Regardless of how well your business is doing, the tax levied on your revenue probably feels like an extra expense, and it’s often treated this way. Properly managed, however, your tax responsibilities can be turned into an opportunity for growth and stability. Adjusting your attitude towards and treatment of your taxes and adopting a proactive tax strategy can increase cash flow for your business.
Instead of thinking about taxes at the end of the fiscal year, it’s in your company’s best interest to create a proactive tax strategy while there’s still plenty of time to implement it.
In this article, we will outline the benefits of creating a proactive tax plan early that will improve your cash flow, build more resilience into your business model, and allow you to pay less tax at the end of the year.
❓What Is Cash Flow?
When you’re running a business, whether small or large, cash flow management is vital to your success. Your cash flow is how much money is available to your business at a given time and how it is best used to maintain operations.
The net income your business receives from sales or services, less expenses, is taxable. So, while you will most likely put that money back into operating your business, you must always put a percentage aside to pay an appropriate amount of tax. So what is an appropriate amount? That is where ongoing advisory can help.
A large tax bill at the end of the year has the potential to cripple your business’s cash flow if not managed properly. Applying forecasting strategies will ensure that you’ll have the funds you need when taxes are due.
💵 Save for Future Costs
When your business is going strong and gushing cash, using that extra cash can be tempting to invest, increase salaries, and embrace growth strategies. You want to be visionary when deploying cash flow based on your business and personal financial goals.
Most businesses have a cyclical nature, which means they are more profitable at certain times than others. This requires critical cash flow forecasting so you don’t overspend during strong cash months and ensure you have enough for leaner periods (plus taxes owed).
If you want to strengthen your balance sheet and use cash-flow forecasting for planning growth and achieving financial goals, it’s advisable to regularly update your forecast in real-time. Additionally, you want to set aside savings in an account to pay your estimated taxes.
💡Understand Tax Obligations
It’s important to understand the taxes you need to pay before it comes time to pay them. The tax system in the USA regarding sales tax, for instance, permits each state to set its own rates for particular items. It is also regional, meaning that areas of a state have the autonomy to set their own rates, too. Self-employment tax, personal property tax, excise tax, franchise tax, and more comprise the taxes you may be subject to paying.
To make matters more difficult, tax laws change from year to year. Research your state and region’s rules regarding tax payments and employ a Certified Public Accountant (CPA) if necessary; a CPA can ensure your books are correct, your tax is paid on time, and will save you money where legally possible.
Consulting with a CPA throughout the year will ensure that your strategic cash-flow forecast and tax strategy plan is on-target for year-end. As you make investments, face new challenges, and set new goals, your CPA will make sure that you aren’t missing out on possible deductions and other opportunities to deliver the most savings legally possible.
How Can A CPA Help?
You can get in touch with a Certified Public Accountant (CPA) for help with tax strategizing. Outsourcing these responsibilities can help alleviate inexperience in these subjects, allowing you to focus on things that make you great.
The right CPA can help create an ongoing cash-flow forecast and proactive tax strategy that helps you maximize savings and reach your financial goals.
Want to optimize your cash flow and tax planning? Contact us at Insogna CPA today to learn more about how our team approach can help your business achieve its financial goals and stay ahead in 2024. Let’s make your tax plan work for you!