Get 2005 ClosedWritten By: GARRY BARTECKI
Article Date: 01-02-2006
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
To deal with tax problems you have to make money.
2005 is behind you. Hopefully you will quickly, and I mean quickly, get your taxable income calculated so you know what tax is due for 2005 and if there are any related estimated tax payments due starting April 15. If you can, do the planning for 2006 using estimated or budget figures to calculate the potential tax due (and cash required) for both the 2005 tax liability and 2006 estimates.
I keep harping on this because dealers I reviewed at the end of the third quarter had much higher taxable incomes for 2005 and will need to make estimated payments in 2006. This is quite a tax drain and dealers have to figure out what they owe and how they are going to finance the payments.
And don't think you will just reduce taxable income by taking bonuses, because all you may be doing is transferring the liability from the company to your personal 1040.
Also, please don't file an extension without knowing what your estimated tax liability is going to be. It's easy to just pay last years tax to avoid estimated tax penalties, but this may not be the year to do that. If you are wrong, the check you have to write could be a big surprise. Even if you like surprises, you won't like this one.
Ask your CFO to get your tax data gathered as soon as you have a soft close for 2005. The biggest problem will be the rental asset changes, but it's important to get these right because they provide depreciation, as well as significant tax gains when sold.
If your CPA shows up April 15 and tells you there is a significant balance due, and "by the way your estimated tax payments are understated," it may be time to find another tax accountant. I guess the same reminder may be in order regarding your internal financial statements and related supporting schedules.
Monthly financial statements should be in your hands on the 15th of the following month. The income statement format should have the following column:
You get the idea. How are you doing this year, compared to last year, compared to this month's budget and compared to the year-to date budget? If your system can't do that, maybe an Excel spreadsheet can recap the information for you.
- Current month actual
- Same month last year
- Budget for month actual
- Year-to-date actual
- Year-to-date last year
- Year-to-date budget
- Annual budget
I'm not saying you have to replace people because you're not getting your statement by the 15th. There could be any number of reasons why you don't get monthly financial information when you should. The system may be bad. The system may be old. The system may not be used properly, procedures may need updating, more timely help at month end may be required, or the CEO may not make this a priority.
The point is you can't run your business like this; things have to change. You need to know what's going on every day in each department. You need to be able to make adjustments to the plan. You need to be able to adjust the following month's budget and so on. These are not unreasonable expectations in today's business environment, and you don't have to break the bank to get there.
With that in mind, I'm asking each CEO reading this to tell their CFOs and accounting department that AED's Cost of Doing Business survey will be due March 15 this year. Ninety days should be plenty of time to gather the info required for the survey so that when you receive the report, the data is fresh. We don't need the final audited figures on the survey; the internal statements should be good enough. If you need help, call us.
To deal with tax problems you have to make money. To make money you need information to drive your decisions. To be competitive you need information faster.
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