Why Tax Planning Matters
Ryan Schirmer • May 1, 2024
Unfortunately, tax is a part of life, but by doing some forward tax planning can help you reduce you tax expenses and make informed financial decisions. Everyone can benefit from tax planning from the biggest of business to an individual.
Here’s why tax planning is so important:
Maximize Your Deductions: You may be missing out on deductions you don’t know are available to you. Tax planning helps you take advantage of all the deductions you’re eligible for.
Plan for the Future: Tax planning isn’t just about this year’s taxes; it’s also about planning for the future. By making smart decisions now, you can set yourself up for a lower tax bill in the years to come.
Avoid Surprises: Ever gotten a big tax bill and wondered where it came from? With tax planning, you can avoid those nasty surprises. By staying on top of your finances throughout the year, you’ll know exactly what to expect come tax time.
Stay Compliant: Tax legislation is constantly changing, and it can be hard to keep up with all the latest updates. Tax planning helps ensure that you stay compliant while still minimizing your tax liability.
Remember, the goal of tax planning isn’t to avoid paying taxes altogether; it’s simply to pay your fair share while keeping as much money in your pocket as possible.
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Budgeting is an essential part of business planning. A well-prepared budget helps leaders manage finances, allocate resources wisely, and stay on track to achieve their business goals. Here are 6 practical tips to follow to create a budget that works. 1. Set Clear Goals Start with the end in mind. Define the financial objectives for the upcoming period — whether that’s growing revenue, reducing costs, or expanding operations. Clear goals give your budget direction. For example, if your goal is to increase sales by 15% over the next year, you might allocate funds to targeted marketing campaigns, new sales tools, or hiring additional account managers. If your priority is cutting costs by 5%, your budget will focus on efficiency, renegotiating supplier contracts, or pausing discretionary spending. 2. Track Income and Expenses Keep detailed records of all revenue streams and expenses. This helps identify patterns and areas for improvement, which can be factored into your next budget. For example, there are some businesses that spend heavily on marketing channels that don’t generate leads. Tracking and analysing results allowed us to reallocate funds to higher-performing activities, improving return on investment. 3. Be Realistic (Even Conservative) Optimism is great, but overestimating revenue or underestimating costs is a common trap that can create financial pressure. Here are some recommended multiple scenarios: Expected: the most likely outcome Conservative: lower revenue, higher costs Aggressive: upside potential Plan based on the conservative scenario. It gives breathing room if sales fall short or unexpected expenses arise. 4. Prioritise Essential Expenses Some costs are non-negotiable. Identify essential expenses, payroll, rent, utilities, and core operational costs, and make sure they're covered before allocating money elsewhere. For example, a manufacturing business should prioritise raw materials and production costs over a website redesign or an internal newsletter. Protecting essentials keeps the business running smoothly, even if revenue dips. 5. Plan for Contingencies Unexpected events happen. Projects can expand, clients may delay payments, or equipment might fail. Include a contingency fund in your budget to handle surprises without disrupting operations. For instance, a service business can use the contingency to hire extra staff if a project suddenly requires more resources, ensuring deadlines are met. 6. Review and Adjust Regularly A budget isn’t a “set-and-forget” document. Review it regularly, at least monthly, and adjust based on actual results and market conditions. This keeps the budget relevant and ensures you can make informed decisions rather than reacting to surprises. A budget done well helps leaders commit to assumptions, make smarter decisions, and optimise performance as circumstances change. Follow these tips to prepare a budget that actually drives your business forward.
Tax is an unavoidable part of life. However, with proactive planning, you can manage you tax obligations more effectively, reduce unnecessary expenses, and make well-informed financial decisions. Tax planning is not just for large businesses - but for individuals, families and businesses of all size who can benefit from taking a structured approach. Maximise your Deductions Many taxpayers miss out on deductions simply because they are unaware of what is available to them. Ongoing tax planning ensures you are claiming everything you are entitled to, helping you legally reduce your overall tax liability. Plan ahead with Confidence Tax planning isn’t just about this year’s taxes; it’s also about planning for the future. By making smart decisions now, you can set yourself up for a lower tax bill in the years to come. Avoid Costly Surprises Unexpected tax bills can place unnecessary pressure on cash flow. By reviewing your financial position throughout the year, you can estimate your tax liability early and prepare accordingly. Stay Compliant Tax legislation is constantly changing, and it can be hard to keep up with all the latest updates. Tax planning helps ensure that you stay compliant while still minimizing your tax liability. Remember, the goal of tax planning isn’t to avoid paying taxes altogether; it’s simply to pay your fair share while keeping as much money in your pocket as possible.
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