a lot easier to factor into pricing, but that percentage
Daniel Fava: Mm-hmm.
Emily Bowie: really is what will help you determine if you have predictable margins or not.
Daniel Fava: Yeah. And is there like a sort of a standard percentage that or like a range that you hope for private practices to kind of fall into when you're looking at that?
Emily Bowie: Honestly, it would probably be somewhere between 30 or 40%.
Daniel Fava: Okay.
Emily Bowie: it just really depends on how much it costs you to deliver a session. So if you are paying other people to do the session, if you take insurance or don't take insurance, like all
Daniel Fava: Yeah.
Emily Bowie: of those things come into play. But with 30 to 40 percent there, you really can have a good net income margin after. But
Daniel Fava: Yeah.
Emily Bowie: I will tell you most people are fifty and above, especially if you've never looked at it.
Daniel Fava: Yeah, yeah. And then over time that is that would definitely lead to feeling like there's not enough money in the bank.
Emily Bowie: hundred percent. And I think a lot of times too, because of when we're talking therapists, they are doing a service for somebody. And if they
Daniel Fava: Yeah.
Emily Bowie: can't make ends meet, there's resentment that can build up for doing the service. They, you know,
Daniel Fava: Mm, yeah.
Emily Bowie: there's a lot that comes into it. So it's more than just the money piece of it. It's like
Daniel Fava: Yeah.
Emily Bowie: really being able to serve well. And
Daniel Fava: Yeah.
Emily Bowie: so what I encourage therapists to do if you do find yourself needing to raise prices, start with your new patients first. That's the easiest.
Daniel Fava: Mm-hmm.
Emily Bowie: And then if you have old patients, rising the fee by five, ten dollars, whatever you can kind of get behind is a great
Daniel Fava: Yeah.
Emily Bowie: way to kind of build that gap and like bridge that gap.
Daniel Fava: Yeah, yeah, and that's great advice and that's That's the approach my wife has taken in her private practice where
Emily Bowie: Mm-hmm.
Daniel Fava: she she tends to, you know, she thinks more like three, six months out and so it's like, Hey, January first, new clients, they're gonna be at this rate and then come
Emily Bowie: Mm-hmm.
Daniel Fava: March I will have brought my old clients up and you know, and sometimes there needs to be conversations and and some people do sliding fees and stuff like that. If a client
Emily Bowie: Mm.
Daniel Fava: can't meet that new that new pricing. but for the most part, I don't think she's ever gotten much pushback at all.
Emily Bowie: I and I feel like more people need to hear that. And I
Daniel Fava: Yeah.
Emily Bowie: think about it because the one thing I always say, because it is a common objection, I'm like, I literally my therapist changes prices twice a year. I have never once been like, absolutely not. We can't do that. I'm like, no, I'm invested into
Daniel Fava: Mm-hmm. Right, right. Yeah.
Emily Bowie: the care and the value I see in therapy, you know.
Daniel Fava: Yeah, yeah, absolutely. I had a similar similar process with with my coach that I work with and it
Emily Bowie: Mm-hmm.
Daniel Fava: was like, yeah, like but you're totally that I get that value. Like totally I totally get it. Yeah, yeah.
Emily Bowie: Yeah. I'm here for it, right?
Daniel Fava: Okay, so yeah, we talked about fees, but like are there any other things that are kind of impacting the story of why is there not that much in the in the accounts here?
Emily Bowie: Yeah, I think you touched on it earlier about essentially reviewing your expenses. So
Daniel Fava: Mm.
Emily Bowie: one thing I encourage all business owners to do, doesn't matter what industry you're in, is
Daniel Fava: Yeah.
Emily Bowie: at least annually. To me, I think you should do it quarterly. But if it's anything in
Daniel Fava: Mm-hmm.
Emily Bowie: between, doing an expense audit and just going through it with kind of three questions like, what is this? And do I need it? To
Daniel Fava: Yeah.
Emily Bowie: do I have something else that can fulfill this purpose? And then
Daniel Fava: Mm-hmm.
Emily Bowie: third would be like, am I getting a return? And
Daniel Fava: Yeah.
Emily Bowie: I think that's usually the harder one to decide because it's not just quantitative, it's
Daniel Fava: Yeah.
Emily Bowie: also qualitative. And so I know I've fallen victim to this where I've stayed in like founding prices for things because I might use it, or I've been in like a coaching membership.
Daniel Fava: Yeah.
Emily Bowie: And I haven't actually attended anything in months. And I'm like, yeah, but it's gonna go up. And what if I
Daniel Fava: Right.
Emily Bowie: do need it? And you know, all of those things.
Daniel Fava: Yeah.
Emily Bowie: But I think when you kind of get in a standard practice of actually looking at these expenses, you start to detach the emotions from it. And it just becomes
Daniel Fava: Yeah.
Emily Bowie: like a data decision. Like, hey, you said three months ago you were gonna use this and you have not used it. It needs to go, you know.
Daniel Fava: Yeah. Yeah.
Emily Bowie: Type of thing.
Daniel Fava: Mm-hmm. That's great advice. And and to be honest, I love doing this. It actually makes me
Emily Bowie: Mm-hmm.
Daniel Fava: so happy when I'm like, no, we don't need to use that. Or, you know, like I've got my team and at Private Practice Elevation we use a lot of different softwares because, you know, we're we're we're dealing with websites
Emily Bowie: Yeah, I'm sure.
Daniel Fava: and SEO and you know and all that stuff. So things come and go, software's come and go, and it's like, hey, are we still using this? Is this still serving us? we just
Emily Bowie: Mm.
Daniel Fava: went through the process with a software that helps our clients review their websites before we make it live or they can add feedback. And it was kinda clunky. It wasn't working so great. And we found a better and cheaper option. And so then it became that decision, okay, we're gonna switch over to this platform. But there's been other things too. You know, like you said, like, we're paying for this and this and they both kinda do the same thing. Let's eliminate
Emily Bowie: Mm-hmm.
Daniel Fava: one and just go with the other and and we just kinda, you know, focus the team around that and making sure that everybody can use it and still get that return, like you said.
Emily Bowie: For sure. And I think the one thing you kind of pointed at is like there's also this like operating procedure piece of things that do
Daniel Fava: Yeah.
Emily Bowie: help with eliminating some of these cash leaks that will tend to happen. I think one SOPs in general, which are standard operating procedures, are helpful because they increase operational efficiency in general because you're not keeping it in your brain anymore.
Daniel Fava: Mm-hmm.
Emily Bowie: but also standardizing expense audits, standardizing looking at a process and saying, This is clunky. How do we improve
Daniel Fava: Yeah.
Emily Bowie: it? And how can we save on it too, you know?
Daniel Fava: Yeah. Yeah, absolutely. That's probably the part of it I struggle the most, like setting the time aside each year to review
Emily Bowie: Yeah.
Daniel Fava: the SOPs and review, you know, everything. But I I like what you said about quarterly, you know, getting
Emily Bowie: Mm-hmm.
Daniel Fava: into looking at your your profit and loss and your expenses and making sure that, you know, everything is really working for you.
Emily Bowie: One thing I'll say to ease the SOP review process, I have like a standard way of doing it. You only review and do once a year, but you have a parking lot list. So every time
Daniel Fava: Mm-hmm.
Emily Bowie: something stutters or stumbles or doesn't
Daniel Fava: Yeah.
Emily Bowie: work, you throw it into the parking lot list, and then you have like an executive team meeting of sorts, like whoever
Daniel Fava: Yeah.
Emily Bowie: is like process owners. And you say, okay, what from the parking lot list has to be done this year? And then
Daniel Fava: Yeah.
Emily Bowie: you set them off to go do it and you have a very defined end date because with procedures, you could literally
Daniel Fava: Mm-hmm.
Emily Bowie: work on them all the time and they
Daniel Fava: Yeah.
Emily Bowie: still wouldn't be the most up to date. But you
Daniel Fava: Yeah.
Emily Bowie: kind of like put those boundaries in place. It helps a lot.
Daniel Fava: Mm-hmm. Yeah, that's great. That's great advice. Now, one thing that I noticed, you know, in in the notes that I was reviewing before you before our conversation here, you talked a little bit about people not really looking at their balance sheet. And so we talked about the profit and loss. So
Emily Bowie: Yes. Yes.
Daniel Fava: take us through what the balance sheet is and how does that work together in this conversation of you know, making sure that you are profitable and you got money in your account.
Emily Bowie: Yes. So balance sheet, I'm sure all of you, if you have a bookkeeper, they send the balance sheet with the income statement or the profit and loss.
Daniel Fava: Mm-hmm.
Emily Bowie: And you have no idea what it means or why it's important. And
Daniel Fava: Mm-hmm.
Emily Bowie: I think that's completely normal. But the way I like to look at it is a profit and loss teaches you what the activity looked like for the past month, half a year, depending on how you pull it. And then the balance sheet tells you the health of your business.
Daniel Fava: Mm.
Emily Bowie: And so that first portion is your assets and it's normally your cash. So the way I try to explain it to people is that if you are a sole proprietor, meaning you have not elected to be an S Corp or anything like that, and you pay yourself just by transfers out of your account, that net income number from your profit and loss should match that cash balance plus how much you've distributed to yourself.
Daniel Fava: Mm-hmm.
Emily Bowie: If it doesn't, you likely either have debt or something else is amiss in awry and means you need to kind of look at it. Then
Daniel Fava: Yeah. Mm-hmm.
Emily Bowie: if there's a big difference, that's when you start kind of like pulling back the layers. Do I need to do an expense audit? Look at my debt. Am I keeping track of things? Then if you are, if you have elected to become an S-corp. You pay yourself via a payroll or a W-2 employee within the business. So that's captured on your profit and loss. So when you get to that net income number compared to your cash, the only difference would be in those owner's draws. So
Daniel Fava: Mm-hmm.
Emily Bowie: other than that, it would be related to debt. And so debt tends to be one of those things where It creates timing delays. So you recognize the expense when you put it on a credit card, but you don't pay for it until later. So
Daniel Fava: Yeah.
Emily Bowie: that could be one of the things. Or you only, if it's a loan to you only recognize the interest on your
Daniel Fava: Mm-hmm.
Emily Bowie: income statement, but then you're paying down the principal as you go because everything that you've paid for with said loan is already been on your income statement, profit and loss for so long.
Daniel Fava: Yeah.
Emily Bowie: So there are timing deliver like differences that you're gonna run into. And sometimes there are just like problems with how the math is working. But
Daniel Fava: Yeah. Yeah.
Emily Bowie: this is why when you get to a certain point, it's so important to just hire the experts to come in and they're gonna be able to whittle that down to what the actual
Daniel Fava: Yeah.
Emily Bowie: problem is. And then you go work on the problem, not necessarily have to like do the full scope thing yourself. Cause like
Daniel Fava: Yeah.
Emily Bowie: Who has the time to do that?
Daniel Fava: Yeah, and it's helpful to have somebody kind of like diagnose a professional diagnose. You know, you 'cause you can see, you know, if you get used to looking at that balance sheet, okay, something's not right here. What do we
Emily Bowie: Mm.
Daniel Fava: do next? What do we that's the most important thing that we need to kind of dig into and then you know, maybe it's some of the things that we've already discussed, but
Emily Bowie: For sure.
Daniel Fava: but yeah, having a professional you can lean on I think is huge.
Emily Bowie: The other thing I think business owners run into as well as practice owners is mixing personal and business expenses, which
Daniel Fava: Mm.
Emily Bowie: we know we all know it's a bad idea, but is a very common practice, right? And
Daniel Fava: Yeah.
Emily Bowie: I think for you know therapists it's actually a bigger issue for them because that then can compromise their personal finances if they were to ever get sued or have any other issues. And especially if you have people come inside to a place and like there's all these other layers of liability and risk. So it's really important to take any kind of like business or personal expenses and make sure they're separate because I will see a lot especially on business credit cards. They say this is a credit card for just the business and then there's
Daniel Fava: Yeah.
Emily Bowie: like a personal Amazon charge and it goes to owner's drawless. But then you just really don't have a good feel for what your business is doing or
Daniel Fava: Yeah.
Emily Bowie: it could just set you up for more liability to.
Daniel Fava: Yeah, no, that's good advice. It can get it can get a little messy that way for sure.
Emily Bowie: For sure.
Daniel Fava: Well you you touched on owner draws a little bit
Emily Bowie: Mm-hmm.
Daniel Fava: and so for for folks who are, you know, S Corp and doing the owner draws, like is there any advice you have for those folks, like how do we structure those and what that should look like?
Emily Bowie: Yeah. So if you are an S Corp, you have to set yourself up with a reasonable compensation. And what that means is that if you were to go hire somebody to do your job for the same amount of hours you do it, that's what your W 2 should be. Now, that doesn't mean that's all you get to pay yourself. That just means it minimally needs to be at that rate. Now, When you do tax strategy, this is where a tax strategist would come in and say, Hey, there are tax advantageous ways to pay yourself what you need to be paid without having to prepay all the payroll taxes that are associated with a W-2. And so those are often done via owner's draws. But there are definitely different vehicles. There's things called an accountable plan, there's the Augusta rule, there's a bunch of different ways that you can utilize the tax code for you because
Daniel Fava: Mm-hmm.
Emily Bowie: of the those monies are taxed differently when you become an S Corp. And so those vehicles would be tax free dollars. And there's definitely parameters and reasons and why you should do it this way.
Daniel Fava: Mm-hmm.
Emily Bowie: But that's another common cash leak for business owners is compensation structure issues. That would be a great example for the owner. But then when you start paying people and then you're trying to move a contractor into a W-2 position, not factoring
Daniel Fava: Mm-hmm.
Emily Bowie: in benefits, not factoring that you're prepaying taxes, all those things can hinder your cash flow tremendously, especially if you didn't plan for them.
Daniel Fava: Mm. Yeah. Yeah. Yeah. I think like really the lesson here is just hire a professional. Yeah.
Emily Bowie: Yeah. I mean I I it's so hard because you can know all of this, but and I think you should know all of this, right? Like
Daniel Fava: Yeah. Right.
Emily Bowie: we're very big on education at our firm. So like we're not afraid that you're gonna go do it yourself. We want you to
Daniel Fava: Mm-hmm.
Emily Bowie: be empowered and encouraged to make those
Daniel Fava: Yeah.
Emily Bowie: decisions yourself. But we also know there are things you don't know. And
Daniel Fava: Right.
Emily Bowie: so When we have these conversations, it's so hard to not always end with well, you should probably just hire somebody because
Daniel Fava: Yeah. Yeah, but I mean this is definitely not my forte, you know, and so every time when I get into the financials in the books, I'm like, I need somebody on the outside
Emily Bowie: Isn't
Daniel Fava: looking in who can without emotion help me make decisions and review these
Emily Bowie: For sure.
Daniel Fava: things, tell me how to structure things and stuff like that. but at the same time I want to be educated so that, you know, at the end of the day it's still, you know, our call as the busin as the business owner, you know. but yeah, I think that especially when it comes to things that can save you money on your tax. Taxes, like let's hire a professional for sure.
Emily Bowie: Mm-hmm. Well, and and I think if there is another cash leak out there, it's reactive tax decisions, right? So
Daniel Fava: Mm.
Emily Bowie: if you can plan properly throughout the year, if you know and you can run different scenarios each time you're
Daniel Fava: Yeah.
Emily Bowie: gonna make a big decision, that makes a huge difference. One thing I do wanna like touch on is the difference between a tax strategist and a tax preparer. I think a lot of people believe the person who does their taxes every year should be able to give them advice on how to save on taxes. And that's not always the case. Those are two
Daniel Fava: Yeah.
Emily Bowie: different skill sets, in my opinion. Some people
Daniel Fava: Mm-hmm.
Emily Bowie: do both, we do both. We'll do your taxes, we'll do your tax strategy. But it's a kind of a different lever in your brain to turn it on because
Daniel Fava: Yeah.
Emily Bowie: you're looking at the tax code and then you're looking at a person's. personal situation to say, hey, you can leverage this or that. Here's the difference. Now you choose to make
Daniel Fava: Mm-hmm.
Emily Bowie: which one makes the most sense for you based on your goals, you know.
Daniel Fava: Yeah, yeah. That's a great point. Well, as we're kind of, you know, landing this plane in this conversation, I guess my my last question would be kind of bring us full circle. You know, if someone's listening to this and and they're kind of hearing, there's some things that I need to check on or things I need to be doing that I'm not doing. What do you advise is kind of like the place to start? What do they do first?
Emily Bowie: I would say the best thing you could do is if you're not having your books done for you already, that would be the first thing I would look into is getting
Daniel Fava: Mm-hmm. Yeah.
Emily Bowie: to outsource that because it's it's helpful, helpful on every level. But
Daniel Fava: Yeah.
Emily Bowie: then if you are having your books done for you, have them pull an expense report for you so you can go vendor by vendor and just see the impact of each of your expenses. That's a very practical. thing you can do today to make
Daniel Fava: Mm.
Emily Bowie: sure you're not leaking cash that's unnecessary.
Daniel Fava: Awesome. Awesome. Well thank you so much for your time, Emily. This is always it's always so educational for me when I get to talk to folks who are in the financial space and and taxes and all that stuff. So
Emily Bowie: Mm.
Daniel Fava: where can people find you if they want to learn more about your your your business and what you do?
Emily Bowie: Sure. If you want to find me personally, I'm on Instagram at Emily V Bowie, B-O-W-I-E. And then if you want to find the for firm, we are at Thornadvisors.com and that is Thorn with an E. we also have a podcast called Prosper and Get Paid. My business partner and I do these like five to ten minute episodes of like things you can go and get done right away. So if you're ever interested in just having that like quick hit of information and something you can go do, we hang out there every week.
Daniel Fava: Awesome. And we'll put all of that stuff in the show notes. So if you're listening, you can head there and find it. And thank you so much, Emily. This has been a great conversation.
Emily Bowie: Thank you so much for having me.
Daniel Fava: Great. And if anyone's listening to this and you are looking for help with your online marketing, your online presence and reaching your ideal clients, please head over to private practiceelevation.com slash kickoff and let us know where you're at and what you're looking to do and we can hop on a call and find a way to help you out and move you forward. So thanks for listening and go elevate your practice.
