Why Cashflow Is King and Taxes Are Terrific!

Why you should be thankful for profits and taxes!

So why is cashflow so important to our business? I once heard the CEO of a large bank at a seminar talking to business owners about lending, financing their business and cashflow. The one point I took away from that meeting, was his words…” Cashflow is King”. It is so important, and it is also a concept that many business owners do not understand.

Your financial reports and data are there to help you to make timely business decisions. Employees can’t wait on pay cheques until your customers pay.
 
If your have poor cashflow, your landlord doesn’t care that you’re talking to investors and will have the money in a couple of months. Suppliers may not be willing to extend your credit any further and you may not be able to purchase the goods you need in order to deliver to your customer and receive payment.
 
More businesses fail for lack of cashflow than for lack of profit. Why is this? Two main reasons:
  • Business owners are often unrealistic in predicting their cash flow. They tend to overestimate income and underestimate expenses.
  • Business owners fail to anticipate a cash shortage and run out of money, forcing them to suspend or cease operations, even though they have active customers. Hence why we need to prepare a yearly cashflow budget report which is regularly compared to actual figures.

Paying tax should be enjoyable!

Yes you heard me right! NO I;m not crazy or deluded. The fact is, that unless you are cheating the system or making NO money, you will be paying taxes! This is a great position to be in! Banks will look favourably on lending, suppliers will happily give you credit!

 
Many times in my 12 years as a tax accountant, clients would come to me asking how they could reduce the amount of taxes they were paying. My answer was usually – Spend money! Or, Why spend a dollar to save That’s right! All the so called ‘tax perks and concessions’ the Government put out every year are all to do with spending money on items (such as vehicles or depreciable assets) to get a tax deduction.
 
At the end of the year, you are going to have more in your pocket, than the Tax Department and that is something to get HAPPY about! So go about earning MORE, not trying to reduce taxes! They really are TERRIFIC!!
Why Cashflow Is King and Taxes Are Terrific!
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