CFO Services | Business Owners Should Get A Financial Plan
Planning is so important to the success of businesses, and entrepreneurs should hire the right CFO services achieve that. However, many business owners think all they need for plan to succeed is a business plan.
While business plans are very beneficial helping entrepreneurs succeed. Not all business plans are created the same. Which means not all business plans have a financial plan were tax plan included.
When way that an entrepreneur can tell if their accountant and CFO services have created an effective tax plan or a financial plan for their business. Would be to look at how they are taking money out of their business.
If the entrepreneur is taking 100% salary, or hundred percent dividends in their business. This typically is an indication that they do not have a well thought out tax plan.
The reason why, is because the most efficient tax strategy typically has combination of some salary and some dividends. But what that mix is, depends on many different circumstances.
There accountant should figure out what percentage of each a business owner should be getting. By looking at the businesses circumstances. As well as their own personal circumstances. To create the right number.
If business owners realize that they do not have an effective tax planning strategy. They may think that this is something that they do not need right away in their business.
Especially as they look at the cost it takes to create a financial plan and tax strategy. And they think that they will save that money early on in their business. And get that important planning later on in their business.
However, this is not the best strategy to implement. Especially because 15% of all entrepreneurs fail in the first year of owning their business. And 30% of entrepreneurs fail by their second year of business ownership.
Therefore, if business owners were able to get an effective tax strategy created. It may be able to help them avoid going out of business in the first or second year of business ownership.
Because they have be able to save a significant amount of money, which would help them stay in business longer. Especially since the second most common reason why entrepreneurs in Canada fail. Is because they ran out of money.
Business owners also need to take into consideration. That they do not have to be making a lot of money in order to make a tax plan make financial sense.
And in fact, businesses only have to be making fifty thousand dollars in gross income every single year. In order to benefit from a financial plan and tax strategy.
By getting it financial plans done with their CFO services first. Can help entrepreneurs significantly save money, and use that saved money in their business.
If entrepreneurs are able to understand how important it is to get a tax plan and financial plan done right away. Even if they have to pay for it right away in their business. It is going to be more cost effective to do that. Then it would be to pay the additional taxes in their business.
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It is externally important for business owners to understand the importance of financial plans and tax strategies says CFO services. Especially since so many entrepreneurs in Canada fail in the first and second years of owning a business.
However, business owners also need to understand that the best tax strategy. Will need to take their personal financial circumstances into consideration. As well as their business financial circumstances.
The reason why, is because the most effective tax strategy. Will minimize both corporate and personal taxes. And so their CFO services should sit down with them and understand all of the financial circumstances of their personal life.
This includes understanding how many streams of income they are getting in their family. Whether this is other people bringing in a paycheck. Or if they are getting income from investments, or things like investment property.
The next thing that CFO services will take into consideration. Will be how much the family has in debt at the moment. This should take into consideration credit cards, and all other consumer debt.
After that, they will look at the bills that an entrepreneur must pay in their personal life. From utility bills, phone and Internet, two things like mortgage and car payments.
They will also consider the number of dependents that are living in the home as well. So that the accountant can figure out the best tax minimizing strategies.
As well as understand how much money the business owner needs to draw from their corporation. In order to provide for their family.
It is also very important for business owners to understand. That if they want to truly minimize taxes for their business. That they should sit down with their CFO services on a yearly basis.
And go over all this information again. The reason why, is because in order to end up with the best tax strategy. Accountants need to take all of this information into consideration at the beginning of every year.
Because as the entrepreneurs personal circumstances and business circumstances change. So can the tax strategy and financial plan. To help an entrepreneur continually pay minimal amounts of taxes personally and in their business.
If an entrepreneur uses last year’s tax strategy. They might not realize that that strategy does not work. Until they get to the end of their current here. At which time they might have already paid to much in taxes.
Therefore, business owners not only need to go through this exercise once. But they need to do so on a regular basis. To ensure that they are always ending up with the minimal amount of tax payments.
So that they can keep that money where it belongs. Which is in the business, so that they can use that money to help them not only overcome common obstacles.
The use that money to help them run their business. So that they can avoid the second most common reason for failure in Canada. Which is running out of money in their business.