GUEST SPEAKERS

Kelly Johnston

President & CEO

Johnston Financial Services, LLC

the full report

Greg Olson (00:01):

Hello everybody. And welcome to GROWL Connex. I’m Greg Olson, founder of GROWL. And today we have Kelly Johnston with Johnston Financial, Kelly, how are you? How are you doing Greg? I’m doing great. Hey, we really appreciate having you back on the show again. I guess if there’s something in the financial world and accounting world that we can continue to learn, I think you and I could probably have a show a day and we’d never get through it. But I do appreciate you have being on the show. I think today we’re going to be talking about a lot of things like year-end planning, beginning of year planning. And for many of us like business leaders, business owners the year end comes up extremely fast. So it also, it’s been a very interesting year and probably more important than ever is like, how do we, you know, how do we close out the year? And you know, how much would, should we consider and starting the year. So before we get started, I just want to give you a second to say you know, who, you know, who you are, what’s your company, and then we’ll go into some what you want to talk about.

Kelly Johnston (01:08):

Awesome. Thank you, Greg. This year. Yeah, you, you hit the nail on the head this year understanding who’s your invisible board of directors and leveraging support has been more important than ever before. I know I personally have reached out to two different team members. I call them team members cause they’re always there on my team. Right. and just using them to help us build these businesses and continue the growth trajectory that we set despite everything that’s happening in the pandemic. So I’m Kelly Johnston, as Greg had mentioned, I’m the owner and founder for J F S also known as Johnston Financial Services. We are a full service accounting firm that does everything from your bookkeeping and accounting needs to tech strategy, cashflow planning, and really wealth building. My intention is to be that, that business resource, that connector of everything finance, but also be able to help people pair up with other team members in the Valley that are very strong business leaders themselves to help them cover and mitigate risks and other areas of the business. So that’s where I feel like it’s been a fun space to play this year because we’ve been really able to build those relationships despite not being able to be in person per se.

Greg Olson (02:18):

Totally, totally agree. I think you know, there’s, these kind of moments are important to have these, these ongoing meetings with your finance team. And as a small business myself, we don’t have a massive finance team and then I’ll pull transparency. You are my finance team and is why I’ve learned so much over the past few years of working side by side with you on some of these tax strategies and end of year planning and things like that. And I’ll be the first to say, I didn’t think it would take as much time as when I started the company, because I thought everything would be much more basic depending on the kind of company you are. And it has gotten more complicated with different rules and, and things like that. But I feel like working with you and your team, we’ve gotten more confident at the end of the year and more confident about what’s happening kind of year over year for planning. So with that, I say, thank you. And well, let’s try to give some tips and tricks and things that people should consider. I mean, should we panic? I mean, it’s whatever the company is like this year has been crazy. All of a sudden we’re in December and I haven’t done a lot of end of year planning. Let’s go, what are, what’s kind of, what are we doing?

Kelly Johnston (03:27):

That’s a great question. So first of all, don’t panic, I think the first thing that a lot of us business owners as an entrepreneur myself, I tend to do is make things way more complicated than they need to be. And so the, the biggest thing I’m emphasizing more now than ever. And I, you know, I had this really big epiphany, which is funny that it’s an epiphany, but back in at the end of November, like why have we made things so hard sometimes? And so you’re in planning can be that simple. I highly encourage people to take time between now and the end of the year. And I understand it’s the holidays. It’s hard to set that sign of time, that time aside, I should say. But, but let’s, let’s dive into it. It can be a hour here, 15 minute breaks there and just go over a reflection of your year. And the reflection could be as simple as taking notes. And those can then turn into your annual meeting, compliance minutes and things like that, that you can leverage for your business, but really reflecting on everything that’s happened. And that includes all the stimulus financial packages that you’ve taken account of all the loans and lending grant opportunities that you have and just kind of brain dump all of that information onto a sheet of paper. And the reason I say this is because each of those different pieces that a lot of our businesses have partook for taken in this year are resulting in some tax strategies or different things that could impact them come March 15th or April 15th, respectively. And you need to be aware of that information right now. And so, by getting it all on paper, you can see kind of the map of what has happened and then take that and figure out, okay, is this going to affect my bottom line for the business from a tax reporting perspective? You know, the PPP funding, if the IRS issued final guidance the week before Thanksgiving, about how they are saying it is truly not deductible expenses, however, Congress is currently working on a bill that could possibly change that. And so being aware of like, okay, what’s the worst case scenario that can happen and being prepared for it, but also knowing that part of your strategy this next year could be extending your tax return to be able to handle if Congress does make that change, right? No one grant funds grants are under reported as income. The minute you cash is earned. And so that might cause your bottom line to go up, which means taxes slightly go up. And so working through those different little pieces just by writing them down and having a deeper understanding of that, I’m also challenging business owners right now make your accountant work for you. So we right now working with all of our clients in preparing our year-end like last minute plan strategy, we have a lot of year-end meetings scheduled with clients such as yourself and we’re going through and we’re saying, okay, this is where you’re at. As of today, if we were to file your return, this is where we project the last couple of weeks to be. Is there anything else that we can do in the last couple of weeks to make any adjustments that you want in that strategy? I don’t necessarily say the year-end planning should be the end all be all strategy for you because we do it consistently throughout the whole year, but like the Christmas bonuses, things like profit sharing do you need to upgrade some equipment, things like that can be taken into account in the last couple of weeks, which could totally change your tax position come you know, April, in addition to that, working with the retirement advisors, like, okay, are, do you have a, an IRA, a step or 401k you can contribute to and maximize putting more money into your pocket creating that nest egg? Cause we all know how those were very important this year. And at the same time, reducing your tax exposure from that perspective as well. So your end to me is like the icing on the cake. This is where we make the final decision, because come January, we’re going to be setting goals to run for this next year.

Greg Olson (07:12):

That’s right. And we’re going to use the information we have from this year and how we are planning. I also think I’ve taken a step further, like I’m already into next year, right? Planning are based on the ongoing quarter by quarter analysis of my business. You know, it helps me plan and be prepared to have a let’s say, a nicer meeting with my accountant and finance team than it would be if I had not had those meetings. Cause I’ve been on the other side of the boat as you know, where I waited until the end of the year. And it takes a little bit longer. And sometimes our surprises that as a business owner, he just didn’t think about right, like how income was reflected and, you know and the ramifications of taxes and things like that that maybe you weren’t prepared for. And so I really love what you’re starting to say because it really does matter. And I think it takes away the anxiety for me as a sitting down. I mean, now as a time, I agree don’t panic. Most business owners we have a lot to panic about. So I think this is the finance thing, get comfortable with it. I was one of those people that I just want to put my head in a dirt sand and not think about it until almost the last second. And then you’re filing and I know you get a lot of those people calling you at the last second. Like they have to file in the next week. And you’re like well, I don’t know if I can help you very much, you know, or cause it’s very hard at that point here. We’re already planning for next year for grow. And I think it’s really beneficial. So you know, to say like, you know what, I think we’ll talk some of those you might have some pointer that helps me with hiring and helps me with different purchases. It helps me with a bonus structures and things like that that, you know I don’t centrally have to panic. I kind of know what’s planned out and I know my revenue goals have to be to meet. Yeah, that’s fantastic. So I completely agree with you on that is don’t panic and just start the start now, start grabbing that information and contact an expert. That’s what I like to say. So

Kelly Johnston (09:10):

The biggest things that like, I guess make me get twitterpated as an accountant, obviously accountants, we’re very historical looking, right? We’re looking at past transactions that are going to result in something, but when you really think about it, my, my biggest premise has always been cashflow. You know, me, I have, I love to talk about cashflow and projections and that kind of stuff. And so I’m all about creating and mitigating tax exposure. Cause I mean, there’s, there’s a lot of IRS code that allows for you to play within that and do it really well and come up, come out with some really, really good tax positions. However, you know, sometimes going out and buying that brand new truck at the end of the year is maybe not the best cashflow strategy if you had a different plan down the road, down the road. And so, I’m always weighing the benefit of, okay, yeah, this is a really good tax position by taking this expense and accelerating this or doing whatnot. But I’m also like I’m still a business owner and cash is King. And so I’m like, okay, but is this part of my five-year plan? Is this part of that business entity? I don’t, I have a lot of clients in, in, in my experience in the past that have like, Oh, you know, it’s a year and I need to go buy a new piece of equipment. I’m like, but do you really need that? Like, is that revenue producing for you in the long run? What can you do that is going to have a long-term benefit rather than a short-term.

Greg Olson (10:21):

I agree. That’s a really great way to look at it because it is kind of those knee jerk purchasers or knee jerk reactions that can negatively affect you in the next year or the next two years and things like that. You know? So and I, I tend to run my purchases by you before I even run it by my wife, because I’m like, is this a good, is this a good idea? You know, so and then you asked me like 10 questions and then half the time I don’t buy it. So there you go. So well let’s talk about the new year. I mean, we’re going to sit down, we’re going to we’re either we’ve been planning or not. We’re going to sit down and start writing things down about what’s happening in the year. You know, did we meet our goals, our goals, other purchases that we made, do we need to make some where are we in a cash position, those kinds of things. So now planning for next year. I mean, there’s a lot of things to consider I guess, and so let’s start there. I mean, everybody kind of thinks of a fresh new year. I want to lose weight. I want to save more money. I want to have better cash position. I don’t know. So, you know, what, where do you guide people on or what questions do you ask or where do you start?

Kelly Johnston (11:31):

Well, I think that’s a really great question. It’s a hard one because everybody’s like, okay, do we think 2020 is 2020? Is that going to continue into 2021? Right. Is a lot of people I’ve talked to, Oh, 20, 21, can’t get here fast enough. I’m like, it’s not going to just all go. So what does that look like? So we’ve been doing a lot of budgeting and planning meetings, actually over the last couple of months, we have some large corporations that we serve. And one of the things that we really have looked at is like, what is the ultimate mission of the organization in 2021? Meaning you, you know, you have your core mission and vision statement. Don’t get me wrong, but I’m talking about like, you know, personal development wise. I usually choose a couple of words or something that I’m going to try to step into that quality for the year to be, you know, that that’s my mission for the year. And so I I’m challenging a lot of our business owners. Like what is that? What does that look like for 2021? What is your goal that you want to accomplish in the company? Is it increases in pay? Is it serving more market share is what does that look like? And then you’re in a back end of the numbers from that perspective. And the reason I say we start there is because your mission and your intentionality with the business might have shifted quite drastically because of what happened in 2020, not to mention, we have no idea. Are we going to have some of the same shutdowns this next year? Are we going to see other stimulus packages? I don’t have a crystal ball. I don’t think any of us do. If you do, please share it with me. But at the same time, it’s like, okay, well, let’s, let’s set the foundational premise to give you an example, JFS, we set the mission back January 10th of 2020. My team members, we sat down and we chose two words. We were going to live by this year and the irony is not lost on me with these two words. We chose the health and wealth of our businesses. Those were the two words and we defined health and we defined well not knowing we were going to go into a health-related crisis as an or as an economic company you know, County, all that good jazz. So, but the thing is because we had those things as our premise, we chose to do some very strategic choosing and moving as things came down the pike, meaning during the middle of tax season, which is our craziest time of year, PVP rolled out, we chose to ask our clients who we were doing tax returns for. Hey, can we take a week longer to do your returns so we can help get PPP long apps out. But we did that decision based off of does that meet the core goal of health and wealth for the organization, right? And so that’s one example of many I can go into, but thinking about 2021, you know, we’ve been sitting down as a team and we’re like, well, what does, what does that core mission for us? And our whole premise has always been served the client from a to Z. We want to be the person they call first. If we can’t, even if we’re not the one that can give the solution, we got to at least connect them to the solution. And so knowing that that’s kind of in the premise behind all of the different decisions that we’ve made. And then we also had some revenue goals, don’t get me wrong. I’m all about very smart goal format, right? For the year being very specific, measurable, attainable, realistic, and have a timeline for it. We set those smart goals, but we also made sure that the goals that we set were in alignment with that core mission or those words that we set for the year, because you can’t, if you have a mission, you know, from a core perspective of X and your, your financials are Y and they’re not in alignment, you’re not going to hit one of them. And then you’re going to feel like you haven’t accomplished something. So coming into alignment, and I know this isn’t very fine Nancy in the conversation, but it truly is because we all have programs when it comes to the word money and cash. Like whether we want to say that they show up or not is totally different. And so if you know, core wide where you’re going, we can align the cash flow with that core. And it becomes a heck of a lot easier to hit the cashflow goals.

Greg Olson (15:31):

You know, I liked that. I think we, I love the words. I think that’s an important thing to add. I’m always very goal focused. I believe in writing my goals down, I’m always have, and then, you know, where do we land? You know, ours is kind of, we would like to work with companies that it’s important that they retain or generate new jobs. Right. And I think we asked that question with companies, we’re going to start to work with, you know, what’s your process? How do you track this? You know, it’s almost like I wish I can on my website, have a job generated index or something to show like our, all the clients we work with over time that they’ve been growing. And that, that tells me, you know, what’s happening and they’re help. They’re really, you know, how they’re working with the economy. You know, I love the smart goals. We should probably even have a, we could probably even have something on that. People are like, you know, I go by specific, measurable, attainable, relevant. Time-Bound I add ER, smarter to that. And I just talk about what’s enjoyable and what’s rewarding. I think as business owners, we forget that, you know I can talk about our revenue goals, but it killed me to get to that point. Right. I mean, it just crushed, crushed. And I think there, the health part of it goes away sometimes, you know? So I try to think of, you know I try to think of those other things, you know, how is it rewarding to me? It can be rewarding to the company, but was it rewarded me as a business owner too. So, thank you for bringing that into play. And I think I’d like to see more people writing their goals down as a plan. So when you work with us work with a company, you’re kind of guy, I know you’re kind of helping guide them through that a little bit. Like, what are your goals? What are you trying to work at? And I guess, you know, a lot of people lead with, of course that our revenue goal, right. But I have worked with you and you’re like, no, what’s important to you. What are you trying to do? And I think that goes into probably wealth building also, but also, you know, we want to pay our house off or we want to buy another piece of property or I want to do X. And I think what I do enjoy is having that conversation. It’s not just about your year over year accounting or taxes, but how it all flows into a bigger piece of the pie, which I’d never really thought of it in all that very much of a layer cake of how we work together, how we work with it. Cause I think after we started thinking like that, we started seeing some of these other goals come into place and how it was pushing our company. And all of a sudden, internally I was like internalizing like the decisions I was making were affecting these other things, I guess.

Kelly Johnston (17:56):

Well, and that’s like, I always preach when I teach classes through like the business incubator for a lot of our startups, I never, I want people to think, and this is how I approach everything. Is that end goal in mind, like if I’m setting something up now, like what’s the end goal of this? Am I going to sell this company? Am I going to give it to my kids? Is there, you know, what does, what does that end goal? And if you keep that kind of in the back of your mind, the, all the decisions you make become part of that alignment, it’s kind of like when all of those stimulus packages came out this year and everybody was like, Kelly, do I do the PDP? Do I do idle? Do I do this? Okay. But like, let’s check in for a second. Where are you at now? Is this what your five-year goal? Is this going to create problems or help you in that five-year goal? It’s having debt on your balance sheet, a good thing or a bad thing for you? A lot of it just depends on the situation and the particular long-term planning for, for that reason. And then what, like, like I said, what I like to think about is from all of the those that, that smart goal philosophy, you can then pair down key performance indicators, KPIs that, that help you measure those fence posts along the way. And that’s what a budget is to me. A budget is a flat out smart goal. It’s a little bit of a big one comparatively speaking, but it’s a smart goal, right? And to me, a budget is like, I get to look at it from a permission to spend in certain buckets rather than a restriction, meaning I know that I’ve set aside X dollars based off of my revenue to be able to do this. And yeah, you can have a little bit of a flexible budget approach, meaning as things change you, you can flex and move within that. And at the same time that that’s the whole point of doing this is to kind of give you that, that guideline, what I’ve learned as clients and companies who’ve chosen into just kind of running it, flying by the seat of their pants. Don’t get me wrong. We’ll do great. And at the same time, it becomes really hard for them because after a certain point, they kind of get lost as to like what their core goal is anyway, or the purpose, that whole thing kind of phased away at that point.

Greg Olson (19:57):

It completely does because you forget what you’re working for, or you should get your personal goals. And, you know, you skipped the mission vision of your own company because of other people are making decisions. I just want to say, I think more than ever now, I think we have ABC types of scenarios that we’re running right now for next year. I sat on a couple of boards. I know you do as well. And I think it’s like when we look at like not non-profits or foundation, now we’re looking at that more than ever. Like how, what happens if X happens or how do we do this? Or how do we raise funds no different when my own business, I look at different scenarios, you know you know, who knew we’d have to start planning for a potential if it shut down or if we can’t be in the office or if our client mix is correct, or if they have to shut down and what products and services, you know I, more than ever like to look at all of those things, because I’m more, it takes the fear out of, right. So, when I, when some scenario happens, I know like really how to plan for it. So almost I feel like I’m my own little astronaut, my little crew spacecraft sometimes flying alone, but if something happens, I can open my book up and be like, Oh, well, let’s implement this. So, you know, I want to take just a few more minutes. And I know I thank you for taking so much time, you know? Can you mention something just key on profit first for me? I mean, I guess again, I throw it out. The book is behind you. I’m a huge advocate of it. I’ve been learning so much about it working with you. So I thought maybe you can be, people are going to be like, what’s that I’ve told people about it. But again, I think it’s, it really has changed how I run my finances in my business and my personal life. Which you told me it would, but I was like, sure, it will. And then, and then here we are.

Kelly Johnston (21:42):

I do remember that conversation, right? Yep. Alrighty. So, yeah, profit first. Okay. I if you all don’t know profit first is a book that was written by Mike [inaudible]. I am a certified profit first professional that’s that tells you how much I really do love this, the process that he really has created, but really if you think about it profit first is just a cashflow methodology that works within normal human behavior. We all remember when grandma used to do, I don’t know if your grandma did this, my grandma totally did. So this is how I grew up. She has multiple on envelopes and she’d put her money in the different envelopes and take that one envelope to church. And that was her typing. And then she’d taken envelope to the grocery store. That was how she managed cashflow. And then, I mean, she was Uber conservative. She’d saved like foil, tin, foil, all sorts of stuff. What profit first is, is it that same like envelope or envelope systems but using bank accounts and working within our normal spin habits specifically where we’ve gone more electronic with a lot of our cashflow. Meaning if you put, put the money aside ahead of time for taxes and prop paying yourself first and profit, which is also like your emergency fund, things like that, putting, pulling that money out before you even pull out your operating expenses. So I’d say it’s a methodology of operating off of a smaller plate. Meaning if you, if you eat off a smaller plate and you eat less calories, you’re probably going to lose weight. It’s the same kind of thought process within the business. It’s one of my favorites, like I said, methodologies, and the cool part is Mike McCollough does a ton of free resources on it. And then also he’s got lots of profit first professionals that can help you implement at a deeper level. The book is easy, an easy read gives you some great tips to get right out of the gate. He has an amazing elevated now podcast for small business owners that has a whole, he brings guests on that. Talk about how to do it in restaurants, how to do it in like every industry is broached in that subject matter. But for me, we’ve been doing it in JFS for four years. And I’m going to tell you it really shifted my mindset around cash which is funny to say considering I’m an accountant, but it also really allowed for us to have the reserves available to us during the contraction that we just went through from the pandemic perspective. I saw a lot more confident navigating those waters than I ever had before. And so I had clients who we had implemented profit first with about two or three years prior, you know, in the last two years, call me and say, Kelly, your profit first profit account is saving my business. And that was the coolest thing to ever hear. So it doesn’t have to be complicated. It’s really simple. But it works within our normal behaviors.

Greg Olson (24:33):

It really does. And I think it’s those different buckets and planning. Again, taking the anxiety out of planning ended the year and the beginning of the year and during the year and how that cash flow kind of flows through your company has really helped me plan for, you know, how do we, how do we kind of have like some type of profit-sharing bonuses raises, you know, and be confident in the decisions. And I think as a business owner, I think, you know, we’re not always competent because we’re not finance experts. We didn’t go to school for finance, not, you know, we didn’t go to school for accounting. You know, maybe we took accounting classes by guarantee it might’ve not been the, the, the class that we’ve paid attention to the most or, you know, and I tell everybody now, like I would go back and take an accounting and finance class now, because again, I think you can get over it by hiring experts that stay up on type of tax code and state business code. And, you know, there’s all these kinds of things, enterprise zones. And we didn’t even talk about that. You know, how does that affect you and what should you do as a business? And so there’s all these, and we’ll talk about that on another show, but I think you know, this is all I get excited, obviously why like talking to you about it because it wasn’t long ago that I wasn’t excited to talk to you or talk about tax planning or finances, you know, and it was sometimes things are heavy lifting and you know but I think if we get through it with planning and I think I’m a good testament of that is like, if you work your plan, you know, then you get on the other side of it and it can take, you know, 12 months, 18 months, 36 months. But again, it’s such a short period of time to be in a very positive position.

Kelly Johnston (26:09):

Yup. Very much so.

Greg Olson (26:12):

We talk a lot about, we talked about a lot of things. I really appreciate it. I took some notes too, of things that I’m going to work on for my end of the year and my meeting with you. So I can be a little bit more prepared and also for a beginning of the year I want to close out with, because what’s really exciting and we will have more information on this as this whole extreme movement business. You’ve started an extreme cashflow and we will have a whole series on that because this is amazing that I don’t know where you find the time, but again, you care so much about helping other businesses and other people that you came up with these own tools and business. So do you have a couple of minutes just to share that with us?

Kelly Johnston (26:56):

Yeah. So my biggest thing has always been the education aspect about finance and accounting for small business, because I just felt like there’s always a gap in communication there. So extreme movement is one of our companies. You can go to extreme movement, llc.com, no E so starts with an X that there is extreme movement is our educational platform. You can take on-demand classes that are pre they’re preset, they’re run like six to 12 weeks, depending on the course on how to plan your cashflow profit first methodology that one’s actually going to be launching soon. There’s one on understanding accounting and understanding how to read your financial statements. These are courses that I’ve done live through the business incubator and things like that. And so you can sign up for those classes there. We also do a ton of content on this page. So we’ve got tips for success, board of directors. We’ve got some starter budget information, we’re doing a whole debt corner. Yep. So there’s the education center about what types of debt are good debt to invest in things like that. And this is purely from an self-education perspective. There’s a podcast that we are going through and working on, we bring on guest speakers for it like bankers, insurance, advisors, things like that. And that one right now we’re working on some growth and changes in trajectory for 2020 run around. But again, it’s educationally driven and it’s free content. So plug into that, if you’re a business owner, there’s just some really good stuff there for ya. And then extreme cashflow is actually a software application. I developed with a help of a really amazing developer here in the local grand junction area. And it is a cashflow projection tool that plugs into QuickBooks, QuickBooks online and zero, or it can just be standalone, and it helps you plan out your budget and cashflow projections. And from there you can import prior your information and then create new assumptions, say what happens if I hire an employee? What happens if I cancel this contract? And it gives you some scenarios about what will happen with your cash in your bank. The cool part about that platform is it does pair well with profit first, meaning you can run multiple bank accounts through it. So we do that a lot with our current clients utilizing the platform. It’s definitely something other accountants hint, hint can plug into and use to help their clients as well. So again, my intention is to truly give you as business owners, lots of resources that are available because you might not have time necessarily to meet with your accountant, but if you can get some of the content, why not leverage it and use it. Yeah. I’m excited a great product

Greg Olson (29:43):

You know, any kind of information that’s easily at our fingertips that my business partner and I use it to plan you know, we can run different scenarios with you. And you know, that way we can understand. So we’re, you know I mean, there’s that head and heart thing that we have as business owners and we’re trying to make how we make decisions and, you know, it’s great to have the data to tell us, right. Especially if you have partners in a business or, you know, you’re trying to make decisions. You can really make an on data right. In play with the different scenarios. So thank you for sharing for sharing that. We’ll put that the, to our listeners as well. Well, with that, Kelly thank you so much for again, talking about end of the year planning beginning of the year planning, fixing it took away don’t panic work your plan. There’s always there’s new information come out of the time. I hope you have a wonderful holiday, you and your team. And thanks again for being on the show.

Kelly Johnston (30:39):

Thank you. It’s so great joining you today.

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