Your Taxes Impact Your Cash Forecasting and Your Mental Health
Use your accountant to help you estimate your business taxes, then break your remittance down into monthly -or weekly- sums. Here’s why:
Hi everyone Barb here with Dryrun, cashflow forecast and management software out of Edmonton, Alberta, Canada.
Today I want to talk about everybody’s favourite topic taxes.
So I was doing a little googling because of course I have a lot of friends in the industry who are deep in tax hell.
OK so it comes and goes like a fever.
All right and then they recover. They go lay in the sun for a month and then you know they’re ready to kick at the can again.
So I feel for them.
I think they should offer cash flow forecasting and advisory services but that’s a peripheral issue to my point today.
So, I hear two things.
I hear a lot of business owner say I don’t need cash for forecasting and then literally in the next breath they say something like well not literally but often quite soon after the first statement they say something along the lines of:
Oh my goodness, my taxes are going to take me down this year, they almost took me last year, this year they are going to get me, what should I do?
For fun I googled it.
OK and I see a couple things.
So, I see 404 million relevant search results for help paying business taxes on Google.
And also I see huge spikes in interest over time, quarterly and the biggest spike of all, every year, annually.
OK so I can’t quite believe given my area of expertise that people…I’m just looking fo my window, there we go…
That people can hold these two ideas in opposition in their brain.
My suggestion to you is go to your accountant today and get an estimate… I mean like it’s fairly timely if you go in the spring time in any given year right.
And not saying that your corporate year end is at this time, but none the less, why not and ask what your estimated tax impact is for next year. Your accountant will be able to calculate that for you.
OK and then my suggestion to you is instead of breaking it up into quarterly estimated payments to remit.
First, if you don’t remit you should remit.
Second, you might need to get a little more granular.
So, those estimated tax payments have an impact on your cashflow.
Therefore, it’s completely relevant to divide that total annual figure into 12 or even 52 if you need to and provisionals funds on a cash flow forecast.
So that you can sleep better at night knowing that you don’t have a thousands of dollars bill approaching. Lurking around the corner of your business at a really inopportune time.
So, yes is it forced savings? Yes. Are estimates incorrect? Sometimes. Will you owe the government in advance and they’ll have to pay you back? Sure.
But you know what?
Your peace of mind and the smooth running of your business and the avoidance of that ebb and flow in your cash flow forecast are all major factors toward the health of your business and your mental health that you should consider.
So, go to your accountant today, ask about your estimated tax impact. Ask them to get out their 10 key and calculate it by month or even by week and bang that into your cashflow forecast not hard.
Have a great day.