Focus on cash flow not tax

Focus On Cash Flow Not Tax

This time of year it seems like everyone is talking about year end tax planning, strategies to minimise tax, or top 10 tax tips, etc. These are all helpful but really miss the point.

Tax is tax, and yes there are a few things you can do prior to year end, but as long as you have a good accountant this should just be business as usual.

The goal of any business should be to maximize your free cash flow. Period.

At its simplest, Free Cash Flow = Cash In – Cash Out*.

Now, as a business owner, which are you better to focus on? Cash In or Cash Out?

While you can impact both, your accountant will be better able to help with Cash Out (including Tax). We are pretty good at costs, efficiencies, minimising tax and alike. Accountants, on the other hand, are generally not that great with Cash In. We can help for sure, but it is not a natural strength.

So, the questions you as a business owner should focus on, and ideally not just at year end, are things like:

  • What is my strategy?
  • What advertising has the greatest impact on sales?
  • How can I improve my payment cycle?
  • How will a price increase impact sales?
  • If we do reduce costs, will that impact customer experience?
  • Can technology do anything to improve our costs and productivity?
  • Are my staff aligned, well trained and happy?
  • What can we do better?

and so on.

As a business owner, a focus on these areas can be profound. It also makes it easier to succeed. Rather than juggling everything you can just focus on one thing: Increasing Cash In. Then leave the rest to people that are better at it.

Play to your strengths.

If you do, and your income goes up, you will likely have higher costs and perhaps tax too. Who cares? Your Accountant will focus on this and make sure there is as much left for you as possible. If they don’t, get a new one!

Focus on Cash In. Let us focus on Cash Out. Trust me, we are better at it!

Cheers,

Michael Binnie

* Free cash flow is more fully defined as: FCF = Net Income + Non-Cash Expenses – Increase in Working Capital – Capital Expenditures

If you are located on the Gold Coast or surrounding areas Contact Us at Solve Business Accountants for advice on your cashflow.

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