January is one of the most financially difficult times for many customers that we work with. Trying to end the calendar and fiscal year often requires a lot of planning and preparation. Needless to say, I spend a great deal of time discussing quite a few details that often need to coincide with these dates. Unfortunately, people will spend so much time worrying about paying taxes, they often end up tripping themselves in the process.
Over the years I have seen purchases on equipment, vehicles, ground and all sorts of company distributions as a way to try and lower the effective tax rate for the calendar year. When done as part of an effective growth and business strategy, this can be beneficial. The frustrating thing is that most of the time it is a short term unplanned decision in an effort for quick relief from looming tax consequences. From a lending perspective, you may need to document your ability to generate income to pay long term obligations or have ability for future growth. The good news is that putting a good strategy together is not difficult, but it does take some planning.
Every good strategic plan for a business starts out with the goals of the company, how it plans to meet those goals and a budget of the resources in order to achieve objectives for the next year. Your plan should begin by enlisting the help of a qualified CPA with references in these areas, your lending partner and your internal leaders. Choosing not to use these resources puts companies at a disadvantage. In this world an ounce of prevention is worth a pound of cure. With good work up front you will be prepared for paying taxes (remember it could be worse), and making decisions based on your needs for year two, three and so on.
The intention for our customers is to have plans for a long term vision that is not based on single financial events. We hope to help provide resources for individuals who are able to make decisions based on the overall health of their financial condition. Sometimes this means working out problems and sometimes this means planning for success. Both require good judgment, patience and having resources to help provide options to handle any situation you may encounter. With the right plan you can rest easy and enjoy the holiday season.
Information provided by Brian Chittenden, Executive Vice President, Legacy Bank, 515-276-7010