THE DOCTOR IS IN: Digging Out of a Hole
As the year quickly comes to an end, some time-sensitive items are begging for your attention!
But first, let's take a big collective sigh of relief that the economy has finally started to turn around. Many of us will complete a better year in 2014 than we have had in many years. It feels like our industry is finally on the mend. Hooray!
If you are like many integrators, you have probably been suffering through a cash flow crunch for the last few years. You may have had to max out your credit line as well as credit cards, and your accounts payable balances may not be as current as you would like. But as we emerge from the economic slump, improved volume and profitability should help cash flow.
The problem arises if you, like many other integrators, are finishing up a profitable year. If so, congratulations are in order. Why do I say that a profitable year can be problematic? It's because if you have been suffering from a cash flow crisis, all those profits have gone into digging out of the deep cash flow hole. This means that when you finish your wonderful year and show a very nice profit, you may have to pay significant taxes on this profit, but still have no money in the bank!
So what's an owner to do? First, make sure your numbers are accurate. Either review them on your own, or have an outside accountant or financial consultant review them to make sure they are correct; it will do wonders to start the new year with a clean set of books.
Then, run (do not walk) to your tax preparer. Schedule this meeting at least two weeks prior to the end of the year.
With proper planning, you just might be able to defer taxes on your profits. Should you buy a vehicle this year or wait until next year? Should you bonus yourself and/or your employees and, if so, how much? If you file your taxes on a cash basis, is there anything you can do differently at the end of the year to manage the cash profits and thus taxes?