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You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cash flow, forecasting or mindset.

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The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. Your bookkeeper is not a CFO and confusing the two will cost you money. Ask me how I know. That's where a lot of people think that the way that they handle the financial side of their business, they hire a bookkeeper because usually that's the cheapest hire and they get that bookkeeper in and then they say, here, do all my finances, do all my stuff, like pay the bills, do the QuickBooks and the entries and all that stuff, and I'm going to go do deals and I'll talk to you sometime, maybe next tax year.

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And so they give all their stuff to their bookkeeper, and maybe they might even ask their bookkeeper periodically like, hey, can you send me a report? What do these numbers mean? Can you help me out here or like, why do I not have a bunch of cash stacked up? Because it looks like on the bottom line that we actually have some profit.

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But where is that going? If you ask a bookkeeper, they're usually going to say, good luck. Like, I'm just putting the data in there. I'm giving you what you need from the financial aspect of like knowing where everything is supposed to go inside of QuickBooks and knowing all the different categories and all the different chart of accounts and all that numbers speak.

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But a bookkeeper is not a financial leader. They are usually the day to day, and that's where sometimes people even confuse the CPA as well too, because they're like, well, I have tax strategy. Not just not just filing. They don't just file to the IRS, but maybe they give you some tax strategy and it's like, well, maybe I can ask them about the business too.

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But most CPAs are just going to say, here's how you can save on taxes and here's your tax strategy plan. But they're not going to say, what should you be doing on the day to day? Or when should you hire? Or how much should you do? You have to be able to hire. How much should you put in reserves, or how much should you reinvest in the marketing?

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Or when should you give yourself a raise? When? How can you pay yourself like the day to day business management? So there's a big difference in the roles of people that are in the financial department. Now, sometimes you might get someone in there and they can handle multiple roles, like they could be a bookkeeper, they could be a CPA, maybe they could be a CFO as well.

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But usually you'll have different people. But what's the real difference between those three functions? The bookkeeping, the CPA and the CFO? I like to give an analogy of like a hospital. When you go to the hospital and you're in that bed, first of all, it's a horrible experience. And let's just say the hospital is like the IRS in this case, you've got your bookkeeper who is kind of like the nurse.

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They're checking your chart, right? Every day. They're making sure that they're checking in on you periodically, and they're also making sure the day to day is taken care of. They're not the doctor. They're not going to diagnose you, but they're going to make sure that everything's taken care of on that day to day and that your chart looks healthy.

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So just like a bookkeeper in a business, they're going to make sure the day to day is done, but they're not going to diagnose anything for you. Now, in the hospital, usually in a certain wing of the hospital are the specialists like maybe the surgeon. And maybe you need an arm cut off because that's like what a CPA is.

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They're usually the surgeon, and they're going to tell you how much you owe the IRS, and it's going to cost you an arm and a leg. So they're going to also give you that strategy of like, okay, how do we stay out of the hospital as much maybe and maybe not pay as many as taxes to the IRS.

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So the CPA is really there to help you from that tax perspective. But ultimately, at the end of the day, the CPA and the bookkeeper work in the hospital like they're making sure that they're compliant with the IRS. Then you have a CFO. A CFO is more like a private doctor that does not work for the hospital and tries to keep you out of the hospital as much as possible, but can communicate with the nurse and usually the surgeon better than the patient.

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Like the patient usually has not read the medical books, has not gone to medical school, has not had all this schooling. Where in the financial world you probably have not gone to school for accounting, don't know the bookkeeping, don't know where to point the bookkeeper, don't know the questions to ask the CPA. Whereas CFO comes alongside you and says, I understand both worlds.

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I understand you as the business owner, I understand you as the patient, but I also understand the hospital and what they're looking for as well, too. And we can interpret that. So those are the different functions and why a lot of people mistake. The bookkeeper for the CFO because they think that's the one stop shop. I have a bookkeeper, so they should just be able to answer any question I have, even if it's around my business, my finances, the financial management of my business.

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But a bookkeeper is there literally just to make sure the day to day is not on fire, and to make sure that the day to day is getting input, like into the chart of accounts, like a QuickBooks type system. So making sure your numbers are up to date and that you have access to them. But being able to interpret the numbers, being able to forecast, being able to reinvest, being able to ask different questions, being able to hire, being able to know how much you have in reserves.

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Know how much you could pay yourself. Know how much you need to be able to have for the next tax year. What does financial freedom look like to you? Those are not bookkeeping questions. Those are CFO or financial leadership type questions. Where a CFO is more of a financial leader or coach, they're that private doctor and they're going to diagnose you differently than a bookkeeper, because a bookkeeper is not going to diagnose you at all.

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So that's the big difference between those roles. But at the end of the day, even if you are, let's just say you're small and you're like, there's no way I could hire a CFO. First of all, there are fractional CFOs out there now, and making sure that you can have the option of not hiring like a several hundred thousand dollars a year person, but having access to a high level person for a fraction of the cost.

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But let's just say you're not even ready for that. Let's just say you're ready for bookkeeping. There's number one. Do not go to the bookkeeper looking for financial coaching. Go to the bookkeeper to solve a bookkeeping problem. Like what's the bookkeeping problem? Knowing that every dollar has been recorded inside of a financial system so you could get a profit and loss, a balance sheet and a cash flow statement like that is the role of the bookkeeper.

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Sometimes bookkeepers will be able to help you with paying the bills or uploading them. I would use like a system like Bill. So there's approval processes or there's some layers in between. And like your bookkeeper is not just making those payments for you unless they're on staff and it's someone that you care about and trust like a spouse, that you probably could give them access to that.

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But this is where a bookkeeper is usually going to solve bookkeeping type problems, not business owner problems, where a CPA is going to solve tax problems, there either going to help you to know how much can we save on taxes this year? What could you invest in? What could you do? But then sometimes a CPA, by avoiding a tax problem will create a business problem.

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What do I mean by that? Let's just say you're getting to the end of the year and your CPA says, hey, you should go buy a truck so you pay less in taxes, but then you also have a CFO and you say, hey, my CPA told me to do this. And then the CFO says, you could do this, but you came to us during a cash crunch.

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And like, if you spend this money, you won't have as much in here. How will you sleep at night if you go out and spend $50,000 on a truck right now, even though you might save just a little bit on the tax side, how will you feel on the cash or even on the monthly payments? Because right now you're like at the max of what you could and then you might say, hey, I do not want to spend that money right now because it would cause more stress than me spending a little bit more on the tax side.

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So it's like there's the given the take. I'm not saying that the tax person is always wrong. Sometimes you have the money to be able to go and buy the truck or do the thing, or reinvest in something or buy into a syndication, whatever it might be. But you also have to take into it the business owner side of you and like, where are you right now?

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Where is your cash? If you did reinvest in these things, would you really get the return you're looking for? Or is it just something where you're like, oh, I did what they told me to do, and now I feel better, but I actually feel worse because I have less money in my bank accounts. This is the type of questions you would bring to someone like a CFO.

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If you went to a bookkeeper. With those types of questions, you're going to be like, I don't know, go talk to your accountant again and asking those questions. And then this tax accountant or the CPA is going to be like, well, I don't know. I'm not your CFO. I don't I'm not going to give you financial management advice.

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This is why having someone in your corner to really understand you as the business owner, know your goals, know your tolerance for reserves and understanding what you can handle from the business aspect and from the financial point of view. That can really help you sleep well at night knowing that someone's there, focused on your profitability. Diagnosing the real problems in your business when it comes to the cash and cash flow management and the finances, and just someone that you can trust to be able to say, they have my best interest at heart and they don't work for the IRS, they work for you, the business owner.

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But that's where you're probably leaving a lot of money on the table, because you're asking someone who's doing the 10 to $50 per hour task something where it's like you're asking thousand to $10,000 per hour questions, though, which the 10 to $50 per hour person is not going to be able to answer, or they're going to answer with a $50 per hour answer versus like a CFO who could answer with a thousand $10,000 per hour answer.

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So that way you could actually build a business that you want and go and ask the right people the right questions. But that's the difference between those roles. And I don't want you leaving the money on the table anymore. So don't treat your bookkeeper like a CFO or you're going to leave a lot more. Thanks for spending time with me today.

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If this episode gave you clarity or a new perspective. Be sure to like, subscribe, and comment below if you're ready to apply what we talked about today with real guidance and accountability, visit ProfitREI.com to schedule a free discovery, call with us to create your path to financial clarity and freedom.