If this is the question you are facing, or have faced, I challenge you to reevaluate your mindset.
Typically, this question comes because someone is unable to pay the liability due to a lack of funds. And THIS means that your cash flow management system needs an overhaul!
To be clear, you receiving a large tax bill ๐ถ๐ ๐๐ต๐ฒ ๐บ๐ฒ๐ฎ๐๐๐ฟ๐ถ๐ป๐ด ๐๐๐ถ๐ฐ๐ธ ๐ผ๐ป ๐๐ต๐ฒ ๐๐๐ฐ๐ฐ๐ฒ๐๐ ๐ผ๐ณ ๐๐ผ๐๐ฟ ๐ฏ๐๐๐ถ๐ป๐ฒ๐๐; while unveiling the flaws of your cash management system. Let me say that again, you getting a large tax bill ๐๐ the indicator that your business is rockinโ it! If you are not able to pay the taxes on that success, you have been overspending and/or under-saving!
A word of caution! Many business owners get advice to make large purchases to avoid paying Uncle Sam. While ๐๐๐ก๐๐ ๐กโ๐๐ ๐๐๐ฆ ๐๐๐๐ ๐ ๐๐๐ ๐, ๐๐ข๐ ๐ก ๐๐ ๐๐๐ก๐๐ ๐๐ก ๐๐๐๐ ๐๐๐ก. Large purchases do not always mean dollar spent = dollar saved; it can look more like dollar spent = quarter saved, and you would have been better served to pay the tax liability; leaving more money in your pocket! Make sure you carefully talk through any purchases with your CPA, and are aware of the recurring expenses it will generate (i.e., if you purchase a new vehicle you now have annual registrations, monthly insurance, repairs & maintenance, fuelโฆ.)!
I encourage you to take the time NOW, this week, before any tax planning meeting and identify if there are any purchases that are ๐ฐ๐ฟ๐ถ๐๐ถ๐ฐ๐ฎ๐น to your business operation or would, guarantee to increase your revenue AND bottom line. DO NOT list any would like to haves, strictly MUST haves to move the needle. The rest, table for a future year. If you end up with a tax liability, review these potential purchases with your CPA before deciding.
Of an important note, this scenario is exactly why you NEED a Profit Plan. Work with your bookkeeper or CPA on a cash management plan that includes a Profit Plan! If your bookkeeper or CPA do not offer this service, I would consider a few things:
Find a new provider.
* If you have someone that strictly is data in and data out and isnโt walking you through business planning, I will argue you are being underserved and there is someone out there that will provide those same services while coaching you on the best decisions for your business!
Research! Research! Research!
* One resource I have personally had success with is Profit First. I started by reading the book and was able to implement in my business quickly. The book provides a great starting place for someone who needs a DIY solution until you are able to engage professional help. You are welcome to download the first 2 chapters here:ย https://springsteadsolutions.ck.page/profitfirstbook. (If you like what you can read, you can find the entire book on Amazon or Audible.)
Get educated.
* I will be launching a digital course to walk you through step-by-step setting up a Profit Plan in February 2022. If you are interested, get on the notification list here: https://springsteadsolutions.ck.page/digitalcoursesignup
Lastly, with all of the craziness of 2020, donโt leave your tax discussions until the last minute giving you more craziness. Tax laws change each year, you want to make sure you have a clear picture of what to expect and what actions will bring you closer to ensure that you are set up to be Permanently Profitable!. Schedule your meeting with your Tax Preparer tomorrow!
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