O𝐮𝐭 𝐨𝐟 𝐭𝐡𝐞 M𝐨𝐮𝐭𝐡𝐬 𝐨𝐟 B𝐮𝐬𝐢𝐧𝐞𝐬𝐬 B𝐰𝐧𝐞𝐫𝐬 𝐭𝐡𝐢𝐬 Q𝐮𝐞𝐬𝐭𝐢𝐨𝐧 C𝐨𝐦𝐞𝐬!
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 𝗶𝘀 𝘁𝗵𝗲 𝗺𝗲𝗮𝘀𝘂𝗿𝗶𝗻𝗴 𝘀𝘁𝗶𝗰𝗸 𝗼𝗻 𝘁𝗵𝗲 𝘀𝘂𝗰𝗰𝗲𝘀𝘀 𝗼𝗳 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀; while unveiling the flaws of your cash management system. Let me say that again, you getting a large tax bill 𝐈𝐒 the indicator that your business is rockin’ 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 hear advice to make large purchases to avoid paying Uncle Sam. Sometimes that advice makes sense. Just as often, it doesn’t. Big purchases don’t automatically mean dollar spent equals dollar saved. More often, dollar spent equals quarter saved. In many cases, you would keep more money by simply paying the tax.
Before you buy, talk through every major purchase with your CPA and fully understand the long-term costs it creates. For example, a new vehicle also brings annual registration, monthly insurance, repairs and maintenance, and fuel.
Take time NOW, this week, before any tax planning meeting, to identify purchases that are truly critical to your business or guaranteed to increase both revenue and your bottom line. Leave off “nice-to-haves.” List only MUST-haves that move the needle. Table everything else for a future year. If you do end up with a tax liability, review these potential purchases with your CPA before making a final decision.
Most importantly, this is exactly why you need a Profit Plan. Partner with your bookkeeper or CPA to create a cash management system that includes profit built in. If your current bookkeeper or CPA does not offer this service, it may be time to explore other options.
Find a new provider.
If you have someone that strictly is data in and data out and isn’t 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!
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: 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, don’t 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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