 ThinkTek Hawaii, civil engagement lives here. Welcome to Adventures in Small Business, a collaboration of the Small Business Administration, Hawaii District Office, and its resource partners, where we showcase the stories of local entrepreneurs and their businesses. Hi, my name is Dennis Kwok, and before we invite our guests, I'd like to talk about National Veteran Small Business Week, which is from November 5th to November 9th. It is really a great week where we celebrate and we do great events for veterans and veteran small businesses. One of the first events we're actually going to do is the Money Moxie class, which will be held on November 9th in the morning, and it will be held at 500 Alamona at the SBA Hawaii District Office. It'll be for like an hour and a half, and we'll invite bankers, the Downtown Uncorked event, which is a salute to our veterans. It's going to be held also on November 9th, and it will be held at 6 o'clock at the YWCA, and you can purchase your tickets by visiting their website at www.minkcenterforbusinessandleadership.org. And we're going to be actually celebrating the veteran owned small businesses and their achievements, and one of the award winners for the 2018 New Veteran Owned Small Business is our guest today, Ms. Kenyatta McCoy. Kenyatta, welcome to the show. Thank you for having me. Yeah, and Kenyatta is the proprietor of my personal CPA and financial planner, LLC. And Kenyatta is also, she does a lot of great work in the community. She does a mentoring for veteran owned small businesses and other businesses alike. So Kenyatta, maybe you can talk a little bit about your personal history and then we'll talk a little bit more about some tips for small business owners, for small business bookkeeping and accounting. Absolutely. Yeah. So my history, I've spent time in the military. I'm currently still involved and heavily involved in the military as my husband is still at their duty and such, and my military service has truly impacted, you know, everything I did thereafter. Spent some time in the corporate sector, and now I am an entrepreneur where I own my own CPA firm. Okay. Did you do bookkeeping or accounting services in the military? I did. I was a finance officer in the military. So I was assisting other service members and such with pay. I did some unique type of activities and such in the military as well, but all surrounding finances. Okay. And did that translate well into you taking on, you know, your own business and the services? Absolutely. Yeah. Absolutely. My time in the military, really that sense of duty to, you know, a bigger purpose than yourself, that really becomes engraved and engraved in your personality and what you are and so forth that leads to selfless service as well as, you know, personal courage. So that sense of duty carried on throughout, you know, once I left the military and now it's an involvement in our community with other small business owners and like. Yeah. And, you know, I like to just say that, you know, Kenyatta has really, really been a very true member of the small business community. She does a lot of outreach. She does a lot of pro bono work working with small businesses and we really do appreciate you and as a mentor in one of our programs as well as a community resource partner for the SBA and the Veteran Small Business Outreach Center. So let's talk about how you came and to start your own business. I mean, when you were separating from the army, did you just say, hey, you know what? I'm going to start my own CPA firm. I mean, how was that process? Absolutely not. Okay. Yeah, it's never like that. I started from the military. I went corporate. Okay. Spent a lot of time working for Fortune 100 companies and such and really was sitting close with CFOs and, and I like doing worldwide accounting for different statues in different countries and so forth. When I came here to Hawaii, I started in 2015, I started to just volunteer. There were so many people in our community saying that they needed assistance and I started to volunteer and I started volunteering at the small business center. So I would do my corporate job from 4 a.m. to noon and then I would volunteer for the rest of the day just helping small business owners and taxpayers alike. And from volunteering, that's when that sense of duty to the community and, you know, just that desire to serve really started to motivate me to then look beyond myself and start my business, start my own CPA firm. And your own CPA, and your CPA firms, could you talk a little bit about the services that my personal CPAs and financial services? Absolutely. Yeah. So at my personal CPA, what really differentiates us from any other CPA firm is that I take that corporate experience and I then help small, small business owners to incorporate it in their day-to-day strategic planning, cash flow management and other activities to drive forward with what their vision is for their company. And so because we get up close and personal with our accountants, it helped them to, you know, see how their operations and what they do so well align with the data and what can the data then tell them as far as to improve their overall profitability. Oh, okay. I see. And, you know, talking about small businesses, obviously you do your own CPA work for your own company. Oh, absolutely. But, you know, a lot of small business owners, they have, when it comes to finances and doing bookkeeping and filing taxes, it's always a different language. Absolutely. And everybody's level of understanding of, you know, laws as well as, you know, local laws as well as federal laws are different. So with that in mind, you know, key things every small business owner should know about bookkeeping as well as accounting. Absolutely. So the key things is to recognize and understand that accounting is the lifeblood of the company. Cash flow is absolutely critical and as well as planning. And if you lack to do any of those things, then, you know, easily, whether you're booming or whether you're in a, you know, ramping phase, then you can ultimately cause, you know, catastrophic impacts to your business if you're not properly planning and implementing, you know, controls and procedures for accounting and bookkeeping and remaining compliance in all things. Okay. And talking about planning, I mean, if you had to give a timeframe of how to plan for a, for the, I mean, do you plan a few months ahead or do you plan a year ahead? What is, I mean, what is, you know, I guess the timeline here? Planning should be done throughout the year. Throughout the year. Absolutely. It is imperative that, you know, for our clients, we sit down multiple times throughout the year to see are we on track to the goals that we set at the beginning of the year? What actions do we need to take in order for us to shift and make sure that we achieve those goals as well as tax planning is very imperative so that we're not overpaying taxes and we're in the best tax position that we can be by the end of the year. So right now, starting in November, we kick off our tax season planning. And for our clients, we're doing forecasting right now to say right now, if we were to file your taxes, what would your position be? And we have 60 days to take any other actions to put us in the best position to maximize our overall tax position and lower our tax liability. Oh, wow. Okay. So tax season actually, actually, I guess it starts today. Absolutely. No, everyone first. Okay. So biggest mistakes, you would say that small business owners make. I mean, you've seen, you know. Absolutely. And I've experienced this myself. Okay. It's a do-it-yourself attitude where we see, you know, different tasks or activities being done and we want to take on the mentality that we can do it ourselves. We know that we specialize in what the specialty of the business is as a business owner of what have you, but because you're a business owner, you're required to wear so many other hats in the business. And then you start to try to venture out and do things yourself. Learning is one of those areas that you don't want to run that risk because the penalties, the fines, and the impact, the financial impacts that can happen if it's done incorrectly can be, again, catastrophic to the business. But just learning that, you know, you have to get to a point where you recognize when to bring on a professional to be a part of your team. And then you have that CEO, CFO type of collaboration that goes forward with your business. And would you recommend that to any small business size? I mean, we're talking about small businesses that have just one person. Would you still recommend that they actually work with the CPA firm and? Absolutely. Absolutely. There, as you mentioned before, we do pro bono services. So even when you don't have the budget, you don't have, it's still imperative and it's so important for us to serve the community. That's why we continue to offer the free services so that, you know, any small business can afford with just your time to come in and get that guidance and assistance. Okay, so biggest mistakes is not looking for help or not asking advisement from the experts. Absolutely. What do you see when you talk to small business owners, the biggest challenges for them in terms of, I guess, you know, financial planning or whether it's accounting services? What do you see as a biggest, you know, challenge for small business owners in this climate? Absolutely. I think the biggest challenge, especially here in Hawaii, is the fact that you have to manage cash flow in a way that, you know, you may have a little bit more flexibility on the mainland and such, but here with some of the tax requirements and so forth, regardless of whether you're, you know, yielding a profit or not, you still have tax liabilities that you have to take care of. So here, cash flow management is absolutely key because ultimately you still have compliance requirements that you have to adhere to and without doing so it can definitely be, you know, a challenge thereafter. So to mitigate some of the risks for cash flow challenges for small business owners, what can they do? Plan. Plan. We're going back to what we were talking about. Planning is essential. Absolutely. You plan and you put timelines around when you have cash outflow happening as well as your cash inflow and you stretch that out to a point where you know that you can hit critical times and make sure that you can plan that cash flow accordingly. Okay. All right. And if you were working with a client, do you recommend a certain kind of tool or software that you work with that you're comfortable with or can they just come in with a notebook and their PNLs and, I mean, you must have seen, you know, the gamut, right? Absolutely. There's always an array of different accounting resources and tools and such. What I encourage small business owners to do is recognize that you're not, you don't want to incorporate something and spend the resources on a system or a tool now for something that's not going to, you know, assist you in the future. Okay. So look for, you know, resources and tools and systems that's, you know, going to help you grow in the future and ultimately you're going to be able to manage that future growth. But if you get something that's just catered to your ramping phase or your beginning time period, then once you start to ramp up and grow, then you have to look at replacing it and things of that nature. So always look ahead, look futuristic and plan to incorporate something that can grow with you. You actually, last time I saw you, we were doing a class called the 2018 tax reform class. Yes. And, you know, you were a great speaker. We had some, we had you and some attorneys, tax attorneys there. And can you kind of, you know, talk a little bit more of the impact that the tax reform is going to have, not only personally, but ask to small businesses as well? Absolutely. So this 2018 Incorporated Tax Reform is the biggest in history. So it's the biggest I've been in this field for going on 20 years now. This is the biggest that we've ever seen. This is the one that's going to impact everybody regardless of who you are. So if you are a taxpayer in the United States, you will be impacted in one way or another. For my small business owners, a critical piece of it is the, what's called a qualified business deduction. And so that qualified business income deduction can be up to 20 percent of your net profit that you can deduct on your taxes. But the key is you want to make sure that you're within the parameters to maximize on that 20 percent. If you fall outside of those parameters, then you're going to limit what that deduction then can be incorporating your tax return. So it's, again, critical that you plan so that you know ahead that, okay, am I getting close to those parameters and if so, what actions do I need to make now so that I can be sure to maximize that 20 percent deduction? That's the planning, right? Absolutely. That is the planning. That is the planning. That's a great example of it. Sure. And could you talk a little bit more about the parameters? I mean, does it depend on the size of the company as well as how you're incorporated? It depends on the type of company, whether your service company or what have your personal service. It also depends on, it's really going to get down to the pass-through business owners and what their taxable income is. The taxable income based on their filing status is what the parameter is set on. And so you want to make sure that there is calculation and forecast done to see where your taxable income can land based on those results and then make those adjustments to be able to maximize on that 20 percent deduction. Right. So, planning is a key? Yes, absolutely. Okay. So, Kenyatta, we're going to take a short break and we'll come back in a few minutes. Wonderful. Thanks. Aloha. My name is Mark Shklav. I am the host of Think Tech Hawaii's Law Across the Sea. Law Across the Sea is on Think Tech Hawaii every other Monday at 11 a.m. Please join me where my guests talk about law topics and ideas and music and Hawaii Ana all across the sea from Hawaii and back again. Aloha. Hey, Stan Energyman here on Think Tech Hawaii and they won't let me do political commentary so I'm stuck doing energy stuff but I really like energy stuff so I'm going to keep on doing it. So, join me every Friday on Stan Energyman at lunchtime, at noon, on my lunch hour. We're going to talk about everything energy, especially if it begins with the word hydrogen. We're going to definitely be talking about it. We'll talk about how we can make Hawaii cleaner, how we can make the world a better place, just basically save the planet. Even Miss America can't even talk about stuff like that anymore. We got it nailed down here. So, we'll see you on Friday at noon with Stan Energyman. Aloha. Welcome back to Adventures in Small Business with our guest, Miss Kenyatta McCoy. So, Kenyatta, we were talking really about the 2018 tax reform and how that affects small businesses. In your opinion, I know there's a lot of moving pieces for different kinds of businesses as well as personal taxpayers. Is this good or is this bad? I know it's a very, very generic question to a very complex problem or solution. So, overall, there are some very good elements to it because this is the first time we're small businesses that are passed through entities, which is defined by SOAP or PRIDER, an LLC, partnership, or an S corporation. These passed through entities having that 20% qualified business income deduction is significant because this is the first time we've seen something like that. It can be huge in tax savings for small business owners. The other component is just as a taxpayer in general, your overall, the tax brackets have changed. And we see about a two and a half percent, two to two and a half percent savings in each bracket versus the last bracket. However, here are the, you know, there's pros and cons to both. So, here are the cons. We no longer have our personal exemptions that, you know, would have reduced our taxable income and such. However, the child tax credit has doubled this, you know, coming into 2018. So there's a lot of pros and cons. It all depends on the combination of your particular tax situation. For a lot of my taxpayers here in Hawaii, some of the other concerns is now there's a limit on, you know, the, when you purchase a home and such and that limit now being for the mortgage is 750,000. So you know, a lot of homes here tend to be well over that 750. So that poses an additional challenge for my taxpayers that itemize their deductions. So for itemization, your state and local taxes are now limited to only $10,000 for married filing joint. And so absolutely, when your higher earnings have, you know, state taxes and such, now we have limitations that combine both your real estate taxes and your state income taxes to only be 10,000 tax deductible. So on our schedule A, there are a lot of changes that's minimizing the deductions, but overall the balance there is that, you know, standard deductions have doubled and, you know, over. So it's a bunch of ins and outs for each of our taxpayers. What we did is we actually took their 2017 data and we applied the 2018 new laws and we showed them an apples to apples comparison on what the bottom line looks like. And that helped them to be able to plan throughout this year to be able to make adjustments as needed based on what their individual household, how the individual household was gonna be impacted. And you know, because you work with small businesses and through pass through entities, that must small business, I guess filings, must bleed a lot into personal. Absolutely. So I mean, do you see, do you get a lot of clients that actually you do their business taxes and their personal taxes? Yes. Is there a natural progression I guess? We have to focus on both because when we're planning and when we're forecasting such, we have to see how the business is performing. And then based on the business performance, what's gonna pass through to that individual taxpayer and then their overall tax position. So we have to take both components to be able to recognize what's gonna be the best tax move and what's gonna put you in the best position to minimize your tax liability. And you know, I wanna kinda talk a little bit more about, you know, you work in the community because, you know, as a, as being resource partners for the VBAC, one of the greatest pleasures I get is actually just, you know, meeting small business owners and assisting in any way I can. And, you know, it's been a great, it's challenging at times, but it's been a great service for me because I really do appreciate working with these small businesses and it's very, very gratifying. Absolutely. Helping businesses. So maybe you can talk a little bit more about your role in the community and what you do, but also maybe talk about some of the success stories that you encountered through your work with small business owners. Absolutely. So like I mentioned before, you know, we provide the free services, the pro bono services to clients so that small business owners so that they can come in and get that guidance and get that assistance. So as they continue to leverage those services through the small business development center, then we're able to start positioning them where they need to go to be able to grow their business. Once they start growing and ramping up and such, then they start to see cash flow impacts and they start to see, you know, where the train is going in the right direction. And at that point, once they see the impacts, they're able to make those adjustments to say, okay, does my budget now afford for me to have monthly accounting services or do we need to continue to ramp up and eventually get there. So a great example is in volunteering at the Small Business Development Center, there was a particular client that came in and they were starting off as a food truck. And so it was very challenging for them to, you know, great concept. The operations were superb and such, but it was very challenging in the accounting arena and so forth for them. So they started working with us and we went in intensely to help them turn it around. And in less than two years, they grew from just that food truck location to now six location and franchising outside into a different country. So it's been tremendous to see how those very strategies and those very tactics that are used in Fortune 500 companies to bring it down to the small business level and see how just successful it makes them. It must be very gratifying to see your client, you know, flourish that much. Absolutely. But you must also see some clients, do you encounter some clients where it's almost impossible for them to get out of the red and do you sometimes encourage them not to continue on with the business? I mean, is there a threshold that you see? So with any venture that you go into, you have to recognize whether you're gonna be, you have milestones or you have goals and if you're not able to pull forward and such, what is your exit plan? So I always say when you go into a venture, you wanna have barriers there to where you have an exit plan just like you had an entrance plan. And the reason being is because at the end of the day, you have to maintain some sort of protection for your personal household and your own personal liabilities. And so with that being said, you absolutely need an exit plan just in case things are not going according to the way that you initially vision. Right, okay. So some advisement to small business owners. How do you know you've chosen the right account? Except for you. I mean, if they were shopping for a CPA, I mean, what kind of questions should they ask or what should they look for? I suggest that you interview, do a face-to-face interview with anyone that you wanna bring in as a business partner that's gonna support your vision and such. And you wanna know how much involvement are they willing to have and how can they help you get to the next level? Because where you're at right now, you got there on your own. And so if you're trying to plan for the future and you wanna advance and get to the next level, you need a team that's gonna be surrounded, surround you to help you catapult to that next level. So with interviewing them, you wanna make sure that you have plenty of this insight on how they're willing to get involved. I say again, when you model your small business after Fortune 500, 100 companies and such, there are two names that are well-known in corporations. You tend to know the CEO's name? Sure. And you tend to know the CFO name. You know that Chief Financial Officer name. Those are the two people, the two brains that really drive that company to the future. And so as the CEO of any small business, you wanna make sure that your accounting team is bringing in those CFO elements to help you elevate your business and not just keep you where you're at. Just doing the books, doing the data entry, doing those elements is not gonna take you to the next level. You need someone to help you really strategize and come out with actionable items to say, this quarter, this is what we need to do to accomplish that goal. And then we go back and look at it and see, okay, did we accomplish it? What tweaks do we need to make? What should we be doing on the ground in order to hit our goals for the data? So it must be challenging for you because this requires a lot of face-to-face time with clients. Absolutely. Yeah, okay. That's a lot of talking and a lot of explaining to do. Absolutely, it does require a lot of face-time with clients. But again, that's what it's about. That's what differentiates us. That's what our duty to serve is all about and it all comes down to selfless service and personal courage. Are you willing to step outside yourself and do what it takes for the benefit of others? And ultimately, everybody gets a sense of satisfaction at the end. That's a great thing. That's a great mission for a company, I think. And we're about to wrap up. Do you find, just one question, do you find some business owners have a hard time opening up? And because finances is a very, very personal topic, do you feel like some business owners are kind of shy of opening up and how do you encourage them to trust and open up to their CPAs or their financial partners? Absolutely. It's a very scary area. It's a very scary event. And there are plenty of small business owners that have been, had unfortunate bad experiences and such. And so where we look at and we try to work with them is we say, you know what? That first year is all about relationship building. It's all about getting to know each other. You understanding us, we understanding you and really building on that relationship. From that relationship, once we set those foundations, everything else will be set on a strong foundation and pillars and so forth. So it's all about relationship building in the beginning, building that trust, building that just overall strategies and so forth. And talk about building. I mean, you've only been in business a couple of years. That's the qualified for the 2018 new small business award winner. So congratulations once again. And we really do appreciate all you do for all the small businesses in our community. And we hope to work together very soon. Absolutely. And I'd like to thank Miss Kenyanya McCoy for being here today. And thank you for joining us for Adventures in Small Business. We hope to see you next week. Thank you.