October Business Financial Planning–Cashflow Management

Helping Businesses Grow Value, Families Build Financial Security October 2023

The 2022 tax season is over for most businesses and business owners. Looking at the many businesses on the spectrum, there’s a major difference between businesses that had a successful year and enjoyed success year after year, and those that struggled and performed inconsistently.   

Successful business owners are able to deploy resources more effectively and efficiently, including using the expertise of marketers, financial experts, etc. Those who struggle do the contrary, making costly mistakes in areas where they lack expertise.

One of the precious business resources is cash. Cash flow management is vitally important.  

Below are two tips you could use to deploy your cash resource: 

Use leverage to grow your business:

Having access to cash is better than having cash. This means cash is working for you when you don’t need it and accessible to you when you need it.  

For example, company ABC invested its cash in short-term investments and retirement accounts that earned good returns. They used their line of credit to draw for temporary cash needs and a favorable SBA loan for longer-term working capital needs.  

The interest expense is tax deductible. The profit margin is higher than the interest rate.
A very effective strategy. 

Use your revenue to grow financial security:

Deploy the cash to fund retirement plans. It can not only build towards financial security for the employees, but also add value for the business.  

The value grows in many aspects. The cash becomes tax-deductible expenses. Triple compounding takes effect– the tax savings, interest, and interest on the tax savings all grow tax-deferred on a compounded rate.

This makes the growth so much more powerful. 

Of course, business owners have the flexibility to various retirement plans that allow large tax deductions that average wage owners cannot access.  

A reward for taking the difficult path of building a business.

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This communication is for general information purposes only and should not be construed as tax, legal or financial advice for your specific business. Please consult with your advisor for your unique needs.