Is tax planning enough?
The character Hannibal Smith from the 1980’s TV show the “A-Team” would often use the phrase “I love it when a plan comes together”. It’s great when a plan comes together, especially if the plan increases the value of a business and reduces tax liabilities. However, kicking off a single perspective plan can often have an unforeseen impact on the rest of the business and needs a different perspective to be complete. Yes, I’m saying that tax planning is a single perspective plan it only focuses on how to improve your tax position without taking into consideration how such moves will impact the future cash position of the business.
An unbiased external CPA
In a previous post, I spoke about the Hierarchy of Financial Management Needs and identified the need to have an external 3rd party CPA who works very closely with a business’s financial planning team. Even a team of one in small businesses. This provides healthy collaboration as well as compliance and oversight. A close relationship between the business’s financial planning team and the CPA results in a tax plan that is integrated with the business’s annual financial plan or budget.
The whole 360°
A tax plan without a good financial plan can bring about some very bad outcomes. Poor communications resulting in lost deductions and poorly timed payments made for tax purposes that led to a cash shortfall are just two drivers of unnecessary stress for a business owner. The integration of the tax plan and the financial plan gives business owners the ability to see the whole 360 degree picture and significantly reduce financial crisis and stress.
Three questions that need to be asked
- Does your business have a tax plan?
- Does your business have a financial plan?
- Are the plans integrated and able to provide timely and complete information to support good decisions?
We can help integrate your tax plan with your financial plan
The Shared Finance Center provides outsourced accounting, bookkeeping and CFO support to small business owners and in doing so we heavily focus on maximizing cash flow. If you think that this post would be helpful to anyone you know, please pass it along. Also please follow our blog for regular tips to grow your business.