1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting
Helping Canadian businesses beat the odds!
Helping Canadian businesses beat the odds!
Thanks for tuning in for another episode of ask [inaudible] CPA. Today we’re talking about a sprawl CPA financial planning process. And here to help me is a Tyson here again. Hello, excites him for, uh, for coming aboard again. So, uh, what sort of project you’ve been working on lately, just a few year ends and a lot of financial plan keeps the wheel rolling. So the quote that we came up with for the planning process is it’s an Abraham Lincoln quote and he says, give me six hours to chop down a tree and I’ll spend the first four sharpening the ax. Um, you know, it really talks about how the preparation is key in any project. So, you know, Edmonton Accountant in the statistic that comes to mind is, you know, it’s the second most common reason why businesses go out of business and they run a cash and the genuinely just don’t have that plan.
You know, the story we get as business owners know they’re struggling and they’re paying way too much money on tax or they have a business strategy completely incongruent with their personal finances. So for example, you know, they want to hire on a new staff in the business, but that would mean that they have to cut their salary and they won’t be able to pay their personal mortgage. We have a problem. So although it might make sense for the business, it’s not going to make sense for the overall entrepreneur. So what do you think the questions that these entrepreneurs should be asking Tyson a first, what formal written plans do you issue? So the formal written plans that we issue here are, number one, we issue a financial plan. That financial plan is based on the business owner’s personal circumstances. So Edmonton Accountant what are they prudent financial decisions that business owner has to make and what’s the tax strategy that we’re going to use for this, uh, for this business or the second one is in business plan, what items are considered in the financial plan?
So it’s very much about their personal, um, basically their personal financial situation. So we start right off with their objectives. So we need to know what’s important for that business owner, what are they trying to accomplish? You know, a business owner who’s trying to purchase a new business is completely different than one who’s trying to sell their business and that’s kind of the opposite ends of the spectrums, but some people are very unique financial goals. They’re trying to put the kids through education and then trying to pay for a wedding, you know, it can be everything under the sun. They’re buying a new house, Edmonton Accountant, you know, they’re downsizing their life. So we need to understand what are the goals then we really looked through is what’s the personal balance sheet of that business owners, so what are the assets and what are the liabilities that they have personally, we’re going to see the assets and liabilities for the corporation on the corporate financial statements.
But you know, that personal balance sheet is going to matter just as much and what does it actually cost for them to run their lives, so to speak? What are they actually need from this business every month that, Edmonton Accountant, you know, they can live comfortably. What is usually the immediate payoff for the client when you complete the financial class? So the, the, the financial plan, normally almost every business benefits from an effective, we call it our remuneration strategy, so how we’re going to pay them, what mixture a salary and dividends and even the smallest businesses if they have an effective plan for the mixture in salary and dividends that’s going to be paid to the owners are the owners or the family of the owners that’s going to have an immediate payback. Five, 10, $15,000 is not unusual even for very small businesses. So you know, sometimes the bigger businesses was even more that we can do.
But even for the smallest of businesses, just that effective a mixture of salary and dividends is really going to save them a lot of money right up front. Where you from day one. Alright. How does tax planning and financial planning different in the real world than what is taught in the CPA program? So I really think it comes down to like when you write the tests on the CPA program, they give you case studies in there, the five well written pages of everything you need to know about the client. And that never happens in real life. They client never comes in with five well written pages of everything that you need to know. Edmonton Accountant It’s your job as a CPA to have a process to the peel away, the layers of the onion until you get to, you know, what variables are actually necessary and significant in this plan.
What are the sproul and associated plans. So. Perfect. Well we’ve been just basing the processes for, for years, so we don’t start from scratch on every client. You know, we started with a financial planning template, you know, before you were telling time Tyson it was, it was five pages, like version one point. Oh, this girl and associates financial plan template. It was five pages. And now the plan you’ve been working on lately, it’s probably 30, 30 plus pages. Yeah. So it’s really significant. So we have a process in place how we get there. So we, we, uh, we can do it efficiently. That doesn’t cost. It’s something that the average business owner can’t afford, but at the same time it’s extremely comprehensive too. So it’s actually covering all those variables. Right? Uh, why do you do the financial time before the business model? Really some business strategies that you can come up with just aren’t practical on some, Edmonton Accountant, you know, with some personal financial circumstances.
So a business owner who has a high degree of personal debt, for example, needs a far less risky business plan, whereas a business owner who has, you know, a lot of personal assets that they can put into this thing and they don’t need a lot of money coming back into the business. They can execute, uh, a whole host of different strategies. So we’ve got to make sure it makes sense that, you know, if we’re planning that the owner is not going to draw from a business, how does that look? Or if the owner needs a certain amount every month, they need 5,000 or $6,000 a year with this corporation. Every mother, we have to make sure we hit that, Edmonton Accountant we. Whereas, you know, if we just try to plan but the corporation in a vacuum, we can have something that’s completely not practical for the personal living circumstances.
Okay. What does the business plan address that the financial plan is not the business plan really goes into the business metrics now. So now we have, you know, what’s actually going on in their personal life, how we’re gonna manage them from a tax strategy, but now this is the business strategy. So you know, things like, you know, what is the pricing model, how we’re going to acquire new clients and what that, uh, acquisition of new clients is actually going to translate into a forecast. So now we’re, we’re, we’re going away from the business owner’s personal circumstances and tax strategy and into the street, the business strategy. Edmonton Accountant again, it’s a business strategy that’s rooted in something that’s realistic for that particular individual. Okay. Uh, how many meetings does it normally take for a business owner to do both a financial and business plan? Use It for meeting process.
You know, sometimes people come in super organized and it’s three and sometimes they come in completely disorganized and it’s five, but four is kind of the eight times out of 10. It’s four meetings beginning of the end. It’s much simpler than people think. It’s going to be what happens to those four meetings. So meeting number one is the first meeting of the financial planning process and really what we’re drilling down to is what is their high level of financial objectives in their life, uh, so what they’re trying to accomplish, you know, things like minimize tax accumulate, like what assets a fund retirement, Edmonton Accountant, you know, things like major purchase in their life to trying to purchase a new house or the trend or acquire a business, sell a business. So starting with those, we start there. Um, and then we drill through that business owner’s personal balance sheet.
What are their assets, what are the liabilities, what are their payments that they, they’re owing every month, you know, what are the interest rates, who are there other advisors that we have to talk with that’s all about meeting number one, meeting number two, that after we have all those variables, you know, we can translate that into a finished product for them. We give them a financial plan is specifically designed for business owner meeting number two. Also me, number two, we introduce them to our business planning process. Our template and in between meetings two and three, the owner usually gets four hours of homework to basically input their vision for the business into our planning template. Edmonton Accountant then meeting number three is just about us going through that information that they’ve put into that, a business plan template and for us to, for us to understand what their vision for the company is.
And then in between meetings three and four, we have the job that of putting our finishing touches on that, you know, based on what we’ve seen work, what hasn’t worked in the past, you know, this is the strategy we’d recommend that’s consistent with your vision and here’s the reasonable forecast based on that vision, uh, once we do sponsor can plead it, how do you keep them updated? Usually it’s an annual process, so it’s, it’s in conjunction with the year. Edmonton Accountant so we start the planning process starts when the client walks through the door, assuming if they’re up to date on all their filings. We start with the financial plan, we continue into the business plan and then the cycle repeats at the year end. So we do the year end, uh, we review the year end numbers and then we, after the, the year numbers we’ve reviewed, we go through the financial plan, the business plan, we determined what’s changed from this year, from last year to this year.
Uh, what circumstances have changed, what goals and objectives have changed, and then we do a separate planning meeting to give them an updated, a financial planning business plan based on what’s changed in their lives. Why do you think other cpas don’t employ this planning process? I think there’s a couple reasons. Number one, I think it’s, it’s pricing. The way they price their services being hourly, um, that they really don’t have the funds built in. So they’re always going to do, we need a plan and trying to sell a plan based on where our planning is built into the person’s one monthly fee plan and financial statements and tax returns. It’s all included so that the customer doesn’t look at it as an adversarial upsell. Edmonton Accountant You know, we don’t wanna we don’t want to do a year end without doing a plan. The same reason why someone doesn’t want to sell you a car with it, doesn’t have the seatbelt and I on, I don’t think it’s the right way to go.
So I think the pricing structure is a little off. It’s, it’s a little crib it prohibitive for doing that sort of work. The second reason is, is you know, we’ve taken seven years to build out our process for doing financial plans and doing business plans so we can actually do them very efficiently so we can actually get a good product to the client and not have to charge them $10,000 for a business plan. It’s something that the average business owner, they can actually afford to do an update each and every year. So because we have that process in place that it’s, you know, not just efficient, but it’s actually very worthwhile. So, Edmonton Accountant so I think that’s what we have here for days. So thanks so much again for uh, uh, for watching. And you’ll feel free to leave any comments below and we’ll try to address any queries you have. Any upcoming videos. Thanks very much.