[LATOYA SMITH] The Grow A Group Practice Podcast is part of the Practice of the Practice Network, a network of podcast seeking to help you market and grow your business and yourself. To hear other podcasts like the Practice of the Practice podcast, go to www.practiceofthepractice.com/network. You are listening to the Grow A Group Practice Podcast, a podcast focused on helping people start, grow, and scale a group practice. Each week you’ll hear topics that are relevant to group practice owners. I’m LaToya Smith, a practice owner, and I love hearing about people’s stories and real-life experiences. So let’s get started. All right, welcome back to the Grow A Group Practice Podcast. I am LaToya Smith, the host of the podcast and I’m excited once again to have a returning guest. I think I’m in that part of hosting the podcast where I’m going to start having some more returning guests because I enjoy all our conversations .but not only do I enjoy conversation with this person, it’s also extremely important, if you’re a business owner, a group practice owner, to have a conversation with an individual like Alan Pruitt. Alan is coming back. He is a CPA, and I think last time he came on, we just talked about like financial tips but this time we are going to talk about, because again, it’s the start of the new year, new year is still fresh, talk about ways to be healthy financially in 2023. I know a lot of times, even for myself in business, we get to the end of the year and we’re like, okay, wait a minute. I know I did better, but what happened? Where’s the profit at? Or, okay, I hit some bumps and bruises, like, how do I get myself out of this financially? Or, I just want to cast a different vision for this year. I want to plan different, I want to save different, I want to move money around. I want to be able to hire two, three people and be in that position to do it ahead of time. That’s the things I want to talk about with Alan today, how to set that tone to have a financially healthy 2023. [LATOYA] Alan, welcome back to the podcast. [ALAN PRUITT] Thank you so much, LaToya. It is a pleasure to always be here with you to talk about stuff that I love, finances, taxes planning making sure we are setting ourselves up better for 2023 than we did in 2022. That’s what I’m all about so I am excited to be here. Thanks for having me again. [LATOYA] Absolutely. I was just, I did a couple, I had a few, another podcast interview earlier, had to do a presentation, and that’s something I said I think a couple times today. Like, look, I know how to stay in my lane and finances are not my lane. So, I know how to reach out and ask for help so I’m glad that you’re here with us today. I appreciate that. [ALAN] Absolutely. Glad to be here. [LATOYA] So when you think about even the stuff I mentioned, and I know it’s a busy season for you, being a CPA and tax season and all that stuff, but I really want to spend some time talking about specifically group practice owners and how we can set that tone. But even before we jump into that, just remind the audience again, like about your firm and where you’re located and what do you help private practice owners do? [ALAN] Yeah, sure thing. So as you mentioned, Alan Pruitt, CPA and so I am the CEO of Pruitt Prep CPA. We specialize in working with therapists and with private practice owners and group owners to make sure that you guys are doing everything that you possibly can to be as profitable as possible. So that looks, that takes on a few different shapes, but what we do is we want to get down to the root of what’s going on. We want to look at your finances, look at your income, manage your expenses. All the while we want to be sure that we are tax planning for you because as business owners, there’s so many different things that are tax deductible and a lot of business owners and private practice owners just aren’t aware of. So we want to one, bring you that information, but not only just bring you that information, we want to implement that information for you as well. Information is super powerful, but it’s only as powerful as it can be if you’re utilizing it and so that’s what we do for our clients who are practice owners. We get a plan, we set a plan for the year, we meet frequently throughout the year to implement that plan and all in a goal to make sure that your practice is running how you want it to. We want to know what your vision is and we want to help you implement that throughout because our motto is, as we all know li life is short and the sooner that you are able to achieve your dream practice, the longer you get to enjoy it. So that’s what we’re here to do, is to help speed up that process because success, love, speed, and so that’s what we want do for you. [LATOYA] Yeah, I love that. I mean, that’s what I want. I’m already hyped because, I certainly want all the things you just said, but I just want to talk about now like what are some tips, strategies that we’ll just take it one by one too, that these group practice owners or private practice owners need to have in place to make sure that they’re, their 2023 is financially healthy. Whether it was last year, they want to keep that going, like that momentum or it wasn’t, and they want to turn it around. Like first things first what do we need to be focusing on to have that financially healthy year? [ALAN] Yes, absolutely. So the first thing I think that is always the most important is goal setting, is setting goals at the top of the year. This is my personal word for the year, and I want all of my practice owners to take it on too, is to be intentional, be intentional about what you want this year because when you do that is when you can create special things. If we’re just going about it, ho-hum, we don’t really know what we’re striving for or striving to. Then we don’t necessarily have that full direction there. So with all of our therapists and practice owners we sent out basically a questionnaire at the top of the year. We did two things with that. One, we want to celebrate 2022 because we want to as they say those who don’t learn from the past are doomed to repeat it. So we want to learn what went well in ’22, but what didn’t go well. So we want to implement those things that did go well into this year. But then also we want to go ahead and set a plan, set goals for this year, and be intentional about achieving those whether that’s a revenue goal, whether that’s a private practice owner going to a group practice where you’re hiring, you’re bringing people in or an already group practice owner expanding or have a few clients that are opening up different locations in different cities. Whatever that that looks like, we want to set our goals and be intentional about what we want to accomplish this year. [LATOYA] Okay, I’m glad you said that too, so just not, yeah, we can all have a revenue goal about how much we want to make but anything, we got to know where we want to go, whether, like you said, maybe get another office building or hiring therapist. Because all of it, no matter what goal we say is going to, finances need to be involved, but we still got to know the direction we want to go in for the year. [ALAN] Yes. No, that is so important. This is odd coming from a CPA because I love numbers, love talking about revenue, all of that good stuff, but sometimes for some of my therapists, the best goals you can have are non-financial goals. It’s like, okay, hey, I am going to delegate more this year. Hey, I’m running this group practice. I’m still the glue that holds this thing together. I have my sessions. I’m doing admin work. I’m looking at my EHR trying to figure this out, all these different things. So sometimes to me, the most important goals are the ones that are non-financial. It’s about growing, it’s about expanding, it’s about delegating getting stuff off of your plate so you can focus on more revenue generating activity at some point. [LATOYA] Okay. All right. I completely agree. I think that I’ll just be honest too, like in the begin, I think January can be so noisy. Everybody on social media has a strategy, a tip. Everybody’s like talking about everything’s great, they’re going to do, they’re back in the gym, they’re eating, but I also think that sometimes I have to tune out so that I can focus on my own and not get sucked in with the hype for what everybody else is doing. So also like for me to have, get my goals together, like I got to get quiet and that’s what helps me focus again. But I like what you’re saying, like, okay, not even financial, I get it. I do have my financial goals okay but I want to have, what do I see coming? [ALAN] Gosh, I’m so glad, I’m so glad you mentioned it. One quick point I want to make, like you said, just blocking out the noise. This is what I always suggest to my private practice owners, is that ideally I would love if you did it every day, but at least once a week, you need to be taking time to truly work on your business. Like you say even schedule it on your calendar if it’s two hours on a Monday morning, whatever the case might be, I like doing at least a couple hours every day but in reality, I know that’s tough, so many moving parts. But yes, where you truly have time to focus on your business, focus about what you want to accomplish, where you want your practice to go and to grow to just taking, like you say, just taking that time out to block out everything to focus on that and be intentional on what your goals are. I think that’s super important so yeah, to your point, I think that’s an excellent move to make there. [LATOYA] Okay, so let’s just say we all did that, the practice owners, we have our goals written down, we’re set, we’re focused, we have time blocked off. What’s the next few things we need to be focusing on so that we can have that fit year financially? [ALAN] Financially? So I would say the next thing, so we have our goals down, revenue, financial, and non-financial we took our time focused on that. Then the next thing I know, I would say look at is I know a lot of people are scared of the B word. A lot of people don’t like it, but I would say we need to set a budget. That’s what I like going to next, is making sure that we are understanding how much revenue we’re bringing in and what our expected expenses are. Of course, this can change. I tell clients whenever we set a budget and a forecast for them, hey, this is a living and breathing document. It’s going to have its ebbs and flows. It’s going to change but it at least gives us a baseline because just like you were saying earlier, the problem can be we are just going and going, going, so much going on, so much to manage, so much to do. We look up at the end of the year, be like, man, I worked so much. I thought I did well, but where’s all my money? What happened to it? That’s why I think it is super important to set a budget and to set a forecast for group owners. We need to be knowing what our staff makes, what their profit margins are. Whether they are contract, whether they’re salary, whether they’re paid a flat rate per session, whatever the structure looks like, we need to know that number, but we also need to know how much they’re making, what are they bringing in, what is their bottom line number? Then for yourself doing the exact same thing. So I always highly suggest one of the easiest ways to do it, and I think it’s somewhat simple, is just to track your income per session. Track your income per session and then track how many sessions you have per week, per month. That gives us a pretty good baseline of what your revenue’s going to be. And then of course, then after that, once we get the revenue piece down, look at your expenses, what do we know is going out each month? Obviously, we have salaries in some form, we have our EHR, we have to pay for other subscriptions, CEUs, those type things. So put all of those things. Rent, of course, so put all of those things in your budget so we have a pretty decent idea of where we’re going because that’s going to be the tool that helps us achieve those goals. [LATOYA] I always, because my practice, we accept insurance and I always get like caught up in that. So when you say, okay, well track your income per session okay, if I start to do that, am I tracking it, what I’ll eventually get back from the insurance company to complete that session. Same thing with EAP, am I talking about that week or am I talking about the expected total amount? You know what I’m saying? Because with insurance, you don’t get it all at that — [ALAN] Never. Yeah, never. No, no, no. I completely understand. What I do to make that simple is we just look at your net amount received, we look at your net amount received, because yeah, we can build $150 out per session, but hey, we might only get $112 of that back. Whatever that number is, I want to look at what we’re actually getting, what’s actually hitting the bank account. That’s the number I’m looking at. Then plus for most practice owners are probably on what’s called the cash basis, which means it’s not really considered revenue until the money hits the bank. Obviously, as with insurance, hey, we could have a session in January, but we don’t receive that money until February or March. So what we focus on is what we know is the actual cash coming in and so those are the numbers we’re tracking when I look at income procession, what is actually coming in the door. [LATOYA] Got you. So for an insurance based company, really just look at basically what you did get that day not what your goal? [ALAN] Exactly, exactly. Correct. [LATOYA] All right. Then somewhere along the line, factoring in when you do get it, like putting that on the back end. Got it. Okay, so that B word you said budget, which can be uncomfortable and frustrated. Again, this is not comfortable, but is uncomfortable, I just don’t like it but — [ALAN] I understand. You’re not the only one. You’re not the only one. [LATOYA] That’s the hard part. I think, I mean, I don’t, I think we talked about before, I do not enjoy spreadsheets, but, even the spreadsheets that I did make to make a budget, because we all can make a budget, but that’s the hardest part. The hardest part is sticking to it. [ALAN] Exactly. No, you were, you were absolutely right, that is the hardest part of sticking to it. That’s why, what I do for our clients is I try to make that process as easy as possible. We actually have an income and expense projection system that we use to make it really simple. So, hey, we’re looking at the income, we have your expenses set up and then as we go throughout the year we’re a few months in, then we have like a combined report that shows, hey, these were our actuals, this is what we have forecasted and so hey, we are on target for what we want to get for the end of the year. Or hey, maybe we’re a little bit under. Why are we under? These are the things that we go over with clients as we go throughout the year, which is why I say for most of our clients we’re usually meeting. Some we meet monthly, some we meet quarterly, but we’re reviewing those things and yeah, we try to make it easy because yeah, I hear it all the time. Like, nope, nobody really wants to talk about a budget or set a budget or stick to it. But that’s where we come in to try to help to make sure that we’re at least getting a decent gauge of where you are in the numbers and what they look like. 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[LATOYA SMITH] Then how do you help, like people who even when it comes to selling a budget, whether it’s sticking to it, wanting to even look at it? What about people who have that unhealthy relationship with money and it’s just not even like, oh, I don’t even want to deal with it, I just want to know bills are paid and after that I don’t care. What’s the step? Do you fire him? Do you refer him? Like what’s the process? [ALAN] No, no, no, not at all. It is a trust. It is tough because, I mean, yeah, I have a few therapists who are, yeah they get uneasy, they have very bad history talking about money. There’s, for any given person, there could be a lot of emotion or trauma when it comes to dealing with money. But what I want to do is make it as simple as possible, so let’s break it down to its simplest core. Like I say, hey, what’s our expected revenue? What’s our expected expenses? We don’t have to delve in. I’m someone of course, I love this stuff so I can give you as much as you want to know but for those that are, do have that, don’t really want to talk about money, then that’s fine. I am okay meeting you where you are, but I still think it’s important as a business owner to at least have a working knowledge of where you’re at. Your budget, your tracking doesn’t have to be 15 different pages and eight different reports. It doesn’t have to be that complicated. We prefer to make it simple. We just want to know, hey, what are we expected? What’s expected in, what’s expected out? Hey, this is our net profit. This is what we’re doing to tax plan and save you some money here. Then, hey, this is our net profit that you get to pay yourself, grow the business, do things like that. Like I mentioned for clients who are expanding, hey, let’s set that money aside for expansion. Or we have clients who are planning now for, who might be looking at maternity leave at some point down the road then hey, let’s start saving money for that now. So it’s a lot of different things that we can do. Or retirement planning of course, too. So a lot of different things, but we just want to make it simple and meet clients where they are and not, you know, even though we love numbers, love talking about them, we don’t want to beat clients over the head with the numbers when they do have previous money and trauma issues there. [LATOYA] Okay, that’s good to know. What do you think about another way to stay healthy even when it comes to taxes? That’s something I hear a lot in consulting, so how to save for it, the overwhelming idea of dealing with it, ways to save when filing taxes, like all that stuff. What are some ways to stay financially fit and healthy when it comes to dealing with taxes? [ALAN] Yeah, yeah, absolutely. I think that the slow and steady method is the best way. That’s one of the reasons why for our clients, we meet throughout the year because we don’t want you to be surprised about the tax bill. We know just like money does taxes brings a lot of people a lot of anxiety. So I completely, completely understand that. But we want to break that down in manageable chunks. So one of the reasons we look at income, expenses, do our tax planning is so that we can save for taxes as we go, making sure that we’re putting money aside for that. We usually do quarterly, we usually pay taxes and quarterly because as you know as a business owner, have to at least pay taxes quarterly. But what we do is we have clients set that aside per month. So in that projection system I mentioned, we have a line in there for taxes like, hey, this is how much we need to be setting aside a lot of our clients. Use the Profit First motto so I definitely suggest having a separate bank account at least for taxes so every month we are setting that amount aside for taxes and then we review, hey, this is how much we need to pay in, so on and so forth. Then that way we stay on top of it. [LATOYA] What’s the projected, like what if somebody doesn’t know how much they should be setting aside, is there a, there are like an easy dollar amount, an easy weekly percentage, like what’s a good number just to put in that bank? [ALAN] That is a great question and I get that asked that question so often. Yeah, to put it simple, I would say this bare minimum, you need to be setting aside at least 15% of your net profit. Let’s say in any given month you make 10 grand, let’s say you make 10 grand and then you have five grand in expenses, so you have five grand left as your net profit. I would say put 15% of that aside. That is what I would suggest doing, putting 15% of your net aside for taxes. Of course, everybody’s situation can differ, there’s so many things that factor into that, but I think if you’re putting at least 15%, you’re probably in a good range there. If you want to be a little bit more aggressive, a little more safe, then I’d say 20 would be fair, but usually between 15% and 20%, you’re at least setting yourself up to a pretty decent place. [LATOYA] Okay, okay. Now what about like filing, like saving expenses, anything that would be healthy to, or just planning for, you know what I mean? Like instead of looking at the last minute, how can we begin to prep or see or what does a, what do you need from us? There’s so many questions about what’s a good way to stay healthy when it comes to taxes and filing. [ALAN] Yeah, well, I think as I mentioned with even with taxes, I think even the planning aspect is much of the same. It’s better if you do it as you go instead of just waiting to the end of the year. I always tell my clients this, which a lot of people don’t think about, there are two different tax seasons. There is tax paying season, which we’re in now, and then there is tax saving season. Tax saving season is when you are implementing all these different things into your practice to try to save you money, to make sure we’re not overpaying in taxes. That’s what we want to help and bring to the table, to bring to each of our practice owners to make sure we are optimizing everything as far as taxes are concerned. As we touched on lightly, retirement planning, that’s one that’s always a great tax deduction. You can do one of the things that is, I think very underutilized, our business meals. If you are out having a meal with the business contact or a networking event or something along those lines with your staff, those are tax deductions. I urged all my clients at the end of last year, we were in a really great spot last year because the last two years you actually write off meals at 100%. Usually it’s always been 50% but due to Covid, the IRS increased that to 100% the last two years. At the end of 2022, I was telling clients, “Hey, if you are having meetings with your staff, hey, let’s make sure we’re writing all those off.” This year for 2023, it’s pegged down to 50%. However, that’s still valuable. So that’s one of the things there. Another question I’m asked a lot about is S-corps, clients always ask, I know that’s the hide and sexy term, everybody hears about S-corps. But they’re not for everybody. I love them as a tax savings vehicle. Just to give you a couple, I guess a couple quick guidelines on S-Corp is I think if you are doing around $100K in revenue a year, you’re probably a good candidate for S-corp. Or if you’re even doing about $50K to $60K net after expenses, you’re probably a good candidate for a S-corp. So that’s something that we can look at at the top of 2023 because you actually have until March 15th to file for S-Corp status for the entire year. I do have clients that come to me after that and we can, there is a late filing election that we can file for you. That’s one of the things there. So yeah, so a few different items there to start now to tax plan. Then one other big one that I absolutely love that I think is underutilized too, for business owners is if you have kids, is that you can pay your kids through your business. For 2023, that number is up to almost 14,000 bucks that you can pay your kid from your business, and by kids I mean 17 and under to work in your business. So this is great for those practice owners with teenagers or tweens, have them work in the business. You’re paying for stuff for them anyways, so why not have them work for it in your business? That becomes a tax deduction for your business and they don’t even have to report it as income or file a tax return. That’s another great tax planning strategy too. [LATOYA] Yeah, those are all great tips. I think especially that’s one I hear a lot too, like LLC, S-corp. And what I gather, like what you said, you have to fit, you have to make it make sense to do the switch over. I’m sure that’s something too that’s deeper, like somebody can call and ask you and see what works for their business. Pay your kids is also something I hear a lot, and I’m glad you said that 17 and under, not your grown child, well your grown child can work there too, but I guess just some different — [ALAN] Exactly. You can still pay them. I mean, hey, they must still be on your payroll so you can, it’s just slightly different because they wouldn’t most likely need to file a tax return, especially if they have another job somewhere else if they pass that that $14K threshold. So yeah, but yeah, you can still pay your kid, especially if they’re still asking you for money if they’re 18, 19, 20. [LATOYA] Yeah, absolutely, absolutely. Then of course, like, I love how you said it’s the breakdown of setting money aside because if we’re not careful, that stuff sneaks up on us, especially when it comes to paying taxes. But each of these steps, I think it’s absolutely important to have that financially healthy 2023, like you said in the beginning, goal setting, not just financial, but also non-financial goals. Like what do you want to see happen for the year so we know what direction we’re even going in? The B word that you said, but making sure that budget is set and not only doing the budget and then sitting it on the shelf just to say you did it, but actually following it and sticking to budget, but then also just planning for your taxes, tax planning and tax saving, like you had mentioned. But these tips are all great to be financially healthy and I’m hoping that we could, as we set them, we focus on them the same way we focus on like physically fit goals and staying in tune. This is awesome. Anything else, Alan, you want to leave the audience with? I definitely want you to tell them how they can find, to get in touch with you, but anything that you would just say, hey, I know I just gave you these three tips, but when it comes to me financially fit, any other word of advice you want to leave for our audience? [ALAN] Yeah, sure thing. I would say this, it is, everyone’s sit situation is different. Don’t feel that in taxes or finances that you have to fit in a certain box. There are different ways for different people. Every practice is a little bit different, so don’t feel don’t feel pressure that you have to do anything one specific way. That’s what we like to do is, like I mentioned help clients implement their own vision for their practice to make sure that they’re doing what makes sense for them. Then we want to take that vision and then help them implement it because we always want to be aligned together because, I tell all my clients we’re a team. So you’re the coach, you’re coaching the team but I want to be there to help you right along the way. So yeah, that’s what I would say too. Then for us, you can find us at, we are Pruitt Prep CPA on of our socials. We’re on Instagram, YouTube, LinkedIn and Facebook and our website, pruittprepcpa.com, and our email is [email protected] [LATOYA] Awesome. Well, thank you so much, Alan, for being a guest. Again, I know we’re going to have you back on later in the year, especially to talk about some more fun financial tips and facts, so I appreciate your time. [ALAN] Thank you so much, LaToya. It’s a pleasure as always. [LATOYA] Thanks once again to Therapy Notes for sponsoring this episode. Use the promo code [JOE] to get three free months to try out Therapy Notes for free, no strings attached. And remember, telehealth is included with every subscription for free. If you love this podcast, please be sure to rate and review. This podcast is designed to provide accurate and authoritative information in regards to the subject matter covered. It is given with the understanding that neither the host, the publisher, or the guests are rendering legal, accounting, clinical, or any other professional information. If you want a professional, you should find one