Why your business needs a tax strategy

A good tax strategy is to business what good nutrition is to a competitive athlete. You can get by without it, but ultimately, performance lags. 

Even worse, it can be a point of failure. 

With a good tax strategy, a business goes beyond mere survivability; it begins to thrive. 

That’s why this month’s blog posts will be all about creating and implementing a tax strategy. 

Today, we’ll start by explaining what a solid tax strategy looks like and why any business will benefit tremendously from one. 

Let’s go! 

Business tax strategy: What it is and what it is not

Google the term ‘business tax strategy,’ and you’ll get a laundry list of sources that talk little about strategy and a lot about individual tactics and tips. 

However, a hodge-podge of tricks and hacks isn’t a strategy. It’s an attention-grabbing mess that wastes time and produces few results. 

A real strategy is comprehensive. It takes into account your business size, its geographical reach, and all tax implications. 

It also includes a plan for continuous, methodical analysis. 

If that sounds like a lot of work and coordination, it is. 

With all the other responsibilities of business owners, this begs the question: Is a tax strategy worth it? 

The answer is yes, and let’s delve into several reasons why right now. 

Tax Savings

Imagine your business could reduce its taxable income by 20%. 

That’s money that could be plowed back into the business on other items, like marketing or equipment, that have positive tax implications of their own. 

So, the potential for creating a virtuous revenue cycle grows the more tax savings a business has. 

Cash Flow Management

Planning for taxes throughout the year helps businesses avoid nasty tax surprises at the end of the year.

This smooths out cash flow, making it easier for your business to run payroll, pay creditors, purchase necessary supplies, and improve credit lines.

Improved Strategic Growth

When a tax strategy is properly aligned with business goals, it allows a business to take advantage of certain credits, freeing up resources for innovation and expansion. 

These credits can be found at the federal and state levels and include a host of opportunities, including hiring, research and development, and eco-friendly facilities. 

Better Compliance

“An ounce of prevention is worth a pound of cure” is a cliché because it’s true, especially when it comes to business taxes. 

IRS intervention burns valuable resources and damages reputation, hindering growth. 

A good business tax strategy involves systems that allow a business to stay on top of filing deadlines, regulatory changes, and documentation requirements. 

These systems are valuable for any size business but grow in importance as its geographic footprint expands. 

A tax strategy also helps businesses stay on top of filing deadlines, regulatory changes, and documentation requirements, reducing the risk of penalties or audits.

Increased Competitiveness

Businesses with effective tax strategies can allocate savings to offer competitive pricing, improve products and services, or invest in marketing. 

Those create an edge over competitors and they all rest on a foundation of proper tax strategy. 

The Bottom Line

The reasons for having a business tax strategy are compelling, but creating and generating one can be complex. 

But fear not because next week, we’ll dive into how to create one without losing focus on the rest of your responsibilities.  

See you then!