Part-time CFO | Can An Efficient Tax Strategy Increase Cash Flow

Entrepreneurs face significant challenges when they start their business says part-time CFO. 50% of all business ownersthat start their business and up closing it within five years. 29% of those failed entrepreneurs say that the reason why their business failed was because they ran out of cash. Business owners who figure out how to increase cash flow in their business, can impact their business significantly for the better by helping them avoid the reason that so many businesses had to close their doors.

Many entrepreneurs donít realize that the decision of how they pay themselves boils down into tax strategy. By hiring the right part-time CFO for their business, and creating a very efficient tax strategy, business owners can utilize salary in dividends as they take money out of their business, to avoid paying thousands of dollars in taxes each year. The money that they save can be utilized to help increase cash flow in their business, and health avoid the main reasons why businesses in Canada fail.

When business owners start their business, they often try to save money by hiring accounting services on a budget which usually ends up backfiring. What they save in accounting fees, they pay far more in additional taxes because of an inefficient tax strategy. Business owners need to be careful and hire the right part-time CFO for their business that can understand their business completely, to help them come up with strategies on how to help the business become more successful.

Entrepreneurs should understand the differences between salary and dividends so they understand that the decision of how they get paid is a significant one says Part-time CFO. Dividends are not deductible from the income of corporation they end up being a direct withdrawal of the prophets of the business. Dividends that are taking out of business will not show up on the income statements. Salary is deductible from income, and all of the amounts and salary that a business owner takes end up showing up on the income statements of the business.

The decision on how to pay themselves, if itís dividends, salary or combination of the two can really only be decided by an accountant who has taken time to deeply understand the entrepreneur in their business. There are dozens of variables that need to be taken into consideration including other income, spouses and children, divorce agreements, corporate losses and contractors of the business. By deeply understanding the business first, and the business owner, an accountant will be able to figure out the most efficient way for business owner to pay themselves to avoid paying additional amounts in taxes.

Once they have efficient strategy that they are utilizing, business owners need to ensure that itís being reviewed on a regular basis because as their circumstances change, so might their tax strategy. By developing a relationship with their accountant, and ensuring that this is reviewed every year, is owners can ensure that they are always utilizing the most effective tax strategy for their business in the moment.

One of the most common questions that business owners have for part-time CFO is how they should pay themselves in their business? Even though this is the most common question, it is not a simple answer at all. Anyone who says that they can answer the question simply, is often not understanding all of the complexities at hand. Many variables go into how business owners should pay themselves because itís essentially tax strategy that needs to get worked out.

One of the reasons why entrepreneurs should understand this, is because by creating an efficient tax strategy with their part-time CFO, entrepreneurs can avoid paying thousands of dollars every year in taxes. That can significantly impact their business, by allowing them to save thousands of dollars every year, business owners can increase the cash flow in their business which can help them avoid running out of money in their business. Thatís the second most common reason why businesses in Canada fail, so itís extremely important that business owners can avoid this whenever possible.

Entrepreneurs first start their business, they often need to find the most inexpensive accountant they can, however this does is end up costing business owners far more in increase taxes that they paid for a great accountant in the first place, is is owners would have saved significantly more in taxes than they wouldíve paid in accounting fees. When there accountant is figuring out what the amount should be that business owners pay themselves, if the person thatís helping them answers their questions for to simply, or doesnít take the time to completely understand the business for the business owner, that should be a warning sign to entrepreneurs. Other warning signs paying should look for, is that theyíre not going to be paid by 100% dividends or 100% salary the most efficient tax strategies utilize a combination of be paid in dividends and salary says Part time CFO.

Business owners should also understand that if they have of their income that they claim, that can affect the decision on how they pay themselves in their business. How much income it is, no they get paid is through salary or dividends, even if they have a spouse and how the spouse gets their income that factor into this decision. Itís a very complex issue that business owners need to ensure that the right person is looking after their best interests.

The Associates have several years of creating efficient tax strategies and because of that have developed process and how to help entrepreneurs with it. The use this process in order to gather as much information from the client is possible, and then use different processes to create tax strategies from that information. By creating a system to go along with this, the accountants can create a great tax strategy much more efficiently than other accountants doing it manually.