Nobody teaches most entrepreneurs what to do once the money actually starts coming in.
You learn how to get clients. You learn how to make sales. But then suddenly you’re making more money, your taxes are bigger, your expenses are growing, and you’re not entirely sure how much you should be saving, spending, or investing.
In this episode, Kendra and financial coach Emily Bowie get into the practical side of building wealth as an entrepreneur. They talk about managing cash flow, preparing for taxes, investing, retirement, lifestyle creeping, and why making more money isn’t the same thing as becoming wealthy.
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In This Episode:
- The #1 place your cash leaks first (hint: you look at it every day and still get it wrong)
- The “hidden” cost most people forget to price for that eats your entire margin
- Why being an S-corp too soon can quietly kill your business
- The tax rule that lets you rent your own house to yourself, tax-free 🏡
- The one number on your balance sheet that tells you if money is leaking
Resources mentioned:
5 Cash Leaks & 5 Missed Tax Deductions: https://www.thorneadvisors.com/cashleaks
About Emily Bowie:
Emily Bowie is a Cash Flow Strategist with 15+ years of experience, including her time as an audit manager in Big Four accounting. She’s known for bringing calm, clarity, and structure to financial conversations that often feel stressful or avoided. Outside of Thorne Advisors, Emily leads her church’s financial ministry, is a mom to three young kids, and enjoys a good DIY project almost as much as a well-organized set of financials.
Connect with Emily:
Instagram: https://www.instagram.com/thorneadvisors
https://www.thorneadvisors.com/
Leave the podcast a 5-star review: https://ratethispodcast.com/wealthy
Why You’re Making Money But Not Keeping It: How to Find the Hidden Cash Leaks in Your Business
You crossed a big milestone. Maybe you’re closing in on $80K, maybe you just tipped over six figures, and on paper you’re crushing it. The sales are coming in. The revenue looks good. And then payday rolls around, you go to actually pay yourself, and you’re staring at your bank account thinking, wait, where did it all go?
If that’s you, you are not bad at business. You are not bad with money. You just have cash leaking out of places nobody ever taught you to look. And in this episode of Wealthy AF, I sat down with Emily Bowie of Thorne Advisors to map out exactly where that money goes and how to plug the holes so that “I’m making money” and “I’m keeping money” finally start to mean the same thing.
This one is for the practitioner, the coach, the service provider who is great at the thing they do and never signed up to become an accountant along the way. We’re going to talk about why your pricing is probably leaking cash, how to run an expense audit that actually saves you money, how to read your own books without your eyes glazing over, when a tax structure change starts making sense, and the single mindset shift that changes everything. Let’s get into it.
The Real Reason Your Revenue Doesn’t Match Your Bank Account
Here’s the uncomfortable truth Emily opened with: it is incredibly common to hit a good revenue number, be generating sales, and then go to pay yourself and find there’s just not that much there. The money is coming in. So why isn’t it staying?
The first place to start is having good books. Not because bookkeeping is glamorous, but because your books are the map that shows you where the cash is actually leaking. As Emily put it, “with books you can do a ton of things which then identify where the cash is leaking.” Without them, you’re guessing. You feel busy and profitable, but you can’t see the gap between what you sold and what you got to keep, so you can’t fix it.
And most business owners are only looking at their books after everything has already happened, if they’re looking at all. That’s a problem, because by the time the numbers show up, you’ve already made the decisions. You can’t un-spend what’s gone. So step one is not some fancy strategy. Step one is simply having accurate, current books so you can see reality instead of vibes.
The number one place that cash tends to leak? Pricing. Emily said she can’t count how many times a business owner has told her “I just don’t know where all the money goes,” and then they sit down, do a price analysis, and the lightbulb goes on. So that’s where we started digging.
Your Pricing Is Probably Leaking Cash (Here’s Why)
Pricing is emotional. I said it in the episode and Emily agreed completely: for my audience, pricing is a touchy, loaded, emotionally charged topic. Most people price based on where they feel comfortable, or based on what they see other people charging, or based on some internal story about their worth. What almost nobody does is actually crunch the numbers.
And that makes sense, because most of us did not get into business to be a fabulous business person. We got into it because we’re really good at the thing we do and we want to make an impact. Then one day we look up and realize we’ve been quietly drafted into being an accountant, and we have to make sure our prices can actually withstand the cost of delivering the service. Nobody warned us about that part.
Direct Costs vs Indirect Costs
Here’s the distinction that changes how you price. Emily broke costs into two buckets.
Direct costs are anything tied directly to delivering the service. If you send a client a lab test, that’s a direct cost. If you ship them a supplement, if you pay a Stripe fee on their payment, if you pay someone to counsel them on their results, those are direct. You only incur them because you made the sale. These are the easy ones because they’re obvious and they scale with each client.
Indirect costs are the sneaky ones. That Zoom link you send every client costs you every single month whether you make a sale or not. Your email platform that fires off all the reminders costs you whether or not you booked anyone. These expenses aren’t tied to a specific sale, and that is exactly why people forget them. As Emily said, “that’s what normally where your overhead lives, is in all those expenses that aren’t directly related. And most people don’t ever really think about that when they’re creating their price.”
So most business owners account for the direct costs, feel like they’ve done the math, and completely miss the overhead that’s quietly eating their margin.
The Overhead Percentage Nobody Calculates
Okay, we’re about to get a little mathy, but stay with me because this is the part that actually moves the needle.
Pull up your profit and loss statement, sometimes called your income statement. It shows your top line revenue, then subtracts your cost of goods sold (your direct expenses), then subtracts your additional expenses (your overhead). Take that overhead number and put it in relation to your revenue.
Emily’s example: say you have $50 of other expenses and you generated $100 of revenue. Divide 50 by 100 and you get 50 percent. That’s the slice of every dollar that goes just to keeping the lights on. Now you build your price like this: the price of the service, minus the direct costs you know are tied to it, minus that percentage of revenue that you pay every single time you sell just to run the business in general.
When people skip that last step, this is exactly what happens. You sell something for $100. You look at your cost of goods sold and figure you’ve got about $80 left. Then you check your bank account and there’s $30. Where did the other $50 go? It went to the cost of running the business, the piece you never priced for. That’s the leak, and it’s usually hiding in plain sight on your P&L.
The Subscription Trap: Run a Quarterly Expense Audit
Let’s talk about those indirect costs, because subscriptions are absolutely wild and they add up faster than anyone wants to admit. It is so easy to let them get out of control and forget what you’re even paying for.
Emily’s rule of thumb is an expense audit at least once a year at the bare minimum, but ideally quarterly. Here’s why quarterly matters. You know exactly how this goes: you sign up for a free trial, it starts charging, it’s only 15 bucks so you shrug, you might use it. Then there’s another one you might use someday. And those little charges pile up quietly in the background. If you catch them after the first quarter instead of letting them run for a full year, you’re in a dramatically better position.
Software and Memberships Are Usually the Biggest Culprits
Software subscriptions are almost always a major offender. So are memberships, especially those group coaching programs everybody joins and then never uses, or the ones you got into at a founder price so now you’re keeping it “just in case.” I raised my hand on that one in the episode. Emily did too. We both know the rules and it is still hard to let go.
So make it a regular practice. Every quarter, print out your expenses and go line by line. Can I get rid of this? Is this a personal expense that snuck onto the business card? Get it out of there. And then get honest about the memberships. When’s the last time you actually attended that group coaching call? Did you get value when you did? If yes, amazing, that’s a real return on investment and it’s worth paying for. But if you’ve been in a group for three years and shown up twice, you have to ask whether that money is doing anything for you. That same money could go toward private coaching that actually fits how you work.
I’ll be honest, this one hit home for me. Emily said something I related to hard: in a group she can perform just well enough to look like she’s fine, when what she actually needs is someone on a one-on-one call telling her, you’re phoning it in, you’re not doing what you could really be doing here. Sometimes the more expensive-looking option is the one that actually gets you the result.
Let AI Do the Boring Part
One thing that genuinely helped me: I dumped all my subscriptions into an AI tool and asked, is there something cheaper here, can I combine any of these, do I even need this? It flagged that I was paying double on my Google Workspace and didn’t need to be. Anyone who’s ever wandered into their Google dashboard knows that feeling of “what is happening here and why am I paying for it.” AI is great for exactly this kind of cleanup, because it’s very common to be paying for two tools that do the same thing.
And while you’re in there, Emily added one more strategic question: should you be paying annually to save cash, or monthly because your cash flow is tight right now? The audit isn’t just about cutting. It’s about making informed, intentional decisions instead of letting everything roll on autopilot.
Read Your Books Like an Owner, Not a Spectator
A lot of us outsource the bookkeeping, and that’s smart. I have a bookkeeper and an accountant and I do not want to be doing that myself. But outsourcing the work is not the same as ignoring the numbers. So how should you actually engage with your books?
First, timing. Your books should be done by around the 10th to the 15th of the following month. Any later and, as Emily put it, “you’re already two weeks into a bad decision if there was one.” Timely books mean you can course-correct while it still matters.
Second, don’t just stare at this month in isolation. Look across the last few months so you can spot trends. That month-over-month view is where you catch the free trial that quietly turned into a charge, or the moment you realize you’re spending a suspicious amount on “office expenses” and need to ask what that even is.
The One Number to Check on Your Balance Sheet
Your bookkeeper probably sends you a balance sheet, and if you’re anything like most of us, it goes straight into the “I have no idea what to do with this” pile. Emily gave us the shortcut. On that balance sheet, look at your cash. If your cash varies a lot from your net income number, that’s your signal to start asking questions.
Here’s the simple version for a sole proprietor, which in Canada is roughly the equivalent of being a sole prop or unincorporated (versus being incorporated, where things separate out). As a sole prop you pay yourself through distributions, just moving money from the business account to your personal account. So the money you took out, plus what’s sitting in your cash account, should roughly equal your net income. If it doesn’t, cash is leaking somewhere. It might be a timing issue, like buying everything on a credit card so the expense hits this month but the cash doesn’t leave until next month. It could be a few different things. But the mismatch is your flag that something’s being missed and it’s worth a closer look.
If you’re set up as an S-corp and running yourself on payroll, it looks a little different because your W-2 is already captured in your profit and loss. In that case you’re comparing net income against cash plus any additional distributions you took above and beyond your regular paycheck.
And when net income and cash are way out of sync, Emily’s very first question is blunt: how in debt are you? A big gap is often a sign you’re leaning on a line of credit or credit cards in a way you’re not paying off regularly. From there it opens the door to everything else, the expense audit, the pricing review, all the levers that true you up. Because knowledge is power. If you know there’s a discrepancy, the money problem is already there. You just haven’t found what it is yet.
Tax Strategies That Actually Keep More in Your Pocket
Nobody loves handing money to the government. I would much rather keep my money so I can grow my money, and I know you feel the same. So let’s talk strategy. This section leans US-specific, but the principles travel.
When an S-Corp Election Starts Making Sense
The big one is knowing when it’s time to make the S-corp election. Emily’s guidance: look at your net income, meaning revenue minus all your expenses, both cost of goods sold and overhead. When that net income lands somewhere around $75K to $100K, it’s usually worth seriously considering an S-corp transition. Rules vary by state, and some states tax entities differently enough that it doesn’t make sense, which is exactly why you talk to an expert before pulling the trigger.
Now, plenty of people online will tell you to convert at $40K to $60K of net income. Emily and her firm disagree, because they care about your cash flow. They’ve watched business owners convert too soon, watched it choke their cash flow, and then watched them have to un-become an S-corp just to keep the business alive. Think about the opportunity cost there, all the growth that didn’t happen because the cash wasn’t available. Being an S-corp can become a vanity metric, an “I’ve made it” badge, but it genuinely doesn’t make sense until your cash flow can handle it, because you have to prepay things like payroll expense that a sole prop never deals with.
One thing a lot of people don’t know: you can do a late S-corp election and backdate it to the beginning of the year. This is another place a professional earns their fee, because they know how to file the documents and run the back payroll so you catch up on the payroll taxes you would have owed if you’d been an S-corp all along.
The Levers You Unlock as an S-Corp
The conversion itself saves you money by moving your income into different taxable buckets. But the real magic is the additional levers you get that a sole prop simply doesn’t have.
One is an accountable plan, where you reimburse yourself for personal expenses that are legitimately relevant to the business. You need proper documentation and you need to track it through the year, but it’s a completely legitimate way to bring tax-free dollars into your household above and beyond payroll and owner distributions.
Another, and this one is delightfully specific, is the Augusta Rule. It comes from Augusta, Georgia, where homeowners rent out their houses during the Masters golf tournament and didn’t want to pay taxes on that income. The result is a rule where business owners can rent their own home back to themselves and create tax-free income into the household. You can only do it 14 days a year, you need documentation of the reasonable local rental rate, and it has to be for a genuine business purpose. But it’s all sitting right there in the tax code. Most people just don’t know it exists, and the whole game is awareness.
Tax Strategy vs Tax Preparation (They’re Not the Same Person)
This distinction matters more than almost anything else in this section. Tax preparation is when you’ve done your books all year, you hand everything to your CPA or EA, and they report compliantly to the government. You did what you were supposed to, and you either owe or you don’t. A tax strategist, on the other hand, actually helps you figure out what you can do based on your specific situation before the year is over.
And here’s the kicker: they’re often not the same person. A lot of tax preparers don’t know the tax code well enough, or don’t have the experience, to help you strategize. So ask directly. When you talk to whoever does your taxes, ask “are you a tax strategist? Can I come to you to figure out how to get my taxes down?” They’ll say yes, no, or you should probably talk to someone else. All three answers are useful.
One quick red flag to keep in your back pocket. If your preparer tells you to write off a mountain of stuff and then asks you to sign the return saying you prepared it when they clearly did, that’s a sign you might be writing off too much. You don’t have to be the tax expert, that’s why you hire one, but you should have enough of a handle to recognize when something feels off. The tax code is there for you to use. You just need the right people on your team who know how to use it correctly, so you can skip the crazy stuff that lands people in trouble down the road.
The Mindset Shift That Changes Everything
Before we wrapped, I asked Emily the big one. When it comes to building wealth, and building generational wealth, is there a mindset shift women especially need? Because money is so emotionally charged, and so many of us carry this “I’m bad at math” story. I hate that story, because it’s just not true.
Emily’s answer, hands down: knowledge is power, and the numbers are just data. Not a verdict on your worth. Not proof that you’re bad at this. Just data on what has happened and what could happen next. When you stop making the numbers mean something about you and start treating them as one part of the picture, everything gets lighter. And to be clear, the numbers don’t tell the whole story. If you have gorgeous margins and a miserable life, that’s not the win either. The goal is to keep numbers in their rightful place in your decision-making.
But to do that, you actually have to look at them. So here’s Emily’s practical prescription, and I’m taking this advice myself: have a money Monday moment. Sit down each week, look at your books, look at what you generated, glance at the key numbers that help you decide what to do that week. Start normalizing looking at your money instead of avoiding it until year-end. Because awareness alone changes your behavior almost overnight.
And then something shifts. You get to say, I’m not bad with numbers, I just didn’t know what the numbers were. Once you see that you can do this, your eyes open, and all these opportunities that were sitting right in front of you the whole time suddenly come into focus. You just couldn’t see them yet.
Your Next Step
If you take one thing from this episode, let it be this: the gap between what you make and what you keep is not a character flaw, it’s a set of leaks you can actually find and fix. Get your books current. Rebuild your pricing to include overhead, not just direct costs. Run a quarterly expense audit and be ruthless about it. Check your cash against your net income. And when your numbers say you’re ready, get a real tax strategist in your corner.
About Emily Bowie
Emily Bowie is a Cash Flow Strategist with 15+ years of experience, including her time as an audit manager in Big Four accounting. She’s known for bringing calm, clarity, and structure to financial conversations that often feel stressful or avoided. Outside of Thorne Advisors, Emily leads her church’s financial ministry, is a mom to three young kids, and enjoys a good DIY project almost as much as a well-organized set of financials.
Connect with Emily:
Instagram: https://www.instagram.com/thorneadvisors
https://www.thorneadvisors.com/
5 Cash Leaks & 5 Missed Tax Deductions: https://www.thorneadvisors.com/cashleaks
