Episode 184

Oct 12, 2018

What’s the difference between all the money people? And which do you need? We lay out the details.

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What’s the difference between all the money people? And which do you need? We lay out the details.

Resources we used here and here.

Sponsored by: Acuity and GiftUp!


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Michael Reynolds Hey, everyone. Welcome to the Massage Business Blueprint podcast, where we discuss the business side of massage therapy. I’m Michael Reynolds.

Allissa Haines And I am Allissa Haines.

MR We’re your hosts. Welcome, welcome. Allissa, I understand that you have retreated to your tiny office in the backyard and you are in Zen mode.

AH I am in Zen mode because everything is horrible inside the house and children are —

MR [laughs] Sometimes you just have to retreat to the backyard. Not all of us have a little mini-office in the backyard, though, so —

AH Although, I did just run inside to freshen up my coffee and Walt had retreated to his little office in the basement too.

MR So everyone’s hiding from the kids. [laughs]

AH The kids are not feeling great, but it’s not like they’re really sick. They’re just being dramatic about a little bit sick. So we’re intermittently checking on them. We’re responding when they holler, but they are sitting in front of some cartoons, and we’re just all going to be okay with that.

MR Good job.

AH How are you?

MR I am happy to be home. I was doing some travelling last week. I was in Vegas for a conference. I like Vegas. Vegas is actually a lot of fun. I don’t drink, smoke, or gamble, or do really anything fun at all, so you’d be surprised to know how much I like Vegas, but I actually really like it. It’s a fun town.

AH We had fun. I have to say, I went to Vegas and I do drink. I do not smoke or gamble, but I had one adult beverage the entire four days we were there, and I was like, yeah, I’m good. We had a really fun time. Did you get conveyor belt sushi?

MR No, did not have time for conveyor belt sushi. Did have sushi at a good place. But the people watching in Vegas is phenomenal, so that’s kind of a treat for me every time. It’s just hilarious to see all the shenanigans going on. So, yeah, I’m happy to be home. I am getting back in the routine so I am very happy to be back in my natural environment. Yippee.

AH Oh, can I tell you my really successful budgeting story? Let’s side-bar. Well, we are talking about money today.

MR Yeah, I’m always up for a budgeting story.

AH Walt has had this fancy, it’s called a vacuum coffee pot. It’s this two-piece glass coffee pot that he’s had for years that he got for three bucks at a thrift store in Sweden back when he lived and worked there. It’s a really fancy coffee pot and it makes a really good-tasting coffee and he’s a little bit of a snit about that. So it broke. It broke Sunday morning, and he was kind of devastated. And I have been pushing hard for a real coffee pot where you push the button and coffee gets made. You can literally get it all set up and then push a button in the morning or program it and coffee is made. He’s been really hard-core against that because he had this fancy vacuum pot that — but it required a lot of work. You had to stay in the kitchen to make this coffee. So his vacuum pot broke yesterday, which I was sad for him because he was really sad. And I was like oh, can we just go get a regular coffee pot now? He was like, okay. So we went to the thrift store and, for 6.99, I got this really great coffee pot.

MR [laughs]

AH It has a big carafe-thingy and it’s programmable and it has this little side where you can brew one cup at a time either using regular coffee grounds or using special pods. And I’m not going to use the pods because they’re not environmentally friendly, so relax, everybody. And I used to get a reusable gold filter thingamabob for the coffee pot, I used my Amazon credit that I had because I got some gift cards. And then also, I’ve been hosting these family dinners over at my house every couple of Sundays and we didn’t have enough plates. And instead of going out and buying a new set of dishware, which I totally want, we got a stack of plates at the thrift store yesterday too. So I spent a total of like $18 and I got seven plates, seven bowls, a coffee pot and this great gray sweater that I’m wearing, which is fabulous because it’s replacing the one that ripped last year after it had been used for several years. So that’s my budgeting story and I’m really really proud of myself.

MR Dave Ramsay would be so proud.

AH Ugh, Dave Ramsay, I can’t even. I just read that article you posted and I just can’t — what is it? 7 Characteristics of Debt-Free People (sic)?

MR Yeah, what’s wrong with that?

AH Yeah, I want to put Number 8, none of these people clearly had a major health crisis that put them behind. Number 9, most of these people have some level of support network for childcare and/or help in some way or another —

MR That doesn’t make all that not true.

AH Number 10, all of these people are clearly white and whatever because there’s no recognition of socioeconomic or racial disparity in education levels and availability of quality public education in any of his stuff.

MR So it’s all just false?

AH I am on a rampage.

MR So it’s all just false. It’s all just wrong information then?

AH I’m not saying it’s all false. But I’m saying there’s an obvious lack of context and a lack of awareness of non-white people and certain other access issues that have been built into our cultural and government structure.

MR I don’t deny that and neither does he. But how would you write this article differently?

AH I think every article that he writes needs to come with a caveat that says you know what, we know that this can’t apply to everybody and here are the things, perhaps, we may have not recognized in this.

MR Interestingly enough, during his show, he does frequently does say that. He can’t say it every time because it would just take up too much time, I think. But frequently he does say, yes, privilege does exist; yes, these socioeconomic disadvantages do exist. So he actually says that — I’ve heard him say it more than once on his show.

AH I’d like to see him come down a little harder on deconstructing the institutionalized racism and sexism that is just built into our culture and government. That’s what I’d like to see. I’d like to see him become an ally the way you are becoming an ally.

MR [laughs]

AH And I’m not [indiscernible].

MR I’m sure you would like to see that.

AH I am raring and I think that every listener, every culturally aware listener and probably all of our woman listeners are feeling the same way, but this is just how I’m going to be for a couple more weeks. Deal with it.

MR Oh, I’m dealing with it. [laughs] I’ve been dealing with it.

AH You’re dealing with it pretty well, actually. Should we move into our topic before all of our listeners abandon us?

MR Oh, probably because there’s not enough time for us to argue about this for hours. So let’s go into our topic. I like our topic —

AH I do too.

MR — because it’s about money. Anytime we talk about money, I’m pretty excited.

AH Bring it.

MR It is CPA, accountant, bookkeeper, tax preparer, financial advisor; what do you need?

AH Yeah. And I’m going to hit you at the end with the financial advisor stuff, so brace yourself.

MR Sure.

AH I figured you’d be qualified.

MR Yes.

AH But we’ve gotten asked this a couple times, more than a couple of times. I was actually listening to another podcast that covered it a little bit and I realized that we needed to cover this. So there’s a lot of different kinds of money professionals out there. And some of us need some of them, and rarely do all of us need all of them. And a lot of times you can get them combined. But I wanted to give a little bit of background about what each kind of professional does. I’ll give you the end of the story here, which is that you can typically find some kind of firm that handles all of what you need in one, has the combination of professional who you need so you don’t have to ad hoc this all together. You could, but you really don’t have to. Know that. Don’t get overwhelmed with all this information and think that you’ve got to go out and find four different businesses to handle all your stuff. That’s not true.

So let’s start with bookkeepers. A bookkeeper quite literally keeps the books, keeps the ledgers accurate. Nowadays, these are not paper ledgers, most all — please don’t hire a bookkeeper that’s still using a paper ledger. Most bookkeepers are using software, and it’s simply to keep track of the money that comes in and out of your business. This is till that you can probably do yourself and many of us have done ourselves and many of us will continue to do ourselves because it’s not worth it to pay a bookkeeper. But bookkeepers can often handle these kinds of things much faster, much more cleanly and in a much more organized and structured manor that will coordinate well with what your CPA and/or tax preparer need at your end of year or occasional mid-year reporting. But bookkeepers are going to keep track of the purchases and sales, they are going to reconcile your financial documents like your bank statements, they’re going to make sure it matches up to your recordkeeping every year. They make sure that everything gets tracked in the right category so that when you buy a gallon of stuff from jojoba, it gets tracked into massage supplies, and when you buy paper towels for the bathroom, it gets tracked into general office supplies, which might not matter all that much to you, but then at the end of the year, you can be like oh, I spend this much money on massage supplies and this much money on office supplies. So if you decide to share your office and someone’s like, Hey, how much do we spend on office supplies every year, should we split that? You can give them an accurate number. Who knew.

They are going to rack who owes you money and if you owe anyone else money. That’s accounts payable and receivable, which we don’t tend to do too much in massage businesses; maybe an occasional invoice for some corporate gig. I don’t know. It depends on your business. There tends to not be a lot of that. You can have your bookkeeper pay your bills for you . You don’t have to, but you can. They can process and maintain a payroll system and also help to generate — depending on the software you are using — generate your W2s and W9s for your business accordingly if needed. So not everybody needs a bookkeeper and even if you have a bookkeeper, it’s probably something you could do yourself, but you do not want to spend the time and the angst on and it’s worth hiring that out.

An accountant — that’s kind of the next level. An accountant can do the same things a bookkeeper does, but you’re likely paying them more. An accountant has a higher level of education and you can save accounting for higher level services. So they can review your business finances, give some management and big picture perspective. They can make sense of the data that your bookkeeper comes up with and help you with money advice and planning, maybe tax advice and planner, but put a pin in that because we’re going to get to CPAs in a minute and that’s going to matter. They can help you with financial projections and recommend — give you advice regarding your company’s spending. An accountant may also double-check the stuff that a bookkeeper does. But a thing that you should know is that there’s different levels of tax preparers and there’s only a few that can appear in front of the government and in front of the IRS if you are being audited or there are questions. There’s different types of agents that can represent you, and accountants are not always the best type that you want for that. That’s why I said to put a pin in the tax thing because we’re going to cover that a little more in a minute.

We have a halftime sponsor today and now is the time for it. Michael, who is our halftime sponsor?

MR It is our friends over at giftUP.

AH Yay.

Sponsor message With giftUP, you can sell digital gift cards, gift certificates online. It is built for massage practices with massage practices in mind. It is free and simple to set up and to use. There’s no monthly fee, there’s no set-up fee. They simply take a small percentage out of each gift certificate purchase, so you ‘re not paying for it unless you’re using it. There is a special offer for our listeners. You can visit gift — oh, no. I do this wrong every time. I’m so sorry. You can go to massagebusinessblueprint.com/giftUP and get the first 10 gift cards completely fee-free and, again, there’s never a monthly cost or a set-up fee. It’s super easy because clients can email the gift certificate or they can print it out for in-person gifting, and it’s pretty, and it’s easy for us to handle redeeming with the app with our iPhone or Android. So again, go to massagebusinessblueprint.com/giftup to get the first 10 cards fee free.

MR We actually just had someone message us, I think, yesterday saying, Hey, thanks so much for the promo on giftUP and they seemed to really like it.

AH Yeah, they’d gotten all set up and were starting up with it. We love that feedback. Thanks, people. And thank you, giftUP, for sponsoring our podcast.

So let’s jump back in. The third type of agent we’re going to talk about is a CPA, which is a certified professional accountant — is that right?

MR Certified public accountant.

AH Public accountant. I knew that. Ugh. See I spend a lot of time reading into these and now it’s all fuzzy in my head.

MR [laughs]

AH So this is what I call the super-accountant. It’s an accountant plus. They have met certain curriculum and experience requirements, which often includes a certain level of graduate work or a certain number of hours working in an agency. They have to pass a really hardcore exam that half of CPAs fail the first time they take it; it’s a 14-hour exam. And there are mandatory CE requirements that they have to maintain every year, so it’s like a super-accountant. A certified public accountant. This is like many other professions where CPAs are regulated state by state. So some of the stuff I said may not be exactly correct for your state, but know that as a general rule in most states, these things apply. They do a lot of the same stuff as accountants like financial projections, helping you interpret your financial reports, maybe working alongside a bookkeeper reading those — helping you make decisions and see patterns in your business. But the clincher here is that they tend to be more proficient in tax code because in addition to preparing and reviewing financial statements, CPAs can also prepare tax returns and they are enrolled agents, so they can sign tax returns and represent taxpayers in front of the IRS for audits or other issues. And I’m totally taking a quote from an article here, and I’ll put links to the resources that I learned from so you can see where I’m getting this from. “CPAs do more detailed and thorough analysis and advise on tax and financial matters. And although the designation of CPA doesn’t necessarily mean they individual is giving you the best advice, a CPA is more prepared and they put their license on the line when they give you tax and financial advice.” So they’ve got skin in the game here. They are — if they give you crappy advice or they behave in an uncool way or an unethical way, their license could be up in question. So it is a big deal. CPAs are a much higher level of training and education and usually experience and responsibility-wise.

For some of us, all we need is a CPA. If you’re handling your day-to-day bookkeeping and you’re able to, at the end of every quarter or year, produce a report that says I spend this much on rent, I spend this much on linens, I spent this much on supplies, I spent this much contributing into retirement — if you can generate those reports and then fill out your annual CPA tax prep paperwork and hand it to your CPA and they can file your taxes, they can prepare and help your file your taxes, you don’t need anybody else. You just need a CPA. That can be nice. If you need a bookkeeper, it can help to find a bookkeeper that works in a firm or works for a CPA and then it’s all in-house in one place, everybody’s on the same page, it’s easy to get that info all together.

Next — was that pretty clear about the CPA stuff?

MR Yeah, I think so.

AH Okay. So I also want to mention there are tax preparers. Tax preparers concentrate on tax preparation, clearly, and tax matters. And they can be great at that. They can be wonderful. These are people who may have taken a certification training. They have to — in order to be an enrolled tax preparer for the IRS to be cool saying, we’re cool with you preparing people’s taxes, you’re allowed to sign them along with the actual citizen or person paying taxes, they have to pass a — they have to do a little training and pass a test through the IRS. So they’ve got some skill and some training on tax stuff. And they might be really great at helping small business pick out little deductions that they might miss on their own if they were filing their own or even if they were filing through TurboTax or something. However, they don’t have the same broad educational background that an accountant or a CPA is going to have, so they might not be super in-the-know about other small business stuff. They’re not going to be able to help you do financial projections. They’re really not going to be able to help you with the details of how you should be spending money and what your best retirement options are and all of that because they don’t have that level of training. It’s very strictly tax preparation. And if you meet a tax preparer who stars giving you that kind of advice, you should back away slowly because they’re out of scope.

Finally what I want to mention here is financial advisors. And I’m going to hand this right over to Michael because Michael is a financial advisor, and he can tell you what is in their scope and what their job description is. Go for it, Michael.

MR Just right over. All right, so the thing about financial advisors, first of all is — and I’m going to try and keep this not too long because I could soapbox about this for a while. But the titling and the name we use, the financial advisor name, it’s kind of this murky, ambiguous zone of unofficial and official titles. So a lot of people just say oh, they’re financial advisor or financial planner when they’re referring to someone who does this type of work. And really there are so many other little titles underneath that are kind of subtitles of what — the official titles are kind of the stuff we don’t really use. For example, a lot of people that just work with insurance, they call themselves financial advisors. I’m going to try to be really neutral her because I am biased, but I’m going to try and keep my bias out of it.

AH I just want to make a note that we are totally okay with your bias.

MR [laughs] Well, I might let a little creep in. There are insurance people that just have a life insurance license, and they call themselves financial advisors and they can legally do so. And they do things like set up life insurances and they also set up things like annuities or other products that are pseudo-similar to what other financial professionals will set up but they don’t have an investment component and yet they call themselves financial advisors. That’s one way that the labelling is used. There’s also what’s called a registered representative, which is someone who does commission-based investment work. They basically sell products. They sell things like investments, retirement accounts, IRAs, things like that. They can call themselves advisors as well. There’s also what’s called an investment advisor representative, which is someone who has a different type of license who can do fee-based planning and advising, and they can charge a fee for financial advice and they can call themselves advisors. There’s certified financial planners, there’s chartered financial analysts. There all sorts of designations. And the industry is so confusing to most normal people that it’s really impossible for most people to keep up with what each particular label means and all the stuff that goes with it. So there’s this general, generic label that’s applied to the industry called financial advisors or financial planners. It’s not terrible. But just be aware that there’s a lot of nuances going into that.

That being said, there’s three main things that a financial advisor or a financial planner is really useful in helping you with. One of those things is putting together a financial plan. Often, they will put together a plan based on your current financial situation, and they typically look holistically both personally and business. And in fact, it’s a little more personally focused because, generally, your business life is very significant in your personal life. But when it comes down to it, it’s your personal life that — the money coming into your personal situation is really what matters — how much money you personally are making when it comes down to it. And so they will put together a financial plan based on things like how and when and what your schedule is to pay off debt; how and when to save for retirement, for college planning, for big life purchases, things like that . They will kind of put together a road map for how to put all that stuff together.

Second, they will recommend the right products to support those goals. Things like life insurance, things like the right investments, the right mutual funds, the right retirement accounts, the right growth strategy, all the different types of things that can help you take care of your money properly.

The third thing, which is arguably the most important, is ongoing financial coaching, behavioral coaching. Things like when the market dips, they talk you off the ledge and keep you from pulling out all your money at the wrong time. They help you set up the right habits when it comes to investing. Every single month, for example, make sure you’re steady and consistent to take advantage of things like dollar cost averaging. They answer questions about hey, should I do this or that? Or I’m thinking about buying a house. How much house can I afford? What should I consider my budget range to be? Or I am looking at these options for college or basically bounce ideas of someone when it comes to making big financial decisions or even little financial decisions. They can often be a great resource for financial coaching. So those are kind of the three general areas I like to tell people a financial advisor is really useful for. And if you take advantage of those things, they can be a really good asset.

One thing to kind of keep in mind as a contrast on the tax side, a lot of the CPAs, the tax preparers, the really tax focused people that Allissa talked about, super skilled, super useful, super smart people. You have to kind of make a decision, though, based on what their angle is, what their perspective is. A lot of tax people will focus on — they’ll kind of give incidental financial advice, which is actually within scope. For example, an accountant or a CPA is actually allowed to do incidental lightweight financial planning if it’s incidental to the tax services they are providing. That’s actually legal for them. When they do that, they will often favor any type of product that is tax advantage in the short-term, which means they will often recommend things like traditional IRAs or SEPs or any kind of plan that gives you a tax credit now or you’re saving taxes now. What that means if that you’ll have to pay taxes later on that account. So their focus is usually really, really short-term tax savings, which is not a terrible thing. On the flip side, a financial advisor will often have a more long-term horizon as their perspective, and so they will often recommend things like Roth-based accounts, which means that you may pay taxes now on the money you’re putting in, but 20 or 30 years down the road, you might be happier, depending on your situation, because you will have tax free grown and a tax free retirement account at that point. So just keep in mind that each professional has a different perspective and you want to be sure that you are informed enough to make a good decision on what’s best for you.

I tried to keep it short. I probably failed miserably. Does that help a little bit when it comes to explaining financial advisors?

AH Yes. They help you see a little more future/big picture versus just immediate accounting. And it’s good to get these variety of perspectives when you are making decisions about your life and your business combined.

MR And financial advisors also can give recommendations based on being informed by tax consequences. So they’re not — I mean, some of them may have a CPA license as well, but typically if they’re a financial advisor and don’t have a CPA license, they can give you incidental tax advice, but it is definitely not to the degree that a CPA would. So they can basically say the tax impact of this decision would be X. And then they probably will say for more information, consult your CPA. Both — the tax side and the investment/advising side, they kind of have some overlap, so just be aware of that overlap as well.

AH Sweet. I think that we covered it. That’s the list that I have of professionals. And I think, realistically, what people may need in a one-person operation is probably just a CPA to help with tax preparation and general guidance here and there when you have random questions. If your business is a little bigger and more complex or your really hate keeping the books and keeping that organized, maybe a bookkeeper and a CPA. And on top of that, you probably could use a financial advisor if you’re not already well-versed and planning for your own retirement or you’re just not sure about a lot of those decisions. Hey, we’ve got tons of stuff about retirement on our website, and it will route you to my favorite financial advisor. I personally have a bookkeeper, a CPA, and a financial advisor. Those are the things that I have. They are all worth every penny, and I sleep better at night because of it. And that’s what I have to say about that.

MR Love it. I think that was super helpful. And I appreciate whoever asked — I know somebody asked us that question in the premium group so we appreciate that as well.

AH Yeah, I don’t know if it was Meg or Sara. I can’t remember. Somebody did.

MR Somebody smart.

AH Yeah, wrap it up. Bring it home, Michael.

MR Cool. Let’s wrap it up there. Well, thanks, everyone for joining us today. We appreciate you being a listener. You can find us online at massagebusinessblueprint.com . Feel free to check us out there. We have articles, we have some free stuff, and of course you can get access to our premium community if you want to check that out as well. If you have any questions, topics, feedback for us, we love to hear that. You can send it to us at podcast@massagebusinessblueprint.com. Once again, thanks for joining us. Have a great day, and we will see you next time.

AH Bye.