Business Tax Efficiency
Businesses advertise to generate more revenue and attract more customers/clients/patients. Then they provide goods and services as efficiently as possible and in a competitive environment. We subtract all expenses from revenues, and arrive at 'Net Profit.' Wait! This is not the real bottom line. The real bottom line is 'Net Income After Taxes.' This is the most critical part of the entire process.
How does a business owner know that the tax return is being structured and then prepared properly? Read 'A Question of Tax Structure.'
There is only one way to know for sure: an independent review of the tax returns, a 'second opinion' by a qualified and experienced tax professional. Read: 'Do You Need a Second Opinion?'
I have reviewed many tax returns. Most of them are tax IN-efficient, for many reasons. They have probably never been analyzed for efficiency at all! Many returns are prepared during tax season, when time is very short, by inexperienced preparers and junior accountants without extensive knowledge of taxation. The tax preparers are only reacting to the information they receive. They do not have the time, skill or insight to plan the proper structure, and then implement it. The tax return is the result of the past structure and planning, or the lack thereof.
Most business owners focus on increasing revenue, or cutting expenses, but far too many ignore the tax structure and the resulting tax return. They get comfortable with the status quo, and do not want to change their pattern. They wrongly assume everything is the best that it can be, and that there is no room for improvement. They may like and trust their current accountant. Still, they owe it to themselves and their families to try to improve tax efficiency and reduce their taxes. I have found tax inefficiencies ranging from $1,000 to $80,000 per year.
I assure you, I am not joking.
Many business owners are demoralized, and do not want to try to get more business, because the government taxes will absorb all the profits. They feel powerless, like a rat on a treadmill. Why waste money advertising for more business, when the government will take the largest portion of the revenue? There is clearly something wrong with this scenario. The problem, again, is the tax structure.
Rather than work longer and harder, tax efficiency helps a business owner to work smarter by paying lower taxes, and keeping more profits. The tax savings can pay for investments, vacations, and more.
Clearly, the need is first to get a clear analysis of the current situation, then to design a solution. New thinking needs to be focused on the problem and the solution.
Print this page and call Robert Greene, CPA, CMA – 800-834-3285 – now – while you're thinking about it.