There’s nothing like a tax deadline to force business owners to look carefully at the details of their company’s finances.
But Kevin Payne, a vice president and senior business banker with PNC Bank in Raleigh, advises his clients to stay tuned in to money matters all year long.
Cash flow: Payne advises his clients to get familiar with balance sheets and income statements to really understand their company’s cash flow.
“Business owners know their businesses and are experts at what they do, and typically that is their focus,” he said. “Sometimes they lose sight day in and out of what goes into preserving the business, which is the cash flow – money coming in and coming out. Cash flow is the lifeblood of any and all businesses.”
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Tax liability: One key component of cash flow is fulfilling tax obligations on a regular basis and not being faced with a huge surprise at tax time. Payne says that owners should either pay quarterly taxes or estimate early on what their tax liability will be.
“Have some sort of dialogue with a CPA at least quarterly,” he said. “Paying in advance or estimating what those taxes are going to be in advance, should be a normal course of doing business. You want to be positioned well with the balance sheet and knowing your profitability levels. But you also want to be in a position where the tax liability isn’t going to be outrageous.”
Be a planner: Payne says that business planning shouldn’t stop once the company is out of the startup phase.
“Every business owner has to have a one-year plan and a five-year plan,” he said. “Forecasting is extremely important and taking advantage of the knowledge of a CPA or banker and knowing what capital expenditures you’re gong to have down the road is key.”
Have a reliable team: Payne says it’s best for owners to not handle the company’s finances alone.
“It’s important to have a good attorney, a good insurance agent, a good banker and to rely on a CPA,” he said. “Know your team, understand your team and take advantage of the knowledge your team has.”
Be in the know: Payne says owners need to know what could impact the company’s bottom line.
“Stay abreast of legislation, regulation and tax law,” he said.
Reach Carla Turchetti at firstname.lastname@example.org.