Daniel Litvin is a California CPA with an MBA from the University of Southern California. During Business School, he “tested a concept of a fundamentally different approach to servicing entrepreneurs and business owners atypical to how public accounting firms worked with their clients”. Daniel is now the CEO of Lalea & Black (L&B) public accounting firm and will be sharing with us in this interview, the opportunities from L&B.
What is Lalea & Black and what is the story behind the business?
Lalea & Black is named after my Grandparents. Our family emigrated from Hungary in 1985 and I wanted a lasting memory of the sacrifices they made to bring us to the United States. It started as a concept I developed in business school during the entrepreneurial case studies I worked on. I had the intention of working in a very specific section of finance and if I didn’t get the exact post-grad job I wanted, I decided I was going into business for myself. I had enough savings to pay for rent, food and other basic needs and gave myself 12 months to see if my concept could take a foothold.
What do you do exactly at Lalea & Black and what makes you unique?
L&B is public accounting firm that behaves as an extension of our clients’ businesses. Using modern tools, our process and the interactive workflows we implement, we are able to perform and manage the day-to-day accounting back office tasks that a traditional internal accounting department would perform. We then couple that with managing local/county/federal tax compliance, income tax planning and preparation, creating a seamless process that would typically require multiple professional services providers. This allows to not only head-off potential issues from developing into big problems, but also allows to have multiple points of contact with our clients monthly and sometimes weekly as opposed to speaking with them a few times per year. We build a trusting relationship with the goal of creating a seamless accounting and tax management process that ultimately allows the client to focus more of their limited time on core business matters.
What problems does Lalea & Black solve and how do you solve these problems?
The primary problem we solve is what we call “time recovery” with efficient financial outlays. Most business owners lose tremendous amounts of time to the lack of an efficient reporting system. Even the at the most basic level, post-fact bookkeeping is required in order to have accurate tax planning and compliance with certain local/state/federal requirements. A perfect example is something as simple as 1099 reporting. Without accurate accounting, 1099 compliance cannot be properly managed. Not filing a 1099 has grave penalties beyond the one-time fee. Backup withholding are also assess meaning that the business could be responsible for the taxes the recipient owes regardless if the recipient paid the tax or not. We identify the cyclical items any business will need to deal with annually and automate as much of the process as possible. The owners therefore “recover” their time from being wasted in revenue neutral or revenue negative elements of their business and focus them on revenue positive competencies.
Please tell us more about your accounting system, how does it work?
Based on our experience, we focus on off the shelf cloud systems and integrate them with other tools that provide efficiency, transparency, and near real-time accounting. Less what we do is about proprietary software and more about process, integration and workflow. For example, we have the ability to integrate complete payable systems that allow business owners to never cut a check, see every dollar spent in real time and have complete approval power over payment processing from their cell phone. This allows them to process anything, anytime and from just about anywhere including vacation. We try to be as paperless as possible not only making things easily accessible, but greener as positive side effect.
Who are your major customers at Lalea & Black and can you share any success stories with us?
Our customers vary drastically. They range from entrepreneurs such fashion designers, songwriter/performers, attorney groups and physicians to medium-sized production companies, visual effects designers, retail stores and manufacturers/distributors.
One of our larger clients had decided to sell on Amazon with Amazon doing fulfillment on their behalf. What they didn’t realize, given their e-commerce sales reach nearly all 50 states and potentially beyond the US, was the massive state-by-state sales/income tax exposure they now inherited as Amazon instantly gave them Nexus in every state in which Amazon had a Warehouse. Had we not been working on their systems in real time, their tax prep team may not have been aware of this until several months had passed creating a compliance clean-up nightmare. We almost immediately implemented systems that extracted their sales tax data from their e-commerce platform and remitted filings and payments automatically to each state. Given exposure to 20+ States, the penalties for not filing and paying the related sales taxes timely potentially over a 7-month period would have aggregated to more than what we charge annually.
Lalea & Black is a specialist in business management & financial planning, what advice do you have for startup founders in 2019?
From personally observing potentially successful companies completely derail their opportunities, startups need to be very clear on what their obligations are to their local, state and federal agencies.
Launching your dreams into a business venture can be scary, exhilarating and at times a wild roller coaster ride. Understanding that there needs to be a balance between obligations, creativity and growth is critical. Governments can lien against cash and assets at worst and at minimum, inundate you with non-compliance letters that will take away focus from the fun part. There are extremely cost-effective ways to address the not-so-fun part of business, which ultimately end up being less expensive than having to clean up a mess.
Lalea & Black offers excellent tax planning & preparation services, please tell us how to best manage taxes?
The tax code is vast and often not black and white. Managing taxes comes down to the most fundamental concept in this process; PLANNING. Being able to plan and forecast results in order to maximize the benefits within the tax code is critical to preserving perhaps the most significant results in any business; its retained earnings. The more we retain, the more cost-effective operations can be as less outside capital or debt will be needed to facilitate growth. If this process becomes reactive, the flexibility that tax planning can offer would not be available post-fact.
Do you have any other pertinent information you feel would be of value to our readers?
The final bit I’d like to discuss is what a graduate school professor described as a market-based approach. Always understand what are true core competencies of your business. These competencies typically result in revenue positive activities. For any function that is revenue neutral or revenue negative, assess if the market is able to perform the function more competently and cost effectively than you would internally. There may be times that it is important to keep a revenue neutral activity in-house especially if it directly relates to a core function. Nevertheless, in today’s connected world, businesses have the opportunity to cost-effectively utilize expertise in ways they may not have been able to in the past.
For more information, visit the Lalea & Black website: https://laleablack.com/.