Tax codes and responsibilities change regularly, so hiring a tax professional is a must. Employing the services of a professional is also the easiest way to maximise your return and generate a much-needed cash flow injection into your business.
As with most professionals you’ll employ while running your business, developing a long-term relationship will typically generate the greatest returns. Having someone on hand who knows you and your business inside and out will also minimise much of the hassle associated with the often-dreaded tax-time.
Below are my eight tactics for ensuring this relationship is fruitful and, importantly, commercially successful.
1) Be honest
Even the most embarrassing of financial situations doesn’t warrant sugar coating the truth to your tax professional. You should never fear being judged, because they really have seen it all. And if you don’t give them the information they need – all of it – you may end up with some very substandard or inappropriate advice.
2) Be communicative
This one really can be applied across the board. But it’s particularly important when working with your tax professional, as your tax bill amount can often depend quite substantially on the provision of timely and complete information regarding your financial history.
3) Listen to the information
You may not find issues of taxation to be the most riveting of topics. However, regularly listening to your tax professional’s opinions may assist you in making more informed financial decisions now and into the future. It will also ensure your tax professional doesn’t feel they are constantly repeating themselves or speaking to a brick wall!
4) Pay fees/taxes on time
Paying taxes on time might be one of the most important parts of your tax planning. This is because not doing so can put you at risk of receiving a “failure to lodge on time” (FLT) penalty, which could significantly eat into any potential returns, or add to any potential tax obligations.
5) Work on future strategies
Unwanted surprises are never pleasant for any business owner – especially when they regard finances. For this reason, it pays to be ready for any manner of unusual tax issues that may arise in the future. This is where an honest conversation with your tax professional could highlight some useful strategies you could have ready, just in case – and potentially sleep a little easier as a result.
6) Create a buffer for tax miscalculations
Tax rates change and you can never know for certain what your tax outcome will be. For this reason, it always pays to save for a much higher total of money than you think you may need for your taxes. If you don’t end up needing it – great! Squirrel it away for next time.
7) Have someone review your past taxes
Having a professional review your past taxes can help to uncover any errors that may need to be corrected before the current period. This could allow you to spot any nasty surprises ahead of time, and manage them before they become a problem. A clean slate can never be underestimated.
8) Stay organised
It can be easy to put aside issues related to tax in the everyday hustle of running a business. However, by creating an organisational system, taxes needn’t encroach on your day-to-day activities significantly. This will allow you to avoid a last-minute rush to gather all of your tax information each quarter when tax time inevitably arrives – and your tax professional will definitely thanks you for your organisation.
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Koos Kruger is CEO of Business Exit Companion (www.exitcompanion.com.au), a consultancy firm that provides financial advice and exit-planning services for business owners of small and medium businesses. Koos is a chartered accountant with over twenty-five years’ experience in management, finance, and operations across health care, construction, financial services, manufacturing, fast-moving consumable goods, and professional services. He has advised the likes of Rio Tinto, Downer EDI, Serco, HSBC, BHP Billiton, Allianz Insurance, Munich Re, Nedlloyd, the South African government, and the NSW government, across both Australia and South Africa.