Cashflow Firewall

00:00 Hi everyone, my name is Lyndon Smith and welcome to the business growth factor. Today we're going to be discussing a cash flow firewall, the business growth factor. Here we we have conversations about building better businesses and I'm joined on the call here together with Josh Lionhurst and we're going to really dig into the logic around creating a a cash flow firewall. A little bit of a a quick introduction to myself and our business. I got a company called Expansive EDGE. We work with small tomed mediumsiz businesses uh that serve the trades or construction industries and we help them extract and document their

00:34 processes so that they can organize and scale their their companies without all the chaos. Josh, I'm going to hand over to you for a quick intro and then we can dive straight into the or the conversation for today. Yeah, thanks Lyndon. I'm Josh Lionhorse. I'm a principal at Bepoint CPA, Baseoint Accounting and Finance. Uh we're a uh CPA firm in Canada here. uh also primarily working with the construction and trades uh side of things and uh we focus on maximizing profitability, optimizing cash flow along with all the other fun accountanting type stuff. So

01:08 um so yeah, you said the word cash flow in your intro there. That sounds pretty uh pretty interesting uh to me and is uh seems to be like one of those like pain points with most business owners at some point, right? is the cash flow side of things more more than at some point. I would say we're always looking at cash flow, right? Yeah. Yeah. 100%. So, um you use the word uh firewall there, Lynon, what what are you kind of thinking there with um with that term? Yeah. So cash flow firewall um you

01:42 know I think a lot of the times companies they have challenges with cash flow and and the conversation we're going to have today is how can we create a firewall to protect that cash flow um from you know like being eroded because like you said earlier a lot of companies bump up into cash flow issues. So how do we you know what what mechanisms can we put in place to protect that or just to to create a bit of a structure where it works you know where we can monitor that cash flow more effectively. Um so one I mean we can dig into this a little bit

02:16 more in the conversation but um one of the you like the points are you know is to to separate your operations account into like different types of accounts. So if we had to lean into the profit first approach um by Mike is it Mike Mallowitz? Mike Mallowitz. Yeah. Yeah. He's he's um he's got you know some some methodologies around this but effectively the way I see it and I think you know you can speak to it is um you you want to have your your check account, your operations account. That's the typical account that every business

02:47 would have. That's where revenue flows into. And then you would have a tax account. And and a lot of companies don't set this up. This could simply just be a savings account where you're portioning some of your tax funds um your tax liabilities uh into so that you know when your your taxes are due you're not uh looking at your your operations account and being like oh I got to you know fork out 20 30 50 $100,000 to pay to the you know tax authorities and in our case it would be the CRA and um you know what impact does that have on your

03:19 operations and cash flow in in that respect and then on the other side of of it is the profit account, you know. So once you've um you know got that revenue coming in, how much of that money is actually allocated as profit for your business after you've covered all your expenses, you know, paid your team, you know, materials, all that, you know, typical um cost of goods sold, everything that you'll have on that uh you know, profit and loss statement. Um portion those funds into a profit account that you can you can divvy out or um draw from at the end of the year

03:52 essentially. So, um, yeah, what are your thoughts, you know, just going into this conversation? Yeah, for sure. It's it's, um, yeah, so the book Profit First, a really good book, uh, by Mike Mallowitz, as you say. Um, what what that book does is it recognizes the reality of, uh, just the fact that people make a lot of business decisions like in their business based on the bank balance, right? And it's normal. I mean, as a business owner, you need to hop into your bank and make sure you have sufficient funds to, you know, pay your liabilities, pay your vendors, right? pay your trades um on time, right? Just

04:26 want to throw that in there just because especially in the construction industry, it could be uh a bit of a friction point often in terms of payment timing. Um but that all flows into cash flow, right? And so business owners understandably and from a responsibility level absolutely are always in their bank accounts looking at what the balance is. Um what ends up happening is when you just have one account and this is very normal for lots of people. So, for anyone listening, if you only have one operating account, like you're you're not unique in that. Most business owners just kind of have one or two accounts

04:58 set up, don't have a strategy around this. Um, so what the book Profit First kind of does is it looks at that reality of like, okay, so business owners looking in their bank, maybe there's like $250,000 sitting in there. You've got like a, you know, smallish uh business there, small mediumsiz business, got like say 250K sitting in there as a cash base. They're like, "Okay, we're doing pretty good, right? maybe we can uh buy this piece of equipment that we were thinking about buying. Um and but without realizing okay within that 250k we've got a certain percentage that's uh you know related to growing tax liabilities

05:32 whether that's like sales tax or income tax. Uh there's also a portion of that that's going to be like payroll within the next two weeks, right? Portion of that you that you probably as an owner should take as profit. And so the reality is, and this is super common for a lot of business owners, myself included, I've done this. Um, you take your profit last, right? It's just normal. You're like, "Okay, so I got to pay my my team. I have to pay for the equipment. We got to pay our vendors. Um, I guess I won't, you know, I'll pay myself salary, but as far as like any

06:04 additional profits, I'll forego that because I want to get this equipment or whatever it might be." And so what the profit first methodology does is it uh takes a percentage of what's coming in from your revenue and it kind of siphons it off. It it's sort of like the old school envelope budgeting method if if ever you've done that, right? You've got the the the food, you know, envelope and the rent envelope and the the vehicle envelope and you put cash in each of them and that's what it is, right? And so then you know, okay, I have enough to cover my budget for each of these items. Um what this method does, it kind of

06:38 instead of using envelopes, you're using bank accounts. And so as money comes in, you siphon it off using um target allocation percentages they call them or taps. Uh so it's specified percentage. So you're like, okay, if I have 100 thou or $100,000 coming in, say for this invoice, um I'm going to take 15% for possible taxes, you know, maybe 5% for profit. you move them into these specific accounts and then that way you know you have the cash there uh for when the time comes to pay those things out.

07:09 That's sort of the idea behind it. Again, trying to address the reality of the fact that people uh make decisions from their bank balances instead of uh their financials. Yeah, I absolutely love the analogy of um you know your your envelopes. You know, it takes me back you know to we're that old Lyndon. We are that old. Giving away my age here. Gosh. Well, I never did it. I I just watched my parents do it, right? No, I heard I heard that was a thing. That's what it was. My grandparents, right? That's

07:42 right. Yeah. Yeah. So, um you maybe before we dive deeper into this conversation, um maybe just an understanding or just a more of a conversation around why cash flow is uh like the lifeblood of of a business. You know, there's that that that great old saying, you know, revenue is vanity, profit is sanity, and cash flow is king. Um, you know, why is cash flow the the lifeblood of a business? Yeah, I mean that that's that's a good question for sure. like and this we we use that

08:14 saying all the time like we actually use it probably overuse it here at Baspoint but uh because it's so critical because you know I could fairly easily probably start a company that would be doing about $10 million of revenue by the end of the year simply by selling stuff at a loss right it'd be such a good deal that I would have sales coming in the door like crazy because it's such a good deal I'm operating at a loss I'll go under because I'm not profitable however maybe I'm having great profits that's great but if I'm not collecting the cash or the cash flow is bad even if you're a

08:48 very profitable company um you will have you'll struggle and we you know in the construction industry in particular you see this um you know for especially say like commercial construction you have retainage or like lean holdbacks that's held off of cash that that that's coming in right sometimes you have the classic like deficiency hold backs that are also held off of payments um then there's the payment timing issue, right? Quite often, uh, you know, moving like for any contractors that move say from like residential into commercial, they go from like almost paid immediately or

09:20 within like 14 to 20 days, all of a sudden they're getting paid like 30 to 45, sometimes 60 plus days. Um, that all impacts cash. So maybe the numbers look good on paper. It's like, hey, we're quite profitable in this job. Um, but if the cash isn't coming in for 60 days, but in the intervening time, you have to pay your your your team, right? you have to pay your trades like any trades that you have. Know temp labor is pretty common on construction sites those usually you have to have that paid within 30 days. Um you know if you're an electrical or mechanical contractor

09:53 quite often uh even milwork for example you have a lot of material costs and so that has to often be paid you know within 30 45 days. So you're not getting paid for 60. Now you start to realize, whoa, we might have cash constraints here because we have these pretty significant obligations of cash outflow. But if the cash inflow is not matching that or preceding that, then you're in a cash crunch. So that's sort of the idea behind I suppose that whole cash is king idea. Yeah, 100%. Um so so with with that in mind you know like just pres I

10:29 mean what happens to a business when they have when they have a cash flow crunch? I mean you I mean your your your your focus now now starts shifting from doing excellent work you know um working with uh with your like leading your team to now you're firefighting because you haven't you haven't predicted right you haven't forecasted this you haven't planned for this. Now, you've got a a cash flow issue that uh that you need to deal. So, you've got to go take I mean, how do you typically deal with this? You got to go get um loans or you got to get funding to kind of bridge that gap which

11:04 ends up costing your business money. So, that starts eroding your profits and um it really it really puts you into, you know, Yeah. Yeah. with your subtrades, with your suppliers, with um you know, anybody that you're working with, anybody that you might owe money to and and your employees. I mean, if you can't if you can't make payroll at the end of the month or, you know, um bi-weekly, however that looks for your company, um you know, puts a lot of pressure on the on the owners and the leadership of the the business as well. And uh yeah, it it

11:38 it uh it really shifts the focus from, you know, being proactive and and leading your your your jobs and your projects to, hey, we've got a problem here. We're we're in we're we're in deep trouble. Yeah, for sure. And for anyone who's been in uh the business for, you know, a good length of time, you've probably experienced it in one way or another where maybe you've worked for a company or owned a company that's either made those phone calls, right? calling trades being like, "Hey, uh, do you mind if we hold off on payment for a week? We're just like in a bit of a tight

12:10 tough tight spot, uh, cash spot. We're just waiting for payment on whatever this is, right?" Um, it does happen. I've I've seen it. Uh, it's it's not it's it it's not that it doesn't happen. So, you know, again, anyone listening, if that's if you've had to do that, you're not alone in that. Um, but yeah, quite often, you know, proactive cash planning is kind of key on that, right? Right? And so if you can, I mean, this is diverging a little bit into like cash flow forecasting, but if you can anticipate what your cash flow is going to be looking like in the next 3 months, you'll at least know, okay, we're

12:43 actually hitting a bit of a cliff, you know, at this point, so you can proactively go deal with that. Um because, you know, from a a negotiation perspective with lenders, you always have the strongest leg to stand on when you don't need it, right? If all of a sudden you need it, you know, they're going to ask for your firstborn as collateral. It's like, you know, they have all the leverage at that point. Um, and the cost that's getting into planning is is is expensive, right? Yeah. Yeah. Also, rates are a lot you won't have much negotiating room on the the interest rate, right? So, who's your hoop? Yeah. Yeah. So, yeah. So, then

13:17 getting back to what you're saying then, Lynon, like these these tax accounts, it's or not tax accounts, but like these specific accounts in the bank, it's a good way to proactively then move cash around. Um, you know, we were talking about this a little bit before we hopped on here. Uh, if you again, if you look at your bank balance, you're like, "Oh, okay. We've got say 250K in there. We're doing pretty good." Uh but if you actually siphon off um the cash into their respective accounts, right, to make sure you can pay your uh payroll, so you have like an operating account uh for like your payroll, your trades and

13:48 stuff, but then move some cash in for taxes because especially with growing companies, you're going to have a an increasing tax liability over time, right? I mean, companies have to pay their installments over the course of the year. um and you know based on their their tax from the prior year. But if you're growing then you're going to have a difference between that. So you're going to have a growing tax liability as well as you know say like your your value ad taxes like uh HST GST. Um so if you if you siphon those off and then

14:21 also move some into profit then you're left with a a smaller amount right and then you have a bit more of a reality check. you're like, "Okay, this is actually how much cash is sitting in here for operations. Do we actually have enough to buy that say like this equipment that we wanted to buy?" Sorry, it looks like you want to say something. Go ahead. There's also like a mindset shift around it, right? So like your your mindset around, you know, like oh, we've got all this money versus, you know, like this is the reality like you're saying and um you know, this is what we're really dealing with. So you can see then, oh, we're actually not as in in great shape

14:55 as what we thought we were. uh we need to start filling that pipeline. We need to start um you know increasing our margins on on projects or just uh being a little bit more intentional about how we're doing things so that we can create better efficiencies through throughout um our operations. Um yeah, for sure. Yeah. Because if you're looking at it and it's like now trimmed down quite a bit because you've moved out your profit, you moved out the tax liabilities, uh you've accounted for the fact that you've got payroll coming up in the next week or two. Um, and you're like, "Okay, so we can't now buy these

15:29 things maybe that that we were thinking about buying." Quite often what happens with the the owner, it's like, "Oh, okay. Well, maybe I'll just not take a profit this month, right? Still pay myself, not take profit." But really, you know, as a business, you're like, "Okay, well, theoretically, if you want to be able to get these things, you should be profitable enough to do it." So then, like you say, it's a mindset change. You're like, "Okay, the reality is we don't have this cash available. Why is that? Are we profitable enough? Right? Do we need to look at our pricing? Do we need to look at our margins? Maybe we're not running efficiently, right? Maybe we need to

16:01 collect quicker. Maybe we need to pay uh longer, right? Some people, they'll pay their their trades and their their vendors really quick, which is nice to make sure you don't forget. Uh but if you're paying them quicker than you need to, that actually uh you know is not good for your cash flow either, right? So, uh, that's something else to consider. Yeah, you got to take a look at, uh, when you're receiving funds and and when they're moving out of your business. Absolutely agree with that. And then just see what makes the most

16:32 sense because you're not a you're not there to bankroll someone else's project, right? It's your your company's project, but I mean, you're also not there to bankroll your your client's project. So, um, you got to take a look at when they they're paying you and and how long, you know, you have before you can pay your your vendor reasonably. Exactly. That's funny, Lynon. That terminology is like thrown around often in this industry. It's like, I'm not your bank, right? Like, you know, you hear that a lot when uh especially when it comes to like the the large GC uh subtrade type relationships, right?

17:04 Sometimes it can get a little bit gross how sometimes that might be abused a little bit where payments are stretched out for a long time. Um but yeah, you hear that quite a bit unfortunately. Good. So, so Josh, just looking at like smaller companies uh that are kind of in the trades, maybe like a two to5 million um company, they do do you anticipate that those types of businesses would have a controller or someone who could manage the admin or administer these different bank accounts, move those funds around? Who's typically responsible? What does that look like? What does the administration look like

17:37 when when actually having these multiple bank accounts? Is it a lot to manage? Uh, I wonder if we can maybe just lean into that a little here. Yeah, that's I mean that's a really good question and I'm going to put my accountant hat on and just say it depends which is usually our first response to things. Um, it really does depend because let's take uh so to quick answer to your question usually a company that's like two to five million topline revenue doesn't have controller like it's quite often the uh owner that's still kind of running the finances on that end. uh you

18:10 know we do at Baspoint we have like you know virtual controller CFO services that are like a fraction of the cost of having a full-time so you still get that functionality within there. Um but uh yeah I mean you typically won't see it at that size company but getting to like the question about like the the mechanics of how to manage something like that you know that it depends on the nature of the business. Like say you're um say you have a Miller company and you just have like a few large projects on the go at any given time, right? Or say like mechanical electrical

18:43 company or something like well any of the trade scopes really like if you're focused on bigger projects, you'll have lower volume and so your money coming into the bank, it will be fewer deposits but larger, right? So then managing something like that would be less cumbersome because it's not high volume. If you're like uh plumbing service, right, like residential plumbing service, and you're doing like uh like service calls constantly, you have high volume of transactions coming in. Um and so something like this could be a little

19:16 bit more cumbersome. And so maybe, you know, the management of that is less based on, okay, cash came in, let's move it out, and maybe it's a weekly allocation process instead. Uh because there's always tradeoffs to these things, right? It's like, okay, it's good to be able to manage your money in this kind of way or your cash. Um, but you also don't want to be spending all your time doing it, right? Like, you want it to work for you. Uh, and this is where, you know, I've seen clients with like a ton of bank accounts doing profit first methodology and it's like, okay,

19:50 like if you're kind of not using it well, then maybe you need to to shift it a little bit and trim it down. And so what what I've I've seen, you know, over the years, I think what hap what works best is an operations account, a tax account, and then a profit account. And then the tax account usually that's kind of you're moving money through there typically on a monthly basis because, you know, in Canada you've got GST, HST returns often monthly if not like quarterly at at the least. You know, if smaller company is annual, but uh usually there's installments. So money

20:22 is moving out of there fairly quickly. That could be like a savings account, right? Yeah. Set up an extra savings account. U but then as far as the profit goes, if that's going to sit for a bit, um you know, you take it out quarterly if you like. I think a profit first they recommend, you know, quarterly allocations in the same way say like a a publicly traded company would issue dividends to shareholders. You know, try to get into that cadence. But, you know, if you set up like a GIC account or something like that, at least you're getting some some decent return by the cash that's sitting there. Interest earning some interest on it. Yeah. Yeah.

20:54 And and in terms of like a profit account, um are there other options that you could consider? So how I have it is that uh your your operations account would be your typical check account. You obviously have your credit cards that you'd uh your company credit cards that you'd settle um monthly, however frequently that happens. Um and then your your your tax account would be a savings account. Um something really basic. These things shouldn't cost your business money. And and I think the biggest thing here is that you you don't

21:26 want to create unnecessary unnecessary administration, but you do want to have a handle on your cash flow. Yeah. Um and then on the uh profit side of things, is there are there other options to consider? I mean, you mentioned GIC. Um I've seen companies invest in other um you know, other investments, short-term investments, and and get really great returns in that. Yeah. So that I mean this is where I would say this is not formal investment advice so don't take it as such but um my thought is it it would depend on the risk

22:01 tolerance of the owner because that is that pool that that cash that's sitting there for profit is yours right like that's set aside for your profit and so uh if your risk tolerance is high and you're okay potentially losing capital on it like the actual principle um you then then investments might be something to consider. Uh, you know, the reason I mentioned GIC is, you know, typically when we're having these conversations with clients, it's like a GIC is going to get generally there's a weird period over the last couple years where this

22:34 changed a little bit, but generally GAC is going to get you better interest than like uh most savings accounts, right? Uh so if it's a savings account is sitting there for a year, then that's like wasted money, right? I mean, you're you're kind of losing money at that point with inflation. So, um, yeah, as far as, you know, GIC's versus investments, that would be a risk tolerance, uh, question because with the GIC, the capital is protected, right? You're not you're not going to have uh valuation changes of the equities that you're holding, and so you're not going to lose money. Whereas, if you put it into equities, like the equities market

23:08 and investments, um, then there's that risk, right, that all of a sudden whatever you're invested in tanks, it's like, well, there goes my profit, right? So, um, And what would it look like? I mean, uh, and this could be probably another conversation, but to to leverage that profit account or the money that gets portioned to that profit account, um, to build up an asset portfolio for the owner or the the company. Yeah, that's a good question, Lyndon. And um I mean this starts diving into investment management which uh might warrant like

23:41 another podcast for sure, but uh there's things to consider as far as um tax implications within a corporation, especially in Canada. There's some uh t some disincentives to having um investments within a corp. Now, you know, there's there's times where it makes sense and there's ways to kind of uh work with that, but there are implications to consider there. Uh and as far as how it also um in doing that, you know, it may impact your small business deduction, which may impact your corporate tax rate. Uh also, if you're thinking about selling your

24:14 business, especially in Canada, if you're thinking about utilizing the lifetime capital gains exemption, which is a a great way to minimize taxes on the sale of a a corporation that you hold. uh if you have a lot of passive assets in the company, like assets that aren't actually for the purpose of your operating business, it may actually disqualify you from being able to claim that. So, there's things that need to be considered in all of that as far as building up an investment portfolio. You might be I mean, this is getting into technical tax planning, so I'm I'm hesitant to say what you might want to

24:47 think about or or not as far as like setting up whole codes or or trust or whatever, but there's ways to Yeah. I I would say when it when you're thinking about building up an investment portfolio that would maybe be separate from like even the profit allocation. I mean for the purposes of our conversation here, you want to make sure you're taking profit out of your operating account so at least you're going you're you'll be taking profit from the company um and not inadvertently spending it uh you know on stuff that is necessary for the business. there's always justification

25:19 for getting equipment or buying this new software or whatever it might be. Um, but then it often comes and this gets back to your your term about like the firewall, right? It often comes at the expense of inadvertently taking cash that you had initially allocated for uh yourself as the owner. All right. Excellent. Um, yeah, I'm just thinking uh just to kind of start wrapping up here. Um, you know, so we we we prefaced this uh this this conversation with uh you building a a cash flow firewall and um the idea of um

25:54 segmenting your your your bank accounts. So having an operations, tax account and a profit account. I mean you could create more um depending on you know if you've got the capacity and and what your business structure looks like, what your jobs look like. you maybe you've got uh jobs that you just want to allocate in one one account. Um but effectively you you just want to have those a minim at minimum those three accounts doesn't matter what the nature of your business is. Um you know you have your operations tax and profit account. Now um just want to lean into

26:27 uh that tax account one more time before we we start wrapping up here. Um what's a good way to to provision or like yeah pro like how do you provision for the tax that needs to go in there? So you know you're charging your clients GST um you know in some cases PST HST whatever taxes uh you know your province or country use in South Africa it's it's VA that value added tax. Yeah, like that's like the global term like if you use that term most like finance

27:00 people like I know what that is whereas you say GST although GST is also used in other countries that that actual tax name but sorry keep going I digress. Pretty easy to identify um you know that amount that needs to be moved into your tax account. What about the uh provisional tax that you're you're you know drawing out of each project there? How do you how do you do that? Like what's the best practice? Do you have any recommendations on how much to take out as a as a percentage or you know is is that a deeper question? Yeah, that's a good question. So, uh

27:33 with percentages, you know, using the profit first methodology, there's that whole idea of um target allocation percentages, right? So, uh like the taps. So, you have a percentage. So for 100 bucks comes in the bank, you take a percentage for profit, percentage for tax, percentage for uh operations. And so um as far as planning or provisioning for tax obligations, I mean, you know, say say you're a construction company in BC, right? You're looking at 5% and even

28:05 Alberta. So most of our clients are kind of like western uh Canada here. um you're looking at like a 5% uh GST amount, right? So, you know, $100 of revenue, you've got five bucks of uh GST on top of that. Um so, if you wanted to be super conservative and make sure you're never going to run into like a tax obligation, cash constraint, then for every $100, like when you get your invoice payment of 105 bucks, put five bucks into your tax account right off the bat. However, the reality is we also have expenses on which we also pay GST,

28:39 right? And so, you know, maybe instead of 5%, you you shift over uh 3% or something because with the GST that you pay on your expenses will offset the amount of GST you have to remit to the CRA in that case. So, that would cover the value ad tax or GST uh your sales tax, right? Just to think of what that percentage might be offset by what you're paying on purchases. Uh but then you also have your corporate tax, right? And so that's going to be based on your profitability. And so, uh, getting to your question about like, you know, if you're looking at how much profit's

29:10 coming out of the jobs, think of what your target profit margin would be. So, if you're like, okay, we want to be like operating at like 20% gross margin, uh, like in construction is pretty common target to to try to aim for. Um, depending again on the scope. There's some scopes that are way better, some that are not so great relative to that. But um if that's your target, you're like, "Okay, so 20%, say we have a project that's a million dollars, so we got about $200,000 profit anticipated out of that. Uh you know, if the corporate tax rate in BC is 11%, right? Maybe you need to anticipate 11% coming

29:44 off of that with the profit." And so it's uh it comes down to what your anticipated profit percentage is. Um and then what your anticipated tax percentage is and then siphon that off into there. Uh I would highly recommend for anyone wanting to do this, just have a chat with your accountant and just be like, "Hey, what should I I plan for this?" Because it would take them 10 minutes to just do a little quick spreadsheet and then you'll know, oh, okay, this percentage, right? Well, I think I think the the one thing that that uh that you know really came to

30:16 light for me while you were sharing there um or while you're chatting about that is you know like a budget. You have a budget for every job that you're doing. I mean you're going to put an estimate together. Um you're going to put your numbers together. You're going to submit your proposals. That's kind of your budget for for the job and that's your targets. Now, when you're when you receive those funds, you you kind of have an idea of like how much money you're going to put into your profit account, right? Yeah. Yeah. And then based on that, you can you can um you know, put that corporate tax amount 9 10

30:49 11% where depends what it is wherever you are. Into that uh that tax account. Yeah. So that recognizing just real quickly too like recognizing that 11% or whatever the the provincial corporate tax rate is quick caveat to that is once you hit five in Canada once you hit $500,000 of taxable income now your corporate tax rate jumps up because you've now gone past that small business deduction but um with that percentage what I'm going to say to that again um you oh I lost my train of thought on that sorry Landon

31:23 um if it comes back to me I I'll mention Um, yes, that's what I was going to say. Sorry. Is you're paying installments throughout the year as well, right? So, say you did $250,000 of like taxable income last fiscal year, you're going to be paying installments on that. So, if you are anticipating $500,000 of taxable income this year, uh the only difference is going to be $250,000 now that you're not covering with installments. And so it might not be 11% of all your profit because you're already paying installments to the CRA over the course

31:56 of the year. It's that differential. So that's why it's pertinent for growing and scaling uh companies to be aware of that. Okay. Excellent. Josh, uh we got to wrap up here. Uh so just to make sure we're on uh on time. All right. Any sort of key takeaways that you just want to leave our listeners with? Yeah, I I think um you know these things can become over complicated and they can become cumbersome and so try to find a system that works for you. I think that's why you know we've both kind of talked about this three accounts is good, right? You can try to go like the

32:28 whole uh methodology as far as profit first goes. Um there's multiple accounts to set up there in addition. Um but if you set up like an operating account which is just a regular checking uh set up a savings maybe an additional savings account to start so you don't have to worry about the whole GIC setup or whatever. So you've got three accounts. That should keep it pretty uh pretty straightforward. Not very cumbersome. Uh if you have high volume of transactions, don't try to make these allocations with every cash inflow, right? Maybe do it on a weekly basis. You want it to work well

33:01 for you and not become an entirely new project in and of itself. But the whole goal is to get you thinking about your cash in a way that prioritizes making sure you're taking your profit. uh because you're the business owner, right? You pay yourself a salary to do what it is that you do in the business, but as the business owner, you should also be rewarded for the profits because it's your risk and your time and your blood, sweat, and tears that you put into it. And so mechanisms like this really help making sure you take out a profit. Yeah. And I think like what you

33:34 said there, it's it's your risk. You know, everybody puts their blood, sweat, and tears in um probably the owner more than anybody else. No one's ever going to work as hard as the owner does. Yeah. Yeah. But yeah, it's their risk, right? And and that's really, you know, what they're in it for is the that right there. Yeah. Well, otherwise it's a hobby, right? Yeah. Awesome. Um I'm going to wrap us up over there. Thanks everybody for listening and um stay tuned. We've got a couple more episodes that are going to be speaking about uh profitability and and

34:06 cash flow. Um I think the next one we were going to dive into gross and net margin and we're going to have a conversation around what um what that looks like. So uh stay tuned and we'll uh look forward to sharing some more information with you and having conversations about building better businesses. Awesome. Thanks everyone.