What’s the Big Deal about Tax Planning and Financial Planning?

I was at the mall the other day enjoying a cup of coffee when two women sat down at the table next to me. I couldn’t help but overhear their conversation. “Thank goodness we’re getting more into the year,” she moaned, “I just hate that January slump when I’m so broke.”

 "I know!” the second woman sighed, “and to add to it the other day I got the dreaded ‘we need to talk’ call from my Accountant."

This made me chuckle, Accountants are often viewed as a necessary evil, so I was interested to hear what the woman had to say and what advice she had been given. I glanced over and saw she had a wry smile on her face. “I knew I was in for a lecture - probably about missing a tax filing date or something equally naughty in my Accountant’s eyes.”

“So was it bad?” her friend asked.

“Actually no, for once everything was up to date. Instead she wanted to talk about tax and financial planning, and why they’re both so important. She said that now that I was on track she didn’t want me going backwards. The best way to do that is to have a plan for my financial future.”

“Makes sense” the first woman said, “but now you have me curious, what did she have to say?” The second woman proceeded to share and I was impressed at the solid advice she’d been given. Here’s a rundown:

Why get Tax Planning?

• Tax planning is basically about knowing the current tax laws and how they affect you and your business.
• It includes knowing what forms need to be submitted and when. By the way, ignorance is never accepted by the Tax Office as a defence for not doing what you are supposed to do!
• Tax laws change all the time. When you know what these are and plan accordingly, you can legally minimize the amount of tax you pay. Hence the value of tax planning.
• An Accountant can help you with your tax planning. They know the best way to structure income and expenses in order to legally minimize tax. This can save you hours of trying to figure it out on your own.

What about Financial Planning?

• In addition to tax planning, financial planning includes cash flow management, risk management, retirement planning, investment planning, business succession planning and education planning. i.e. Your entire financial life
• Financial planning takes a big picture approach. You analyse how various scenarios could impact your financial status. Will they increase or decrease your wealth, for example, or what’s the risk involved? This is where the advice of a financial planner is essential. 
• Because of inflation, savings and investments rarely go as far as you imagined. You need to have a plan that takes this into account for when you retire or are unable to earn an income.

Remember, different specialists provide different financial services so make sure you ask your professional what they can provide to you and what they are qualified to advise on. The Bean Countess has numerous Specialist Partners providing services tailored to small business owners - contact us for assistance.