Taxes are unavoidable. In fact, I hope you’ll pay lots of tax! That means you are doing a half decent turnover and that you have a good profit margin.
Joking aside, I’m sure you’ll want to pay your taxes, but not too much. That’s where that bookkeeper comes in. Ultimately though, the responsibility to pay your taxes is yours, not your bookkeepers, and you should be diligent in making sure that you can pay your taxes when they are due.
The easiest way to be prepared is to take care of taxes right away, that is when you receive your payments.
Open a savings account (see ‘banking’) and put the gross tax (your taxable rate) + sales tax in to your savings account at the moment a bill gets paid. That way it’s out of your immediate view and you know exactly how much you can spend (as much as there is in your checking account).
That way you minimize temptation and ‘accidents’. It also means that when tax time is due you’ll find that you have some money left. Why ? Because if you reserve the gross rax rate you are ignoring the deductibles, and when the time to pay comes around you will do your taxes, reduce the amount to pay tax over by the deductibles, but because you didn’t take that in to account when you made your reservations there is now a surplus.
This is a lot more comfortable than to try to pay your taxes from your income at the time when the tax is due. You ignore this advice at your peril, you can gamble that you’ll be able to come up with the money somehow but if anything goes wrong in your scheme you are done. End of story. So better to tread carefully and to try to make sure that you are prepared.
This all means that of a given bill (say 10,000 credit units, for a nice round number) there is not a whole lot to spend initially.
If your sales tax is 15 %, then 1500 credits are gone for sales tax, and assuming a 35% tax rate there will only be about 6000 credits left for you to live of and run your business on.
And that’s if you’re not smart and save some of that money (say half) for when the times are bad and you need to tide over for a while (this happens occasionally).