Spring cleaning isn’t just about tidying your home after a long, hard winter. These days, spring cleaning is all about reducing clutter and getting organized.
And it’s not limited to the home front. The spring sunshine should also shed light on your business’s financial records.
If you obtained a deadline extension to file last year’s tax return, completing this process will be your top priority. Provide your bookkeeper with those final clarifications, and give your tax accountant any missing facts to calculate the last of your deductions. Putting last year in your rearview mirror permits you to focus on this year.
A tax liability is already accruing as the present year unfolds. When you’re able to anticipate that amount, you can begin to plan for it. Current-year taxes are payable throughout the period, and penalties mount if you wait to remit your income taxes.
If your business’s bookkeeping is a bit untidy, it’s difficult to identify your taxable profit.
Make sure the business is not paying for any personal expenses; remember to dedicate one credit card for business-only purchases; and know the limit on the deductibility of certain expenditures.
With your accurate bookkeeping, a tax professional will find it much easier to help determine the estimated tax payments for the current year.
Cash flow and growth
Once your income taxes for the prior year and the expected amount for the current year are under control, you have a known amount to spend on expansion or upgrades to current systems. As spring is a time of growth, it’s also the ideal opportunity for taking steps to ensure continued profits and rising cash flow.
Weigh the costs of new equipment or machinery against the impact on cash—maintaining a healthy amount of cash to fund the upfront cost of new projects is vital, but extra cash might be best deployed for new asset purchases. If you have to borrow part of the cost, measure the effect of future debt repayment on anticipated cash flow.
Assess your spending: Know which categories of expenses are rising the fastest relative to revenue, and set standards early for controlling cash flow.
Changes to your pricing may be warranted if costs are rising. Plus, you can eliminate waste by altering spending on discretionary expenses.
Spring is also an ideal time to dust off your financial forecast. Establish measurable objectives for the current year; reflect on the goals you envision for your business; then prioritize actions for this year by focusing on cash management.
Compare your cash flow projection for recent months to actual results. Update the budget for this year based on the accuracies and misjudgments of the past. An effective budgeting plan enables you to use available funds in the most productive ways.
A diligent spring-cleaning of your business finances establishes a foundation of sustainable procedures for handling taxes, cash flow, and budget projections. These will support your business through the next winter and into a new spring. Give East Harlem Tax Service a call to discuss your tax obligations or your cash flow problems today.