There, I said it, pay more taxes. While most people react negatively to paying more taxes, I actually think it ought to be everyone’s goal! As tax deadlines approach (March 17 this year for corporate returns and April 15 for individuals, partnerships, and trusts) few are facing those days with the thought of delight about paying more taxes.
This newsletter is not about tax policy or the politics in Washington, DC. Aside from voting, contributing to the candidate of one’s choice, being politically active, or running for office, all that any of us can do is operate within the rules that exist at any particular point in time. Rather, this newsletter is about recognizing that there is a broader scope to the finance function other than the preparation of tax returns. I have seen some business owners put so little emphasis on the finance function that I believe they wouldn’t even have an accounting system but for the need to file tax returns.
Businesses that utilize no financial resources other than a CPA who specializes in tax preparation are short changing themselves. If the CPA has the desire and abilities to provide a broader scope of services, business owners who don’t extend the engagement beyond the narrow scope of tax planning and preparation are missing the bigger picture. Clearly, proper preparation of tax filings and related long term tax planning is an important function. Of course, minimize your tax liability for a given level of income. But if you only engage a financial partner for tax work, either by their choosing or yours, then you are missing a substantial portion of value that the finance function can and should be adding to your organization.
I have actually seen business owners react favorably to the statement, “Good news, you don’t owe any taxes; you lost money last year.” The goal of a business isn’t to avoid paying taxes; the goal of a business is to maximize profitability and cash flow. Businesses without a sustained level of profitability lack the capital accumulation that is necessary for growth and to survive economic downturns. They are disadvantaging themselves when it comes time to exit because they are more likely to end up selling under distress conditions, have smaller top-line, and lower EBITDA, compared to businesses that had a broader financial strategy in place.
Broadly speaking the finance function is about providing an understanding of how sales, operations, manufacturing, R&D, administrative areas, etc. relate to each other and contribute to the profitability of the enterprise. A good finance function helps you understand the competitive landscape and make decisions about how to maximize your potential. It provides decision support, valuable insights, and contributes to the long term strategic direction of the firm in order to enhance shareholder value.
So, go ahead. Make more money . . . pay more taxes . . . isn’t that better than the alternative?
If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to For more information, visit www.homza.com
your cash is flowing. know where.®
Ken Homza
Copyright @ 2014 Homza Consulting, Inc.
your cash is flowing. know where.®
Ken Homza
Copyright @ 2014 Homza Consulting, Inc.