Matt had built a successful plumbing company over a four-year period when he realized that he was about to face one of the largest expenses of his career in the form of an individual tax liability stemming significant flow through business income.
The problem, he stated, was that his bank account clearly didn’t reflect the amount of income shown on his income statement. Consequently, he didn’t have enough cash available to cover the pending tax liability.
After review of his financial statements, we uncovered large, fixed asset purchases and corresponding notes that were not included in his balance sheet, giving rise to large first year depreciation deductions. These non-cash expenses significantly reduced his taxable income, turning a significant liability into a several thousand-dollar overpayment carried into the following year! This would also provide a frame-work for strategic fixed asset purchases as his business continues to grow.
As they say “It’s not about what you make, it’s what you keep.” We now meet on a monthly basis to review professionally prepared financial statements and discuss incentivizing employees, marketing efforts, and personal financial planning.