Part-Time CFO | Effective Tax Strategies Can Affect Cash Flow
Itís extremely important for business owners to come up with the most efficient payment strategy that they can in order to take money out of their business says part-time CFO, because how they take money out of their business can significantly impact the cash flow of their business. The reason for this, is because how a business owner takes money out of their business, ends up being a tax strategy. The reason for this, is because whether business takes money out of their business through salary, or dividends, they end up paying taxes on it, and if they are able to come up with a way to do that efficiently, they can end up saving thousands of dollars in taxes every year.
Business owners who save significant amounts of money through efficient tax strategy can then use that money back in their business to help increase cash flow that business. Since half of all entrepreneurs that open their businesses end up closing them within five years, 29% of them saying that the reason why the business was not successful, was because they ran out of cash. In proving cash flow in business, can drastically improve entrepreneurs chances of success in business.
Business owners should understand the difference between salary in dividends, in order to understand why they need to decide how to take money out of their business. Efficient tax strategies rarely have a business owner taking out 100% salary, or 100% dividends. Part-time CFO says itís usually a combination of the two, and how the determination of which combination to choose is an extremely important one. Dividends are the amount of money that the business owner takes out of their business thatís not deductible from their income. Itís a direct withdrawal out of the profits of the business, and because of this it wonít show up on the income statement of the business. Business owners who take dividends paying corporate taxes on them. When business owners take salary out of their business, this is deductible from the income of their business, and it does show up on the income statements of the business. This is owners pay personal taxes on salary since the personal tax in Alberta currently tops out at 48%, and had to the small business corporate tax rate tops out at 11%, this is the reason why itís extremely important that business owners have the strategy of how to take money out of their business.
When a business owner is considering which part time CFO they can hire to help them make this decision, they need to realize that they should not base their decision on price alone. The reason for that is because by trying to save money on accounting services, if the entrepreneur hires a poor accountant, they can end up spending for more on increased taxes than they would in paying for a better accountant.
By working with the right part-time CFO, entrepreneurs can save significant amounts of taxes, this can help them increase the cash flow in their business that can help them stay successful in business where many other businesses have not been able to.
Business owners should understand that how they take money out of their business can be one of the most important decisions they make says part-time CFO. Since 50% of all business owners close their business within five years, 29% of those entrepreneurs say that the reason why their business failed was because they ran out of money in their business. If businesses are able to take money out of their business efficiently, they will be able to save thousands of dollars on your in taxes. Saved tax money, can help entrepreneurs increase the cash flow in their business that can drastically increase their odds of success.
Business owners should go about hiring the right part-time CFO that can help them make this decision. If business owners hire inexpensive accountant because they want to save money, they may end up with an accountant who is not to save them significant taxes. Warning signs that they accountant that theyíre using is not utilizing the best tax strategy for the entrepreneur is if they are getting paid in hundred percent dividends or 100% salary. Typical effective tax strategies utilize a combination of both dividends and salary.
Another sign that business owner doesnít have the right part time CFO helping them is if when they ask how they should pay themselves, the person answers quickly or simply, means they donít properly understand the subject or the owners circumstances well enough to make that decision. Many people claim that they salary, corporate tax and dividends are all integrated. While this might look the reason behind it is that since dividends are not deductible from corporations income, the business owner pays corporate and personal tax. If you add up the corporate and personal tax rates together, it should equal the amount on the salary. This is a theory that many people believe, but business owners should always be wary of anything that is overly simplistic when it comes to this very complex issue.
When business owners are hiring their part-time CFO, they should completely understand that the person making the best decisions is usually a chartered professional accountant, who has four years of undergraduate degree, through years of articling experience and then additional time after that in experience in order to come to the right conclusion. The business professionals at Spurrell and Associates have developed a formalized process in order to glean as much information as they can from their clients as quickly as possible, and without missing any important information. They have also developed processes for processing information efficiently in order to come up with tax strategies that are most beneficial to the business owner, at a much lower cost than it would take other accountants who are crunching those numbers by hand.