Episode Transcript
[00:00:00] Speaker A: SA.
[00:00:26] Speaker B: Foreign.
[00:00:31] Speaker C: And welcome to another episode of Pivotal Change. I'm your host Ryan Khan with CS Business Consulting, and we are going to talk about the changes that business owners, entrepreneurs, leaders can make in their lives to help that pivot on down their path to success and have all of the change and success they can handle. Tonight, we're bringing back a familiar face. We have Joseph Reyes from JL Reyes Accounting and Tax cpa. If you remember from the last time he was on the show, he really walked us through a lot of stuff about sales tax and getting down in the nitty gritty on some areas that a lot of entrepreneurs, business owners really need some help. So we're going to continue down that path with him and use all of his wealth of knowledge, wisdom and years of experience, his various credentials to answer some questions and help you decide and make some decisions that's going to help your business. So, Joe, welcome back to the show, sir.
[00:01:20] Speaker B: Oh, thank you. Thank you for having me. It's good to be here.
[00:01:23] Speaker C: That's good to have you back. I really enjoyed everything you said for us last time. It made a big difference for I know people that were paying attention with the pen and paper like they're supposed to. And we're going to keep talking about some of that exciting stuff, the accounting world, everything that is an absolute necessity if you're going to run a successful business. So I want to jump into our first question here, leaning directly into your accounting CPA experience.
And a lot of business owners, as they're growing, they're starting up and they're reaching various pain points, they have a decision to make and they have to decide when do I stop doing things for myself and let an expert or professional handle it. So I'd like to kind of hear, in your opinion, your expert opinion, at what point should a business stop doing their own bookkeeping and let somebody handle it for them?
[00:02:06] Speaker B: Yeah, so I, I've said this many times, you know, to many different people. You know, if you're not a bookkeeper, you should not be doing bookkeeping.
So there's that, you know, a small business, you might get away with basic data entry stuff from their bank accounts and whatnot. If there's not a lot of complexity, it's easy enough to download data and say, okay, this is office expense, this is a tax expense. But as the business grows and things get more complex, business owners should not be doing bookkeeping. They need to focus on what they do best.
Right. So you're a cook. You're good cook. A good cook. You should cook, you know, don't do the books, you know, so.
But you know, I started my bookkeeping career at $100 million garment company in New York City many years ago and they had a full blown accounting department. They didn't hire an outside firm to do their bookkeeping and accounting. So they had an outside CPA firm. But yeah, so we just basically say, you know, this complex, it's growing. You started to eat into your time of into for what you're doing that best. Now you're doing books. That's the time that you need to stop, you need to grow your business, you know, or if there are errors in the books, you know, if you're putting out financial statements, you're looking at stuff and they're not making any sense and there's errors, then you know, you're in above your head already. So just get stopped at, you know, and, or you're growing, you know, let's say you're growing and you're talking to banks, you're talking to investors. You know, you need, you need good solid sets of books. And whether it's internally generated by hiring an internal full time bookkeeper accountant or you hiring a CPA firm or something like that, you know, you need to get really solid, you know, professionally done financial statements because you know, the banks, if you're trying to get a loan, guess what? You make a big mistake that can eat into the profit ratios, all kinds of ratios that the banks like to use in order to assess, you know, your loanability of your and your credit worthiness and stuff like that.
[00:04:12] Speaker A: Let me ask you a quick question.
[00:04:13] Speaker C: About something that you said. So you said, you kind of mentioned three things. One, if it's only really basic and simple, sure. Every business probably starts off doing their own books. And I always tell people if you grow beyond a basic Excel spreadsheet template, then you need professional bookkeepers. You know, there's not really just a hard line in the fast. But I really want to hone in on what you just said, the two primary categories after that. One, he said, one, if you're finding mistakes or somebody's finding mistakes and making mistakes in the bookkeeping because they need to concentrate on their area of expertise, which is not bookkeeping and accounting services, so they can grow their business and let somebody else do the numbers. And then the other one is based on kind of a measure of how much it's eating up your time. You want to go do what you specialize in, what you really get paid.
[00:04:56] Speaker A: Your top dollar for.
[00:04:58] Speaker C: And Then doing the bookkeeping side of things is not your area of expertise. Do you have any kind of version of like a line in the sand where somebody can say, I'm already feeling that stress. Is it time to go? And then I want to ask you more about those financial statements in just a second.
[00:05:12] Speaker B: Yeah. You know, so we, we have clients that do. They send us an Excel spreadsheet at the end of the year, you know, whatnot. And we just have to clean it up a little bit. The P and L side is relatively easier. You know, you have your income and expenses. But Excel is terrible with a balance sheet. Yes. And balance sheets have specific, you know. You know, you're an accountant, they have specific rules that you have to abide by in order to properly report data and transactions.
You know, that's not simple mathematics. Right. That's like, you got to know the tax rules, the accounting rules, whatever. Tax rules are not always the same as accounting rules. You got to know this stuff in order to get a tax return done. So, yeah, we. We don't want to see people using Excel to track a balance sheet. A lot of people don't even know a balance sheet exists.
[00:05:59] Speaker A: Right.
[00:06:00] Speaker C: So that's another thing, too, is just being educated on your financials and how to read a balance sheet. You know, most people could probably, if they're running a business, figure out the P L.
So that's another one too. I tell, hey, are you doing anything more than run a lemonade stand? Are you doing anything than being a teenager that mows lawns in the neighborhood? Yeah, you probably need an accountant. So I really appreciate that. And then you kind of segued into the financial statements and potential things that can happen with the bank and misunderstandings or even inappropriate reporting and stuff like that. So tell me about what happens if you ignore your financial statements or you mishandle your financial records.
[00:06:33] Speaker B: Yeah, so the first thing that comes to mind is Covid. When Covid hit, you know, you had the PPP program and you had the Eidl loans, and the state, that's federal, and the states were giving out grants and money to assist small businesses to stay afloat. And guess what? They all wanted. They all wanted a good set of financial statements. They all wanted good set of tax returns. And what we found out were a lot of business owners who were negligent and keeping their books in order and whatnot.
When it came time to apply for stuff, they were either late to the game or they couldn't get into the game, or the time was against Them it may have taken a long time to get their books cleaned up and up to date and properly reported.
And that's when a lot of people found out, oh, you know what? I need to keep my bookkeeping in better condition than it's currently in, you know, but you know, listen, you may get a large purchase order that you cannot handle. You need a bunch of cash to buy a bunch of inventory or to hire workers. And that can happen, you know, real quick, you know, the drop of a dime. What are you going to do? I mean, you got to go to the bank and say, hey, I need a line of credit. Can I get $100,000? They're going to say, sure, show us your financial statements. Well, what are you going to do now? Take two weeks, three weeks to go back and to get things cleaned up and properly reported. And the client, that big client may just slip away from you because you cannot handle stuff. So the bookkeeping, accounting is important.
You know, it's not a last minute thing that should be attended to. You need to really stay on top of it because you can lose opportunities or just mess things up, you know.
[00:08:13] Speaker C: Yeah, I love what you're emphasizing about missing the opportunities. And unfortunately we've seen that in the past because as an accounting and professional accounting firm, you know, we, we do this job for people just like you do. But it can't always be done at the snap of fingers or the drop of a hat. As they say, it takes time. You said two to three weeks.
I think you're probably being pretty conservative in some cases, especially based on what time of the year it is and.
[00:08:35] Speaker A: What our current workload is.
[00:08:37] Speaker C: And it's not for you to walk in with a mess of bookkeeping services, go to your accountant and say, hey, my emergency or my urgency and failure to plan now is your emergency to get this done for me.
And so the opportunity, the opportunity could slip by and you know, you'd have a vendor that maybe, hey, this is your breakthrough vendor that's going to supply all of the materials that you need. But you can't get that line of credit. You can't start that vendor contract.
That's, that's a big opportunity slips by. So that's, that's really important that you said that and I thank you for mentioning that. So with that, so now I know I need to get cleaned up.
[00:09:11] Speaker A: I'm.
[00:09:11] Speaker C: It's eating into my time. It's showing mistakes or I had an opportunity to slip through my fingers. I don't ever want this to happen again. Joe, how do you help a business clean up months, if not years of messy and sometimes miserable financial statements and basically get them a fresh start?
[00:09:29] Speaker B: Wow. So we've done that more than once. In fact, somebody's coming in tomorrow with a whole year's worth of bookkeeping documents and whatnot, and they've got an issue.
And the last person I did this for had about 10 years worth of bookkeeping that hadn't been done, and the IRS was on their trail.
And so we just scope it out, like, okay, let's take a look at when's the last time you had numbers. Let's take a look at your QuickBooks accounts to see what's in there. You know, let's take a look at your major items. You know, and it got to a point at one, with one client that this client that we had to call the IRS and say, hey, can you tell us, can you send us all the 1099s that have been reported for this client so that we can get a sense of what the income number should be?
And so we got that information from they. They email, they fax it to us, and then we compare that to all their records and bank statements, and we, like, you know, we're pretty close to the number you. So you're basically rebuilding and trying to figure out what's a true number, what's in the universe of the numbers. And this is a small company numbers that we're seeing really large numbers, or vice versa. And you gotta have a good amount of experience and intuition to assess this client's financial status. And from there, we just start figuring out what's most important. Prioritize.
What's the data looking like, can we get the data, date missing data from a vendor? We never bother clients, so. But a vendor can get us information that we need. So we triage. It basically is what we're doing is we're triaging and then figuring out, you know, what's the best angle to report the proper number to the. To the irs.
[00:11:18] Speaker A: I like that. Yeah, Triage that.
[00:11:20] Speaker C: That triage is a great way to describe it, because even though they think they have one problem, the IRS is on my back underneath that.
[00:11:27] Speaker A: You.
[00:11:27] Speaker C: You lift the hood underneath that, and that engine is all kinds of crazy. And it could be lacking records, inefficient, and records all kinds. And you then go and untangle that mess, reach out to all related parties. You have to do what we call due diligence. That's very familiar term for us, but most people don't understand Maybe even what that is. So I think this is a great spot for us to maybe take a quick break. We're going to be back with Mo Joe from JL Reyes Accounting in just a moment. Sit tight. Pivotal change will continue right after this message.
[00:11:59] Speaker A: Sam, welcome back from the break.
[00:12:27] Speaker C: We're ready to continue on with more pivotal change and more Joseph Reyes with JL Reyes Accounting and Tax cpa. So we are going to have a fun conversation that's going to continue from where we left off. And you were just telling us about a client that you helped do a whole cleanup process with 10 years worth of untangling issues with the IRS breathing down their back. And so that just made me think.
[00:12:49] Speaker A: Of a good question.
[00:12:51] Speaker C: That client maybe already had a relationship with you knew what to do.
[00:12:54] Speaker A: But what should a business owner do.
[00:12:56] Speaker C: If they're out there and also make it one of these scary or nasty letters from the irs.
[00:13:00] Speaker A: What's, what's move number one and move number two?
[00:13:03] Speaker B: Well, from what I've seen, there are two types of people out there when they get a letter from the irs. One type of person, they go through all their mail and is the first thing they open.
And then the other side, the other people are, they never opened that mail, Right. So because it just freezes them and they panic. And what we just tell people is you just can't assume that just because you're getting a letter from the IRS that it's all bad. You know, it's, it's not a, it's not a time to panic. So open the letter, read the letter and then figure out what's this about. And then the next thing you do is you send a copy of that letter to the tax preparer for that tax year that that letter is related to. Because there's some things that you may not know or you may get a letter that you don't know if it's a trap, doesn't happen very often. But you know, if you respond the wrong way, you know, if you take it upon yourself, you may be telling the IRS the wrong things. Right. So we always tell people, just send us a copy and we'll tell you what to do. Just don't ignore it. It don't wait a month to send it to us, send it right away, and then let us get back to you as to how to treat the, how to respond to the situation.
It's really as simple as that. A lot of times it's just, you know, you, somebody sent you a 1099 and you forgot to Enter it on your tax return. You didn't give it to your tax person and you forgot and it just didn't get entered. It could be a simple thing as A$50 or$110.99, then you just got a report and you might wind up owing five bucks. You know, just, you know, just, just don't panic. Let's talk about it. And if you read something that says something like the word lean or Lee or levy.
Yeah. That's going to be a little bit of a time to panic. You have better get with a tax person and pro, especially the one who did the tax return or whatever and deal with it immediately because sometimes they give you like 21 days in order to respond and they're going to go into your bank account. And I've seen it happen.
[00:15:06] Speaker C: Yep.
[00:15:06] Speaker B: They freeze your bank account, they take the money out because you just didn't pay enough attention to it or you moved and you didn't forward your, you didn't do a forwarding address thing. And so all the notices are going to an old address. And then one day you wake up and you're in deep trouble. So you just got to pay attention to your life a little bit better.
[00:15:26] Speaker C: I like that a lot. So rule number one is open a letter and read it. And rule number two is take it to the person related to or the period or issue on the tax notice. So that's pretty simple advice. We've had clients who just throw them in the mail thinking, oh, it doesn't matter, they'll never, never find me or catch me or it's not important.
And that's the disaster.
And then I thank you for also pointing out the levy and lien notices. Those, those are heavier. Those are the ones where you might start biting your fingernail. You need to run, not wait till the 30 day or 21 day period.
[00:15:59] Speaker A: Is two days out.
[00:16:01] Speaker C: Because again, your failure plan now becomes our urgency. And we just charge people for urgenc.
[00:16:05] Speaker A: Right.
[00:16:05] Speaker C: And so that, that's because you're disrupting my entire client base who is behaving themselves. So the we want to help, we can help.
[00:16:13] Speaker A: Not all of them are big deals.
[00:16:15] Speaker C: That's another thing that you said. So I appreciate that. And I think it just really beckons that most people probably are alarmed, are going to let you know about that. But I think it really beckons the call that, hey, most of this can be fixed. Most of this is something that the IRS just needs information on. It's not all the we're going to take your bank account and take your house with us. And probably the man with the gold badge that works with IRS is a long way off from showing up to your house unless you're really messing with things. So that's. That's a good. So speaking of audits and tax notices and things like that, what.
[00:16:43] Speaker A: What are some of the areas that.
[00:16:44] Speaker C: People most commonly get flagged for? I know you kind of mentioned some of the 1099s. Any. Any failure to report income, but what. What are you seeing as the most common reasons people get those letters, notices, or even audited?
[00:16:56] Speaker B: Yeah. So if you. If there are a bunch of 1099s that are issued to you and that income never made it onto a tax return, it's one thing if. If it's 110 99, but I had a client that had a bunch of 1099, and their bookkeeper never reported it, and the tax return was filed. And then we had to step in and do it like an offering, compromise and negotiation with the irs, which I've done. You know, I'm certified in that area, even though I don't do it as much anymore. I have a tax lawyer that I give that out to, but I've done that, you know, so we just. We just don't want clients to be on their own and doing dumb things. I had a client that he had a. A piece of real estate, and he put down $16,000 for a roof repair, which, not that big of a deal, but it was an exact dollar amount, 1 6, with a bunch of zeros.
That really doesn't happen. Right. It's got to be $1,653.25 maybe. But round numbers on the schedule C on your business, your business return, you're going to get. All right, so they sent them a letter. His attorney, his tax guy was an attorney who was nasty, called the IRS agent and was with the agent. And the agent said, okay, fine, we're auditing your client. And then it just turned into a whole fiasco, and the man just wound up paying, like, almost $100,000 back in taxes. And they just. The IRS just went to town on him. So get a. Get an accountant with a nice personality.
Don't put round numbers in your tax return.
Contact your CPA to deal with the letter or to inform you, hey, watch out for this, watch out for that. Let me, Let me respond you stuff like that. That's how you stay out of trouble and, you know, books that are met. So if you have a. If you have a Huge amount of deductions for small, small business.
You're likely creating a loss for yourself. The IRS may want to take a look at that. And then knowing a CPA, who knows who the IRS likes to audit, right? We have the statistics, you know, we know the schedule Cs are the most audited tax returns, whereas S corporation tax returns are the least amount of audits that happen. So, you know, that should go into your situation when it comes to taxes. So just having an experienced tax person maneuver, help you maneuver through the situation is the way to go. Don't do it on your own.
[00:19:20] Speaker C: Joe, that was fantastic. The audience, you do not know this because you don't live in this world, but he just gave you like 30 years worth of like awesome wisdom boiled down into like two to three minutes. So that's really impactful, powerful stuff. And those little paragraphs he was saying could potentially save you tens of thousands, if not hundreds of thousands of dollars. So write down what he just said and if you' too slow with your pen and paper, rewatch what he just said and you're going to be able.
[00:19:44] Speaker A: To help yourself out a whole lot.
[00:19:46] Speaker C: And again, those are just the tips and tricks. The execution of those tips and tricks require a professional like Joe to, to help you out, walk you through it. There's no insult to having somebody hold your hand down the path of success. I wish somebody would have done that for me several stages of my life and guys like Joe were able to do that. That was fantastic advice.
Somebody that's going to know exactly what the, the culture inside the IRS is and the systematic way that they approach what they do is important. You know, you go to Sun Tzu, Art of War, know thy enemy, know thyself, know the enemy, right? So know what you've got going on and know what their tactics are and.
[00:20:23] Speaker A: You can avoid even showing up on the radar.
[00:20:26] Speaker C: So kind of along with that, give us some more ways that again, a person just like you can help someone stay protected and confident through the journey of whatever tax trouble they may be having.
[00:20:36] Speaker A: Traffic.
[00:20:37] Speaker B: Yeah, so one of, one of the things that comes to mind is, you know, when you get a letter or whether it's an audit, and an audit is a full blown thing. So if you get a letter, it's a correspondence request, that's not an audit, right? So you get a letter from the irs, share it with your tax person. Let us respond. If it's, the numbers are big and there's, you know, the penalties might be large, we can respond for you Call the. We can call the IRS hotline for tax professionals, and we can talk to the irs. We tend to see that the IRS is.
Agents that are dealing with the situation generally tend to respect a tax professional more. More than they would the individual taxpayer. So because we talk the language, right? Whereas if you're calling the irs, you don't know anything about what's going on, and it's frustrating to them, right? So there's a hotline just for tax professionals. So we call and we get a power of attorney from you. We call them and we just schmooze them and talk to them and give them what they want.
That's how we keep a lot of people out of trouble. You know, that's the number one way of doing it.
Sometimes you just gotta write a letter. I just sent three letters out the other day, you know, by priority Mail Express. Next day mail. Because one IRS office misapplied tax law to the strategy that we did for the client, and they denied the strategy. We're like, what are you talking about? It's. It's in the law. It's just look it up, you know, and so we're waiting for word on that, you know, so. And the numbers are large. You know, we're talking about hundreds of thousands of dollars that we're trying to recoup for the client. So certainly for your tax return, you get a letter, talk to your tax person, communicate. If it requires professional assistance, do it. It's worth it. Sometimes you may get on the phone, if you call the IRS yourself, what you can do, and you may be saying stuff you should not be saying, right? And so just, just caution, you know, but if it's just a simple tax return, it's not a problem, you know, but it's. When you have business and complexity, a lot of moving parts, the numbers are large.
It can get really scary. And we. I've seen it. I. We got one person off the suicide cliff because he owe $250,000. And it's my best story yet, that his wife told me he was about ready to commit suicide. And we contacted the irs, we spoke to them, we spoke, made an arrangement, and we settled it. And, and it worked out really well, and they moved on and they have a happy life, you know, so, yeah, that's.
[00:23:08] Speaker C: That's a powerful story, and that's how much, you know, so many stressors in life. We know just lots of statistics that financial stressors are towards the top of the list. So that's a big story. And I appreciate you making those points and making sure that you have somebody there to represent you. Most people would never even dream about going to court or having some type of proceeding without an attorney. Why would you be talking to the largest government ent without representation? So those are excellent points. So, Joe, if somebody really is in a situation just like what we've been talking about today, how would they get a hold of you or somebody like you to help them through this process?
[00:23:42] Speaker B: Yeah, so we. We fill the spot of a quarterback for many people on many different from many different angles. So ray sacccounting.com is my website.
That's r e y e s accounting.com.
my contact information is in there. My phone number is 215-525-2976.
I'm easy to get a hold up. And we have clients nationwide, so we're fully remote now.
[00:24:07] Speaker A: I love it.
[00:24:08] Speaker C: Joe, thank you so much for coming back on the show. Probably tap you on the shoulder some more in the future. For everyone else, sit tight. You're only halfway through this adventure. And we'll be right back with more pivotal change.
[00:24:27] Speaker B: All right, that was good.
[00:24:50] Speaker C: We have already reached the halfway point of pivotal change on tonight's episode.
[00:24:54] Speaker A: And we have also, with that halfway point, made a little bit of a scenery change so that we can continue this conversation on. Because I wanted to do a pivot based on what Joseph just said. He gave us some incredible wisdom, gave us some really insights. And I want to really just continue to draw out the points he was making about relying on the experts. And really smart leaders do exactly that. They rely on areas of expertise that they know are not in their wheelhouse or their specialty.
Smart leaders delegate not just inside to their teams, as is the most common way we think of delegating. Give it to a teammate, give it to a subordinate. But they delegate to others outside of their organization to do the things that distract them.
So your genius as a business owner or a leader, maybe you're on executive team or a high level of management, lies in your ability to accomplish your core mission vision, and also lies in your ability to rally people around the vision and get that vision going.
[00:25:55] Speaker C: Whether that's you going out and innovating.
[00:25:57] Speaker A: New products, you're just building relationships and networking, or you are scaling and ramping up operations.
You have to do something. You have to have the power to focus. So I want to talk about that power to focus. It is not attempting to master the every single facet of your business. All of the duties, all of the impact in every single Area that can actually lead to some serious costly mistakes. It dilutes your ability to do what you are best at. Most people have two or three things that are basically their highest and best use their singular ability to have maximum impact.
So successful leaders recognize this and they understand the value and then get out of the value. What it is to delegate to people that can specialize to tasks that are not necessary for them to be bogged down with with experts or other professionals can take that over for you. It allows you to concentrate on your strategic growth, your mentorship, renewing your mindset and making sure that you're hitting all those metrics and measure your growth over time.
One of the really good examples, because I'm a little biased is with like tax advisor in planning and we already heard what Joseph had to say about it, but I'm going to continue to expand avoiding costly do it yourself mistakes. Yes, this is the YouTube generation. This is the online course generation. We can find things that are just really incredibly insightful and detailed and we can accomplish a lot on ourself. But the time it takes to find the answer, to research the answer, and especially thoroughly or diligently enough to go execute it on our own, all of that is ours. And ours is the number one currency of the world. That's the most value. And you can never get back if you end up burning and spending all your money. You can always work harder and make more money, but time, you never get back. So stop wasting your time trying to learn and master these things.
Tax laws, they are ever changing, more so now than ever in history. If you examine tax laws all the way back to the 40s and 50s, until now, what was considered a major or critical change in the tax law would occur every five or six years back in the early part of last century. And then it would ramp up to, hey, we're getting a couple of changes every few years to a couple of changes per year. Now we are getting dozens of tax law changes every single year. Why would you, as a business owner, going out there trying to conquer your industry, be struggling and striving to keep up with tax law changes? Use a professional, an advisor, who it.
[00:28:36] Speaker C: Is their job to keep up with.
[00:28:38] Speaker A: All of these intricate changes. And again, there's a whole language and jargon in the tax world where if you don't speak that language, you can get lost really quick.
A lot of those missteps can result in overpayment penalties, late filing fees, costly time for corrections and refilings and amendments.
And again, that's going to eat away at your ability to be truly successful. Engaging in a tax advisor can lead to significant savings as well. They can identify things that are like credits or deductions that you didn't realize. There is a pretty nice study out there that reports an average increase. So this is an increase to you, your bottom line or your sales, your gross sales and increase 11.5% just by going and visiting a tax advisor and tweaking your situation.
So if you're a million dollar company and you want 115,000 more dollars next year, go to a tax expert. They ain't gonna charge you $115,000 for their services. If they do talk to me, I want to see what the heck they're doing. But the attributed growth for using a advisor of that nature is a easily, easily identifiable roi.
Get one. There's other advisors that you can use as well. But if you don't know all the deductions out there, if you don't know what credits may be available, like you had PPP loans and Eidl loans and there's educational loans and things like that, there's fringe benefit loans for health plans, there's all kinds of not loans, excuse me, credits for all of these plans out there. If you're not using an expert or tax advisor, you're missing out on money, you're missing out on savings and keeping your own money. So get them. Another area that people really mess up, and we see this a lot with our clients, is not using the legal expert. Especially when you're starting off. You can probably go to one of these online contract builders or one of these online places to at least get your articles, organization, organize your business. I still recommend the do it yourself approach. Go pay the couple few hundred dollars or if it's a bigger endeavor, maybe it's a couple thousand dollars to do it absolutely right and then have the liability on an attorney's shoulders. So your contracts don't fall through, your operating agreements don't fall through, your policies don't fall through using an HR personnel or something like that.
This is a crucial role in business to adhere to the law and know that there's regulations and things that need to be mitigated for all of the risks that come along the way. You could actually get into a lot of fines, a lot of criminal or civil litigation. And that is something you can avoid by simply tapping an expert on the shoulder and paying them a few dollars to get the job done for you. They can provide guidance on contracts, they can provide intellectual Property security, they can copyrights and trademarks, employment law compliance and all kinds of things that just safeguards your business in general. General proactive, not reactive. Legal counsel is really, really huge in preventing issues before they ever arise or just completely avoiding them in general. And it's going to save you a ton of time. You just have to have the ability to be forward thinking, look down the road and talk to another advisor that says what do I need to do to protect myself and my business? And this might be one of them.
Compliance consultants are another one. There's all kinds of safety regulations out there. There's all kinds of human resource regulations, regular regulations. There's a wide variety and complex landscape of things that you need to, to do. There's labor, cabinet, all kinds of things. These industry standards can change from one industry to another and they can have potential penalties, some of them incredibly severe.
So don't just sit here and wing it. Don't just do what your buddy does or repeat what you saw in the news or read online. Get somebody to assist you in what is often robust compliance programs.
Get them to help you conduct those audits. Have them conduct the audits for you, train the staff and foster a culture of accountability, integrity so you don't get yourself in trouble or you don't have somebody come back that had some type of malicious or negative behavior and says, well, I was never told otherwise. We don't have an SFP or a policy manual that tells me I can't do that. And then the liability falls on you, the business owner's shoulders. So that is really, really difficult stuff. Stuff. There's all kinds of other things that you can get out there. I mean, I think about people that are like in the oil industry, the gas industry, they have all kinds of compliances and without an expert to leave them through it, give them the checklists and provide the documents and templates, they would be drowning real fast.
Here's the good part. If you do this, I mentioned roi, your return on investment is really, really important. Not just numerically with the dollar signs and in the bottom line, but with your time saving savings and your stress savings. I have seen the stress of litigation, the stress of pending lawsuits literally cause strokes and heart attacks. It completely can damage your mental and physical health. Don't let that happen. Let the experts protect you or lead you through it. Delegating specialized tasks to other people as well frees up your time. If you're sitting here trying to do all of your own bookkeeping and update your financials, let a Bookkeeping or accounting expert, expert do that for you. And that time saving is huge.
There's a couple of studies out there and the studies, one of them from the Times, another one from a business journal says that if you can delegate your to external advisors just in the accounting realm, you can save up to 9.1 hours per week. And you get experienced, you experience reduced stress levels. Think about what you could do with 9.1 hours a week. If you take out vacations and stuff like that, that's over 450 hours hours a year that you're saving. And if you can calculate a billable rate for what 450 more hours would be or you can just think of what the heck would I do with my life with 450 more hours of time saved, then you've got a really opportunity to turn things around. You can reallocate that time. And I'm going to expand on this a little bit more. You can reallocate that energy and I'm going to expand on that a little bit more too. But your productivity and your responsibility to business growth is one of the largest things that is the mantle of your leadership.
I want you to really focus on ways that you can go and basically transform your business and move that arrow up and to the right permanently and forever.
So recognize the value of expert collaboration. That's an important part of this segment. It's really one of the hallmarks of effective leadership. Entrust specialized functions to professionals or a specialized person that you've brought on board your business. Your position needs to be geared up for long term success and resilience because times are going to change, the market is going to change and embrace the power of strategic delegation. It's going to unlock your full potential and it's going to help you drive your business forward.
So there are some things that you can do to really to do this and it's going to be about scheduling, it's going to be about identifying tasks, it's going to be about writing things down and then making an action plan around it. So what I want to do is just stick a pin in the conversation for a moment and I'm going to come back and dive into some more detail about what you do now with this. Save time, sit tight. We'll be back with the final segment on this episode of Pivotal Change right after these messages.
Foreign welcome back. And here's the final push on this episode of Pivotal Change.
[00:36:24] Speaker C: Again, get that pen and paper ready.
[00:36:26] Speaker A: Because we're going to get into some action steps. Here we Just talked about the power of delegation and relying on experts to help free up your time, free up your stress, so you can drive your business forward. So I want to tell you what you should be doing when you're redeeming that time. How are you going to be turning this delegation into actual impact through leadership. So one of the things that you want to remember is that we talked about saving. There's two different journals that I referenced saving nine to 10 hours a week, week and reduce time and stress. So now what specifically now what do we do at that time? Do I just have more clarity? Do I just work harder and pick up more projects? No, you treat your reduction of stress in your freedom in time as capital, time capital.
So let's redeploy that time capital into building stronger teams, some better strategy and sustainable momentum for your future. What I want you to do is step one, one, I want you to audit your time bank. And if you have a journal or one of these time audit types of things that you have somehow in your resource department, something like that, get it out, dust, knock the dust off it and get it ready.
You need to look at the hours you have reclaimed literally by recording, typing, writing down whatever your time management tracking system is if you have it, and if not, let's make one.
[00:37:42] Speaker C: You have to look at what was.
[00:37:43] Speaker A: I doing that I, that I no longer need to do? And I've gotten rid of it. And we're going to categorize this into three categories primarily. 1 is operational noise. Operational noise refers to like the constant stream of like low value, reactive or just distracting activities. These are things that just can really consume your time as a leader. It doesn't generally advance the strategic mission, yet helps in areas. Here you're putting on band aids and plugging in leaks, but it's really just the clutter that gets in the way of you being able to sit down and have clarity on your consistency and working towards your, your daily mission and your overall vision. It's often referred to as busy work and it gets disguised as leadership when you're just running around poking at things and helping people out. So operational noise is one of the categories. Another one is strategic opportunities. You need to literally sit down and write out your strategic opportunities. And then the third category is going to be people and culture. So that's what we're going to do by categorizing our time. And what I want you to do is just use a simple spreadsheet, maybe a calendar, and block things off of your calendar and label stuff Stuff as open capacity or open capital so that time capital or open capacity. And do this on a weekly basis.
When you have those openings you can start plugging in new healthier things in those three categories. Like for example, step two, mentorship. Mentor your key people. I have a friend of mine that says you need to find and identify a champion. Somebody that is going to take this over with passion and initiative and you can train them, give them the resources and the skill and they can run with it. That is going to be your champion. Champion. Well, if you have a business that has any type of diversity to it all, you're going to need a champion and maybe three to five areas. So invest your time into your top three top five future leaders. Meet with them individually. Weekly is pretty ideal. Bi weekly definitely. But you need to be meeting frequently. Ask them, especially in the beginning what is frustrating you right now. And then you can take them, teach them to start thinking like owners. Give them behind the curtain, behind the scene. Look at, hey, this is what I have to worry about. Here's what my concerns also be willing in those meetings to be sharing the mistakes that you've made, what you have learned and what gets you to your highest ROI as a person working on the company. So your, your action item number one actually comes up in step two. After you, you look at your calendar with your new blocks of having delegated and you're going to get these one on one meetings and then a couple of group sessions where you're building the team together and everybody can look around and know that hey, we're the leaders, were the champions here. Let's, let's move into our category in a bold new way. So make a list of those leadership problems. And everyone now says I know it's frustrating me, I know what I need to do. And we are going to start teaching through the ways that they can take that skill set, delegate those roles and move.
[00:40:35] Speaker C: And then you need to go into.
[00:40:36] Speaker A: Step three which is drive. Strategic clarity. That drive that means learning. Have your hands on the FE world. Shifting the years gas break everything you do. Take your now clear mind from having identified the nine to ten hours a week of where you can plug in these systems and ask are we moving towards our long term vision?
Ask that question and then look at what you are doing. The projects, the tasks, the products, the services, the raw materials, the softwares, whatever it may be.
You have a clear mind, you can actually reflect, eliminate the distractions and then revisit that vision. Vision. Vision and mission. Get it out and draw A line, circle, highlight and compare it to the various activities that you were doing and hopefully they align. And if they don't, make some additions or make some cuts to your behaviors as a company, as a team, a culture that, that promote or distract from that. So you can probably pretty much identify one or two just misaligned priorities right away when you sit down with clarity and say, man, does this really serve the purpose of the daily mission and the long term vision? And you can take these things, nickname them like zombie projects, right? Something that's the living dead. It really doesn't serve the purpose, but it's alive because we're working on it and tackling it and find a way to kill the zombie. Okay, action item. Write down those three highest leverage objectives, okay? For the next 90 days you're going to work on them. Jocko Willink calls this prioritize and execute. He's says take your priorities, but you can really only have one priority at a time. So you can prioritize a list, but if you're going to truly prioritize ne execute, you tackle one until it's done. Then you take all the resources and put it on two and take all the resources and put it on three. So your highest leveraging time, zombie projects, you need to figure out how to kill them. And then you want to build systems, not band aids and workarounds. So your step four is going to be re evaluate your operations operational workflow. Are you documented? Are you delegating to the right people down the chain? And are your champions delegating the right way too? Or they trying to keep everything on their shoulders? How much can be automated, how much can be redundant that is automatically carried forward? Copy and pasted AI technology software does it for you. Customers, clients and third parties and experts are taking care of things that can automate, revise those sops or build them out in the first place if you don't handle. And that will help you free up your team from having to ask you am I okay to operate here? Can I go this far? Can I do this or that? Well, you have the boundaries and you also have the expectations in place other than just what you've articulated as a, as a leader. They're written for everyone to see and hold themselves to. Sometimes those workflows need to be simplified. When I first really dug into correcting the just tax season workflow here, we had originally 14 steps that everybody had to check off on and we said, oh well, we can get rid of them. Combine a couple of these and we eventually narrowed it down to seven steps. Half of the process of just checking your time and checking what you're doing and we've since automated a whole lot to do it for us. But if you can simplify things, you can get people to comply with it much easier. Instead of just having something that's daunting, they've got to remember or reference something all of the time.
Step five.
Now you have some time to really reconnect with your market. And then this is important because every owner is realistically the face of the company and they are the brand. You are the brand. And you've seen some of my brand experts talk about this in the past. But leaders often get disconnected from their customers because they're stuck grinding in the back or fixing all the problems that they're not getting that facetime or they're not getting that image of themselves out there. And the communication, the voice of the leader isn't being carried out. It's good to rely on your people people, but your voice must be there as the primary voice of the company.
Use your margin to fix that, Use your time margin to fix it. Personally reach out to maybe just the top three or five clients this month and you're going to make a phone call, just hey, I'm checking in on you, how it going? How are we doing by the way? Where are you headed next in your future? See, we like to do the goal setting and understand our clients goals in the beginning. But you may just reach out to your top five customer. Who's the most recurring customer? Who buys the biggest, biggest bulk of product, product and how are we doing? Where are you headed? What's next for you? And by doing that, you're showing genuine care, you're learning about your market. Maybe you can make pivots saying hey, my product is starting to become slightly irrelevant and I need to tweak something so that I can stay relevant and stay interrupting the market, disrupting the industry. As a leader in the industry.
So get that customer conversation calendar ready, put it in those time blocks and those two meaningful checks, two meaningful check ins. A month is a minimum. And that's going to start off with your key accounts, your key stakeholders, your, your big boy clients.
We do this now automated as a team. So we have that team model and our admin person is responsible for whatever the heck else we've got going on with that client. Once a month you're going to shoot them an email that just says hey, how are things going? How's summer vacation? Kids do anything fun you got any plans for the upcoming holiday holiday? Get a little back and forth email and make sure that the care is being delivered as well. Step six is you gotta sharpen your tools. Sharpen the saw, let's say not just using your time to do things, the new things like do them, but to grow. So you have to sharpen yourself, right? Join a peer group or an advisory group. Attend one high quality leadership workshop or leadership training training. Read some books, okay? Do something that's going to challenge you. Did you know that if you increase your physical fitness, that a byproduct is your mental fitness increases as well? So get back into those workouts with some of your free time. Do that thing that is going to expand you as a person in some other category than your fixated blinders on business concentration all the time.
So get some type of 12 month professional growth plan. Now I say 12 months is probably the ideal because you can track yourself year by year. But if you need to break it down right in three months, in 90 days, I'm going to do this. I'm going to lose ten pounds, I'm going to read two, three books, whatever, just get that going. Get like three books on your list. Make one of them about somehow being a mastermind, like an expert in your industry and critical thinking and problem solving. Get to like a workshop conference. Make another one about just self development as far as thought process, spirituality, things like that. Get yourself into a church, get yourself into a coaching position with your children on their peewee soccer team. Do that stuff with your free time. And it's going to help you sharpen yourself all around.
So I want to give you a final challenge and give you some action items right now. I want you to block two hours this week. Two hours purely for reflection. Reflection and planning on what I just told you in the last 10 or 12 minutes. Then schedule your three first one on one session with your first champion. And then I want you to audit one system, even if it's a simple one. Audit the system with the goal to simplify it or clarify it and then reconnect with one customer and choose the first book or the first podcast or whatever it is. So get all of your ones out of the way and guess what? We're here right around holiday time, you're gonna have to kick yourself from the booty and get moving on. So that's my challenge for for you. And hopefully you've done the hard work of trusting experts. Now do the wise work of leading people, sharpening your direction and building what only you can build.
We'll catch you right here. Next time on Pivotal Change. But go out there and see the change and be the change.
