CFO Services | Why Financial Plans Should Not Cost Extra
One mistake that many entrepreneurs often make according to CFO services. Is thinking that their accountant charges for financial and tax planning. So they do not want to spare the expense on this document.
In fact, since entrepreneurs are often trying to save a lot of money. Particularly within their first year of business. Some of the things that they cut the expense on should not be cut.
A great example of one of these things is a financial plan. And many entrepreneurs make the assumption that they do not need to waste money here. Because a great financial and tax plan will not be necessary. Until they start making hundreds of thousands or even millions of dollars.
However, this is not true. A business owner only has to be making fifty thousand dollars a year. In order to make financial sense. That a business owner would save more in taxes. Then they would on their financial plan.
Since the threshold is actually so low says CFO services. Even Solo entrepreneurs can benefit from a great financial and tax plan with their accountant.
However, since many accountants charge extra for tax and financial plans. This makes it an extremely difficult decision. For new entrepreneurs to want to pay additional money.
What is more important to note. Is that a lot of these accounting firms do not provide a price upfront. Because they will charge an hourly rate for their accountants to figure out the financial and tax plan.
So now, brand-new entrepreneurs are being asked to pay thousands of extra dollars. But not told exactly how much that is going to be.
This is why so many entrepreneurs think that it is better to avoid paying an unknown fee. And that it is probably not going to be beneficial until they can easily afford that anyway.
Many entrepreneurs also think that just by hiring an accountant that they are getting tax planning in that. According to CFO services. Business owners can apply this rudimentary test. To find out if their accountant has implemented some tax plans with them or not.
If a business owner is getting paid 100% salary, or 100% dividends. They typically do not have an efficient tax plan.
An efficient tax strategy. Typically requires some combination of salary and dividends. With the mix of the two depending on the entrepreneurs own personal and business circumstances.
In fact, their accountant should take all of that into consideration in order to figure out what the best mix of salary and dividends a business owner should be getting paid. But if an entrepreneur finds that their accountant is directing them to take either 100% salary, or hundred percent dividends.
A business owner might want to find a different accountant. One who will implement financial and tax plans. And one who will do so at no additional cost. Because that is really the best way to ensure that business owners are running their business effectively and minimizing the taxes that they pay.
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There are so many entrepreneurs that are making critical mistakes financially in their business says CFO services. In fact, many business owners are making such critical mistakes in their first year of business.
That it is costing them not only financially. But costing them their business as well. According to an industry Canada survey. 50% of all entrepreneurs will fail in their small business endeavour within five years.
When asked why, 29% of these failed businesses. Said that running out of money was the reason why their business was not successful.
Therefore, many business owners are making critical errors. Such as paying too much in taxes. And that leads to them running out of money. But if they were able to get a financial and tax plan created for them.
CFO services said they would be saving a lot of taxes. So that the money that they save, could go towards running their business. Therefore, an efficient tax strategy is necessary to a entrepreneurs success.
In order for business owner to have an effective tax strategy. They need to go see CFO services who will create a financial and tax plan that will take into consideration their household as well.
Some accountants do not bother taking into account the personal circumstances of an entrepreneur. But it is extremely important for an accountant to know their personal circumstances. Such as they have people in the family bringing home income in addition to the business owner?
Other questions that they might want to know the answer to is how much an entrepreneur is bringing home in other income in for example investments. An accountant should also know what an entrepreneurs debt servicing is.
And no how many dependence they have, how many bills they have to pay such as mortgage and car payments. This way, the accountant will know how much money the business owner needs to draw from the corporation.
So that all of the tax and financial planning they do for the business owner. Will be based in reality. And will allow an entrepreneur to follow that plan. Because it will take all of the circumstances into consideration.
In addition to that. CFO services says that entrepreneurs should find an accountant that will do this exercise with them every single year. The reason why is because circumstances can also change from year to year.
Whether this is the business circumstances making considerably more or less money than the previous year. Or that the entrepreneurs personal circumstances have also changed. Such as their spouse no longer has a job. Or their making significantly more money.
If they use last year’s strategies. They will find out only after the year is over. That their strategies were not efficient. Therefore, by doing this exercise year after year.
Will ensure that business owners can get the right strategy for their business. Before the year starts, so that they know the strategy they will be using to help minimize the taxes that they pay.