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  • Molly Shoemaker

End of Year Cash Planning

It’s that time of year - the weather is brisk, the leaves have left the trees, and Mariah Carey is being played in department stores all over the country. It’s tax planning season!


Just like there are grinches and elves, there are two main groups of business owners that emerge this time of year. Those that want to minimize the impact of the tax man next April and those that are feeling the impact of the holidays on their bank account. Here are some suggestions to help make the most of your December.


If you’re in the latter group, it’s not too late to make an impact on your cash flow to keep you afloat until Spring and the housing market comes back to life.


Cash in your points - If you’re like one of the many businesses that uses a credit card with points or rewards, this might be the time to cash them in. You can use them on everything from purchasing gift cards for your employees to applying a credit to your outstanding card balance. Take a few minutes to review your options before choosing because some will give you more bang for your buck.


Do some winter cleaning - There’s nothing like a bit of a cash crunch to inspire you to go through your expenses for those leftover software subscriptions that you had forgotten about or shuffle your debt around to a lower interest rate. Maybe it’s an old cell phone line from the inspector that left and was never cancelled or it might be a monthly bank fee for an account that you were supposed to close six months ago. Seize the day and clean away the clutter.


Consider outsourcing - This may seem counterintuitive because you may pay a higher hourly rate for outsourced work. However, if you are paying someone on staff a lower rate, but it takes that person three times as long to complete it because it isn’t their specialty or if they don’t have enough work to keep them busy all the time, you are probably paying more for less work. There is also a flexibility that can come from outsourcing because you can often scale the work up when you need more or scale back during the leaner months.


For those of you that are concerned less about the bank account and more about how best to utilize the profits from the last year, we have some tips for you too.


Evaluate the cost of your debt - While this won’t help you to pay less in taxes, the overall savings may be better than the tax writeoff. If you are making debt payments with interest rates in the double digits, you are investing a lot of money into something that doesn’t do anything for your business. Pay off the debt that costs your company the most every month first and then work your way to the “healthier” loans.


Buy sooner - If you have plenty of cash in the bank and are looking for ways to reduce your tax liability, consider paying some of your existing costs now rather than deferring them. If you pay monthly for a software cost, consider buying an annual license. If you know you’re going to need to buy new business cards or a new website, December might be the best time to make those purchases.


Invest in larger purchases - If you were looking to purchase a new vehicle or a larger piece of equipment, making the purchase before the end of the year could get you some high depreciation expenses for the year to offset some of your profit. It’s always helpful to talk to your CPA about these purchases and we never recommend buying an item for tax purposes that you wouldn’t normally buy. But if it was already on your wish list, now might be the right time.


Invest in your people - This is always a good place to spend money. It doesn’t have to mean writing them a big check either. It might be a fun meal as a company (which has great tax benefits also!), or offering to pay for continuing education. Letting your employees know that you value them can be one of the best investments you make this year.



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