Answers to Your Questions on My P&L
A few weeks back, I shared my firm’s 2025 P&L details. You can catch up here, if you missed it.
I also asked for you to hit reply for any and all questions you had. I got lots of email back (thanks! I love hearing from you!). Here are some of the most common questions I received and my answers…
On “Total Owner Benefit”…
I love the idea of total owner benefit because my s corp clients get confused about their P&L since the net income at year end is not the total the business made (because they get a W2 on top of it). Do you have a good way to show that to your clients in report form?
Yes! I usually only show it on an annual basis to my highest tier clients, but I use Fathom's custom KPIs to calculate Total Owner Benefit. Fathom will auto-calculate anything based on ledger account balances once you program the formula. Once you have the custom KPI set up, you can use it in your client's monthly reporting. It’s take a few minutes to set up, but then it’s automatic forever after that.
On my reasonable compensation…
I know you said you had a reasonable comp analysis to back it up, but can you breakdown $44k in salary vs $65k in distributions? That makes me nervous.
We’re accountants. We’re bred to be skeptical, right? BTW…that can be a good thing. It’s why [most of] our clients trust us.
My $44K in salary is based on the “Market Approach” method for a full-time CPA salary in Idaho, whittled down to a part-time proration of only 15 hours per week, which I could prove with lots of time tracking data. I could probably get it down lower with the Cost / “Many Hats” Approach, but I don't want to push my luck toooo much. I get nervous too. Plus, the $44K salary allows for the employER side of my 401k contribution I want on my solo 401k.
If reasonable compensation makes you nervous, for you or your clients, I felt immensely better after I took a CPE course a couple years back on the 3 acceptable valuation methods the IRS points to - none of which were a 60/40 split or the $60K salary rule.
On the Sankey…
I'm TOTALLY interested in the Sankey - do you use this with Fathom for your clients? Or just for your own biz? Does Fathom spit this out?
Yes, I love it too. No, I don’t use it consistently with my clients yet. I've only used it with one client once upon a time. The feedback was good, but I never rolled it out beyond that. There's nothing in Fathom that does this, so you'd have to do it in an Excel Add-in and then paste into your reporting.
Check out SankeyArt or SankeyDiagram if you want to start playing around. But beware…you’ll get sucked in, lost in the pretty colors, and forget you have client work to do. You’ve been warned.
There were also a TON of questions on my non-US based bookkeeping contractor (How did I find her? Does she contact the client directly? What about security?), but that’s an email for another week…see ya next week?
Cheers,
Erica
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