The sad thing is, more people end up focusing on tax compliance than they do over tax strategy.
Partly because, many don’t know the difference between the two and they don’t like to look at their numbers.
So many entrepreneurs are afraid to look at their numbers because they are afraid they are in the red, and not the black.
Yes it most likely is true that you are in the red if you never look at your numbers. But you could easily change that to black, just by looking at them and creating an actual strategy around your business numbers.
What is tax compliance?
Tax compliance is just making sure you pay your taxes and file your returns by the deadlines.
You follow the rules, but you are always looking back at what has happened in your business.
You aren’t planning for anything to come in your business.
What is a tax strategy?
Tax strategy is planning ahead in your business, whether you plan a budget, a profit plan, a cash flow plan, or even all of the above.
You have a plan for how you are going to bring money into your business and how you are going to spend your money.
You are always saving money ahead of time for tax purposes, instead of waiting until it’s time to file your tax return and finding out how much you owe for taxes.
Your tax strategy is also known as tax planning.
Why does a tax strategy matter?
Many of the entrepreneurs that I work with always complain about time.
They don’t have enough time to focus on the numbers in their business and actually creating a financial plan for their business.
They don’t have enough time to learn all the tax information they need to know to make sure their business is doing everything they need to do properly.
Well, this time that you don’t have enough of, is actually costing you a lot more money than you think when you don’t put a tax strategy or plan in place.
Just being “good enough” and paying your taxes on time, isn’t enough for you or your business.
You are most likely paying more in taxes that you don’t need to pay by not having a strategy in place.
Not only does having a tax strategy in place help you plan ahead, it also saves you money in your business.
As a business owner, you are responsible for a lot more expenses than you realize. As an employee, those expenses automatically come out of your paycheck, so you don’t always have to pay out of your own pocket directly for them. As a business owner, you have to pay directly out of your own pocket.
The more money you have left after taxes, the better off you, and your business, will be.
Tax Planning Helps You Have More Money Available
When you create a tax plan for your business, you actually plan out how much money will be left AFTER taxes are paid.
This means you have already considered all of the deductions that you plan to take in your business and how much money you will owe in taxes before you’ve even made a dime in your business.
Pssssttt...this also helps you create your plan for bringing cash into your business as well!
As a business owner, you get to deduct your expenses, or tax deductions, from your revenue before you figure out how much money is owed for taxes.
This is why planning is so important ahead of time. You need to know what it costs to run your business, how much you’ll pay yourself and how much is due for taxes. That way you can always continue to make more money than you need to keep running your business.
The government loves businesses and gives many tax breaks to businesses.
These tax breaks give businesses more money to invest and continue to grow. And the more a business grows, the more money the government will eventually get from the business.
So they want to give you the tax breaks in the form that of the tax deductions that you do get.
Do you have a tax strategy in place for your business?
So do you have a tax strategy place in your business? Or do you need help getting one set up? Let’s talk!