The Secret to a Solid Cash Flow Strategy for the New Year

Quick, look alive!

The fourth quarter is here and with it comes some of the most significant decisions of the year regarding your business and its cash flow. Don’t be caught unaware. The fourth quarter is essential for preparing your tax strategy, planning your cash flow and reflecting back on how business has fared in the fiscal year thus far. Many business owners don’t take this important period seriously, though, and they end up surprised when tax season takes a bite out of their cash flow. Don’t let this be you. Get the insight upfront from your cash flow specialist.

So, what’s first? There has never been a better time than now to talk with your CPA about your company’s tax strategy. Rather than waiting until next year to plan and budget, discussing taxes now can save your business from a huge cash flow headache later. When you meet with your CPA to discuss your tax strategy, here are the four questions to ask:

1. What is my estimated tax liability for the current tax year?

The fourth quarter is when you’ll want to reconcile owner distributions and owner W-2 wages to make sure the proper payroll taxes have been accounted for. Understanding this will allow you to set aside money in your cash flow strategy in preparation for tax season.

2. How will the company’s tax return influence my personal tax return?

Make sure your CPA explains how money passes through your company and into your personal returns. If you run a Sub-S Corporation, the business itself is not taxed; only the shareholders. The profits (or losses) from the business are passed through to the owners personal tax return.

3. What strategies can my business implement to reduce my tax liability?

Rather than sending all your profits to Uncle Sam, one way to reduce your tax liability is to invest back into your company. Pay an extra month’s rent, start a 401K or pension plan, or purchase some updated equipment. Know that you will want to be careful of what you pay out though, as these costs will affect your future cash flow. Visit with us to uncover what kinds of spending are appropriate for you and your business. Be aware that retirement and similar plans cannot be done at the last minute come December. Meet with a wealth management company or financial planner early. It’s essential to begin planning now to ensure a healthy cash flow strategy for the future.

4. What is my net profit to revenue ratio?

We advise our clients that their profits should account for about 10% of their annual revenue. If your business is sitting below this amount, you may be in danger of running low on cash in the coming year. In this case, we would not recommend large year-end purchases without a good cash flow strategy to go with the decision to purchase.Again, consulting with the right experts will lead you to a better understanding of your financials and the impact your end of year actions will have on cash flow tomorrow.

The fourth quarter is here, you may have questions about where to start, what to ask and what to do next. Contact our office to learn how to prepare today for cash clarity tomorrow.

Join Debra for her “Dirty Little Secrets of Cash Flow” Seminar!

Gain clarity around the financial activities that affect your cash flow on a daily basis! The seminar will be held on Wednesday, November 12th, from 1-3 pm, and the cost is just $49. Register today!

 

Total Cash Clarity: Yesterday, Today and Tomorrow | 303.835.7992 | Contact Us

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Do you have financial concern over making payroll, managing debt, making purchase decisions, or collecting on outstanding accounts?

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