TSS199 - Why you need to keep two sets of books
Hello site shadows today, you doing us for the first part of the taxes central's for trading contractors series that I'm conducting with my night band tab called out of the United States. This is absurd one. This is why you need to keep two sets of books. This is a three part series gauze, and it is awesome. So I encourage you to get a pen and piper out start taking some notes because tab has left some absolute gold hard for you guys. I also little resource for your valuable in the retail section as well. If you wanna blueprint for your tax stuff, you can hanikos there get it behind as value for this. Is there some cold the contractor tax blueprint guy? Check it out. I join us up sorry if you do, please five head, of course, to auctions, and leave us a review you'll take you. The grand title of fully two minutes at adults helping ranking. So we appreciate that luck. 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You're listening to talks from the sought shed now, he's your host Matt joins. Hello. And welcome back to talks on the such. My name is Matt Jones. I'm your host in today. I'm joined by tab Burkhalter all the way from the United States tab. Welcome. Thank you, forever me. Now, did I pronounce you did up? I'm currently book Althoff. You certainly did. Thank you. What where's that from its German good? Now, you're all the way from the United Site. You're in Tennessee, and how is everything looking over the nice and cold son, that will come out and warmer supplemental bit as we approach our taxed on. Yes, I'm sure that's the most important when it comes to backstage lawns. I enough that the government takes her money, we just wish that they wouldn't take as much of. Well, that's a pretty common compliant from around the world. So we had him on today. We're talking about attacks essentials trading contractors. And although you're in the sights, we're gonna try be general at his relevant across the voters. We can think the topics that you've come back to me with are quite relevant across the board. Because in episode bomb, we're gonna be talking about why you need to keep two sets of books in the second episode. We'll be talking about understanding cash flow in reporting and in the final lips. We're gonna be talking about lighter foundations for your business. So I don't think we'll go to wrong with crossing borders here. What do you think now think we will will be able to make it just fi on the first one or dealing with different sets of keeping two sets of books? I was always taught them school that you'd never kept two sets of books that look at you funny. If you did. The way that the government sets up the taxi system, even the Australian government's website talks about keeping two sets of books or, or trainees. They talk about that. You keep one set of books in order to do your income tax. You have a separate set of books for the internationally, accepted, accounting standards. Interesting. So before we jump into part, one, tell us a little bit about the book also group and suppose your background talk of companies egos. We sure. Group has been around. We start off as a law firm over in Nashville, Tennessee. Then we brought in CPA expertise as well as the law, we expanded a not run on the Marable office, then, so we've been around since eighty four nine thousand nine hundred four where we work with residential contractors construction companies d trades as well, then for brief period, time I even dabbled in doing residential spec, building and flipping quickly learned that my expertise more in advising and consulting in that swing a hammer, because the not yet aplomb Lonzo ball. Well, you're probably not alone. Attracting ceiling fan of my house. Are we had a house built in nineteen bird six I would hang a ceiling fan of my daughter's earned the, the electrical line in the ceiling didn't know you could do that. Pretty certainly don't contact the boat hall of but hell to group for anything with service work now. We will contact you. But. But we have worked. So I feel that because we primarily work with the trades as well as the those that do franchising, or, or multi office locations, and there has been as people most of our expertise has come from the school of hard knocks an actual application having gone. It been a part of advisors it in not just on it. So we have actually occasions when we go through what we what we advise. Our clients is part of it. That's important. That's deny that I mean, I think for the better part that's where most experienced comes from anyway, school of Hudson, making mistakes, and being around since ninety four, I guess, is, there's a pretty long road map of mistakes that you've been able to obliterate of the us. There have been a lot wish we didn't have to make. But we learnt when we go on. It's the way it goes. I'm sorry way. These trying in tax financial year. He is thirtieth of June through to the first of law. Sorry. Yeah. Josh or July through June. Sorry on. It's a little bit different deals are there, because you're gonna county, which kinda makes more sense. But anyway, that's try for your bidding up saw him. The, the, the reason that way having this conversation is because it will coincide what well with financial year here in Stryer, and of course of Ulises they're United sites. It's super elephants will, I will the North Americans out, itchy and in, we're gonna let lodge American audience will be pretty Kate. He what we talking about today and know the size will go as if you have any questions you'd like to, I'm ANSA, you can hit across the school community day, and that you will get answered you can get to that group through of the Sasha comments from behind. Piji linked to it. And also, you've tab you're gonna leave on a contract tax blueprints, which is I buy spent what type which runs through some essential tax important items that you guys can get hold of through the racial section are the Sasha com. So thank you for that, right? Well, let's start rawdon I suppose side one we talking about. Whited to keep two sets of books now, I guess, fundamentally kind of understand what you're saying he but practically be I'm not quite sure who is speaking at here is this relevant to anybody that owns a business, or is this relevant to lodge companies will smoke companies way. Way, it's wrong to anybody that has to borrow money from another station. So and is also relevant to those that have to pay income tax in, in what I mean by that is, when you go, your income taxes, you want to pay as little as awful. I don't enjoy paying taxes. I, I wanna pay what I have to not be more. But when you go to borrow money from your parents, from your best friend from your Bank down the street, your Bank wants to see significant cash flow that she can service the debt. So you are automatically at odds with each other. You want low income for the government, which you want high income for your debt service. Go. That's where you come into this. The theory in the thought of having two sets of books, keep one set of books, according to your, the international counting standards, the US still has what's called general accepted, accounting principles or gap. And I'm not sure what the well straightens fall, but most of move all the international accounting standards. Those standards are different than your income tax. So what a business is allowed to claim as a deduction or as income will vary underneath the two different sets of rules. This is interesting because I recently went through a exercise way that was might apparent to me. He in Sydney, where all went to bond Yukon through the business, and we had to look at the end and a property actually, in the Bank ones, the postal incumbent as you just said, you run your business, your objectives by yourself as possible. Taxes possible wise around that. But it actually was a bit of a reality check, so my count. She was like, oh, I brew, not find yourself more because on piper pie and yourself minimum minimum wage, or isn't reality. It's it could be from that it's. How you address it? Exactly into its dressing what we call it is. It's, it's categories ation of income. So, for example, when you buy under the US, hacksaw when you buy a work vehicle for your company, you plan depreciate it and the depreciation the banks at that depreciation back into your net income. But if you were to expense the truck, which you have the right to do the banks don't add, again that fit that, that figure back into your net income, so you, you are trading and you decide you need a new truck to haul around your materials and supplies. So you go out, you spend sixty thousand dollars on truck you get the cargo liners you get the rattler side for hanging ladders, and you sit there and you have spent out. Of your pocket sixty thousand dollars out of the business book out of your on bogut out of the business. Faulk it runs fit sixty thousand dollars. If you expense as an automobile expense, that sixty thousand dollars, you have just decreased your net income by that amount of money by sixty thousand. What if you depreciate it, you can take a hundred percent appreciation sane year, but the Bank does not catalyze that cash purchase of the asset against you. They will still calculate your debt service on your original net profit before you depreciate vehicle think that's actually, it's pretty much the same here as well to do the same sort of thing. And so that's for you. Start looking at two different sets of books, because if your business you go out in, but the your business made one hundred thousand dollars, you spend sixty on that vehicle you've got forty leftover. The Bank might say, hey, you wanna buy a home or if you want to do debt service, you gotta have a fifty thousand dollar net income? If you expense that vehicle, you're not gonna have you're stuck at forty. But if you depreciate it the. Bank will add back in the depreciation say, hey, you really have one hundred thousand dollars to service your debt with. Your cash has not changed. You still only half forty thousand dollars in the checking account, but because of the difference between tax rules and your international counting standards. You have two sets of books for the exact same transaction. Interesting. Wean Iraq this podcast today to talk to you very quickly about trading web GAAS content creation program that program has been designed specifically for tried by organizations, as a why that Ugo is as tried business owners Cain stock creating content that enables you to engage with your customers, and you'll potential customers, it will enable you to build trust and build report because what you're doing is, you're investing in educating them biggest problem that we see with customers today is not regularly, updating their websites, and that's a problem. Because first of all, the search engines looking for that and second of all attention, customers, also king for Tracy web content crash program has been specifically designed to help you get regular relevant content on your website, consistently every month. We know that a Todd when you're at the on the tools, and we know that sometimes you don't always have the time to be able to do these things yourself. So we're taking it off your hands for ya. It's a service that we're offering you go. I want to make sure that you getting these, Don, because we know how important are these anyway. Hit across to trade web goes, don't call. Don't you forward slash content filling the full and one of representatives will come back to you? We use accounting software. Well, I mean, we are not a lot of companies we encourage companies to use accounting Selfridge's, does so reconcilable these pilots and things like that. It's, it's affecting you. I'm sure you guys use a lot of it to enjoy it. Quickbooks. And that kind of stuff. Now when you're making the business on your reconciling different expenses against different shot of accounts where you're running two sets of books. The effectively have to have two different organizations setup open, you run it all through the science so the structural so we work with excellent question. We work with both zero and quick bucks on a few verbs zero or not. Well, yeah, we preserve is probably the most commonly used one in a strike because it's, it's an it's a New Zealand company, actually, yes. Great, great guys. I had opportunity of working with them for a couple of years. Got to meet them group of people. You're the first American, the accountant spoken to that's actually use it. Well, it's, it's very user, friendly and. And the system itself is set up four or multi for multi for multi locations and multi trapping. When what I mean by that is, when you set up your chart of accounts, you can keep track through your chartered accounts. What is you are adjusting for income tax purposes in what I mean by that is you create inside of the equity section of your of your books, wherever you're adjustments are between income tax accounting, and you're generally accepted counting principles. So that's where you can keep one set of books in zero or in QuickBooks. But then when you go to give that set of books to your CPA or to your tax prepare, they can see you. Your books, knick CEO K. This is done according to generally accepted county principles, but we're going to change these few items and we'll show the adjustments down your equity section so that way you know, exactly what you're what we call a deferred liability is we tween, the difference between the general accepted and the text to get to give simple. We have a low voltage electrical company. They installed the security systems and in monitors for, for school systems in nursing homes, those types of things they have a multi year contract. So the multi year contract is worth one point nine million US day, the Bank loves that. That's a hundred percent RAF it for Serbs for just monitoring those those emergency. Calls. But for tax purposes, we don't recognize that one point, not until we actually earn it that month of service. So the books show, the one point nine million of future revenue, but on the tach term, we don't have to show that. So we don't have to pay tax on it until we actually earn it too. It's kinda like a full cost correct? Is that any instance way way for the for the, the tax department, you might be? Ira here in stride. You can effectively pie annual tax full costs that amount you can play it up front. Nothing Egan some sort of credit discount for doing that. Whereas if you Loubet mole is at kind of the same thing that you're talking about, like you can fall cost. I will this is what we're going to be buying attacks this, however you on the as you might get. How long the Saint types of lawns in regard to you can pay your estimated and the government will give you a slight discount and in. So if you're estimates prove wrong at the end of the year you have your chance to settle up with the government. In the next year if you want to go. Oh yeah, interesting. I'm do you think tab that what a good starting point for MRs out bay are interested in would bay to get set up on a program like zero way? Eva, fictive -ly got the ability to collect all of that. Dada reconcilable of your counts and set up the right John of and structure full the business from a financial perspective star that when it comes into financially could take it. The somebody lock yourself inside, rot his, his access zero account Wookey magic yet, family. The foundation is getting getting a good chartered accounts looking at your actual cash flow. Looking at where your money is going setting your chartered accounts up with that focus in Mont of sin. Okay. I am going to need to borrow money from the Bank, or I'm going to be purchasing large assets in. The new set your books accordingly. Then win you have a good system like zero. Do you can sit there and make sure that all of your records are accounted for end? They keep that is having a crystal clear picture of how your income is coming in in where your money is actually going, and that's what a good software just will do for you. But you have to get it setup Ropley on the front end and not don't be afraid to ask questions. There are some things that people just as that talked earlier, about me, wiring, a ceiling fan of burning up wire, I didn't know you could burn up wire, so now that I have to call a professional ask them about how to install even a motion security light. I my wife took away myself own. Threaten, not give it back did a myself, but I don't know how to do that. So I haven't called professional whereas when a trade he is setting up their chartered accounts. There is no reason not ask some simple questions to make sure you get set up properly. There is a how you code your books in how you establish your chart of accounts, the very beginning plays a significant role. When you're when you're CPA your, your tax prepare goes to complete your books in July. In that in that's in. That's all they're looking at is your summary transactions. They're not looking at the individual. -magine we're gonna get a lot more. Well, we walk into that a little bit. When we talk in the about lying raw foundations for the business, but I am interested very much with the what you was assigned that about the cash flow in the reporting sauna theme. So I think when we come back in the second site, and we talk a little bit more about that. It'll give listens a bit more of us what I should be focusing on, and I should be looking at, at a as a weekly you'll monthly basis. So I can keep on top of things lie, cash cash like projections, incoming to outgoing spending in that kind of stuff without the accurate, very accurate run on. Well think we needed to cover on anything else is side in relation to why you need to be keeping two sets of books gone through. I'm the primary reason is for your Linders or ruffle or. Or as you talked about when you try to go and get a home to go and get along to even by our if you're self employed. We have a very bad tendency of keeping our income suppresses. We possibly can in in. There's nothing wrong with doing is just matter how we have classified the info. So with the two sets of books, the other aspect of if you keep your books, hoarding to one establish method being like you're generally accepted counting principles as you grow. You have a consistent comparison as to how your company is doing year-over-year and tax laws change the US just went through a major tax revision this past year. So if I look at your tax return from two thousand eighteen in compared to. Two thousand seventeen what I see. I might see a twenty percent decline in tax blinka. That's because the tax code changes it does not necessarily mean that you are that you had a twenty percent loss of business revenue twenty six huge. So you by keeping the set of books, according to generally accepted counting principles. You have a very good year to your comparison to how your businesses growing and doing versus within the government with a change of a prime minister, or the change of parliament might change how the tax laws are written. What sounds like the government's doing a good job in Cape. Ing accountants, busy. Anyway. It's called job security for us. Listens. You just hearing the end of the I episode of the taxes central's try to back this was episode one, which was why you need to keep two sets of books. I'm talking with tab book taught from the book group are in the United States, the numbers, house dot com. Check that out. We're going to be coming back in a folder next week. We talk about understanding cashflow reporting temp Utah before catching you in the next episode. Thank you. Thank you for listening to another episode of toolbox talks if you liking what you hit, and you can hit across to the site, shade dot com. You can join our community by signing up to tool bookstores, you'll get sent a weekly notification, which is basically a high lot of everything that we've spoken about join that wake alone with any other industry news, that might be relevant specific to the tribes. If you enjoying the show, you can hit across to achieve stitch. Oh. All sound cloud. What you can leave us a review that would be fantastic, and all the reviews, get right out in the show, likewise. 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