Why You Need A Year End Planning Meeting With Your Accountant | Tax Tip of the Week | No. 65

Tax Tip of the Week | November 3, 2010 | No. 65Why You Need A Year End Planning Meeting With Your AccountantImportance of Year End Planning(1)   TAX PLANNINGTaxes may be one of a business owner's largest expenditures.  Therefore, they deserve the planning and monitoring that accompanies any other major expense.  A year end meeting with your accountant should always include an estimation of your taxes.  The discussion should include the projected tax amount, along with the various methods and opportunities to negate or reduce the taxes at both your company and personal levels.  However, sometimes paying the tax is cheaper than incurring the costs of reducing them.  No one wants to spend $10 on something of little or no value to save $2.  With the exception of a retirement plan contribution, tax planning must be complete by New Year's Eve.  Trying to do tax planning for the prior year while sitting with your accountant in early April for your tax return preparation is simply a day late, a dollar short.(2)   BUDGETINGToo often, when the time to prepare the budget arrives, the tendency is to blow off the entire process.  Too many business owners believe the budgeting process is simply not worth the effort.  But, this task need not take days, usually a few hours is adequate.  The end result is usually enlightening and definitely something to review with your accountant.  With their fresh eye you can discuss the many hurdles that may jump up during the year as predicted by the budget, such as cash flow needs for operations to fund growth, capital asset financing, tax estimates and staffing requirements.  The budget is also a model to use for benchmarking during the year.  Is the variance just an anomoly, a coincidence or, more importantly a trend that must be reckoned with?(3)   FINANCIAL STATEMENT ANALYSISYour accountant has seen hundreds, maybe even thousands, of financial statements in a multitude of industries.  Use their experience to enhance your bottom line.   They can help you interpret and understand your financials by examining your trends and ratios, such as accounts receivable turnover, inventory turnover, current ratio and debt coverage.  These analytical procedures can provide you with the information to help you drive your business forward.(4)   BANK FINANCINGWe are not in normal times.  Banks and businesses continue to take a beating.  As a result, meetings with your bank may take some unexpected twists.  Don't get caught off guard by some unusual requests or demands by your banker. To be forewarned is to be forearmed.  If you are ramping up your business following a trough, additional financing may be necessary to fund the growth in accounts receivable and inventory that accompanies an increase in revenues.  The bank, who made such past funding available to you, may not be there to bat for you this time.  One may have to turn to unconventional methods that your accountant can discuss.Your year end planning meeting with your accountant should be one of the most important meetings of your year.  It sets the stage for overall tax minimization, while maximizing your future net income and cash flow.Mark Bradstreet, CPA...this week’s authorAs always, give us a call if you have any questions.You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.Rick Prewitt - the guy behind TTW...until next week.