All Posts tagged Strategic Planning

What Is Positive and Negative Cash Flow and How Does It Affect a Business?

What Is Positive and Negative Cash Flow and How Does It Affect a Business?

As a business owner, it is crucial to understand cash flow and how it can affect your business and your profit. 

We implore you to work with a qualified virtual Chief Financial Officer (vCFO) who can help you determine what practical steps should be taken to reach your business goal. In the world of business finances, a cash flow report can make or break a business, and is one of the reasons your vCFO will be an indispensable part of your team.

Determining the Quality of Your Cash Flow

Cash flow can be either positive or negative. 

When your business account is receiving more cash than it is paying out, you will have a positive cash flow result. This usually means that your company is receiving more money in sales of products or services than it is spending on business expenses or anything else, which results in a good, positive cash flow. The remaining money after business expenses is your profit. 

However, if expenses for payroll, maintenance, rent, and other services are exceeding the flow of money being made, you will start losing money, resulting in negative cash flow.

How Does Your Cash Flow Affect Your Decision Making?

Positive cash flow is the foundation of a solid business. Positive cash flow can pay for expansions in operational capability and help you to recognize when targeted profit goals are within reach. 

However, negative cash flows can also be a necessary part of life for every business, especially during start-up and periods of rapid expansion. Cash flow reporting during these times will help you determine if your business finances will remain strong enough to last until the expected revenue increases finally appear and bring your cash flow back into the positive.

Your cash flow ultimately determines if you have the means to expand, maintain, or upgrade your business.

Planning for Future Growth

Cash Flow Report is an important tool for your vCFO’s; it can be used to determine which investments have the best chance of resulting in future revenue gains without putting the business at risk of bankruptcy.

Your virtual CFO will be an architect designing the profitable business you have always envisioned.

Hiring a vCFO Can Assist in Succeeding in Your Business Plan

The Virtual Chief Financial Officers at Gonzalez and Arrambide, Inc. in Weslaco can help you maintain a profitable cash flow for your business. We strongly suggest learning about cash flow and how it affects your business. 

More

Businesses in the RGV Should Know About These Taxes Before They Open Their Doors

Businesses in the RGV Should Know About These Taxes Before They Open Their Doors

There is a lot more to starting up a business than creating a product, drafting a business and marketing plan, and making a lot of revenue. The tax collector still needs to take their cut, and taxes–even outside of a business setting–can be complicated.

At Gonzalez & Arrambide, Inc. we want to help new entrepreneurs like you get up to speed on identifying what taxes may be applicable to their business by highlighting most of the ones that they may be responsible for paying down below.

Business Taxes in Texas 

In contrast with other states, the low business taxes and lack of personal income in Texas gives the Lone Star State two advantages over many other states:

  1. Businesses keep more of the revenue they generate.
  2. Top talent individuals are attracted to the lack of personal income tax.

This is even better for small businesses. With the business tax rate already being low as is, it shrinks or decreases to zero for businesses whose revenues don’t exceed particular thresholds.

For instance, smaller businesses with less than $1.18 million in receipts pay $0 in business taxes–known as the zero-tax threshold or no-tax-due threshold. Bigger businesses that have over $1.18 million to $10 million in receipts only pay around 0.375 percent, and if you’re a sole proprietor or in a general partnership, you are exempt from the franchise tax.

For startups and entrepreneurs, this can make the few early years a little less stressful.

It is, however, important to keep in mind that Texas refers to its tax on businesses as a franchise tax, but the state doesn’t have a corporate income tax. To clarify, the difference between corporate income taxes and franchise taxes is that corporate income taxes apply to profit while franchise taxes are basically a mandatory fee for companies who have the privilege of doing business in a city or state–usually determined by the capital held by or the net worth of the business organization.

S and C Corporation Taxes

The S Corporation is popular among small businesses. Texas still requires S corporations to pay its franchise tax depending on the business’s annual revenue. This tax can only be as high as 1 percent, and individual shareholders in the company aren’t obligated to cover state taxes on their portions of the company’s income.

This advantage offers benefits to small S corporations whose annual revenues don’t pass the zero-tax threshold. In a sense, they work tax-free since tax isn’t established on the business itself or on the individuals who gain money from the business.

As companies grow from LLCS to S corporations and then ultimately a C corporation, so too will they be responsible to pay franchise taxes where they will follow the same zero-tax threshold rules mentioned above.

Limited Liability Company Taxes

LLC is the other common choice for small businesses. In most states, LLCs are entities that provide protection to business owners from some legal liabilities but give their incomes to those owners, who take care of the personal income tax instead of business income tax on their proceeds.

With S corporations, however, Texas goes against the national trend and charges the franchise tax to LLCs, which applies to every business type. 

It is worth emphasizing that the income that goes to the owners as personal income isn’t imposed on state income tax in Texas.

Partnership and Sole Proprietorship Taxes

Most of Texas’ small businesses are partnerships that pay the franchise tax, whereas sole proprietorships don’t.

However, if a partnership is a business that is directly owned by individuals, meaning that the business income is distributed directly to them, partnerships and sole proprietorships are treated the same and aren’t charged the franchise tax.

The business owners are obligated to pay federal income tax on this income but not state tax, given that Texas doesn’t tax personal income.

Most partnerships in Texas, including LPs and LLPs, are assessed with the franchise tax.

The Virtual CFOs at Gonzalez & Arrambide are Available to Assist You

At Gonzalez & Arrambide, we offer our clients Virtual Chief Financial Officer (VCFO) services designed to help businesses manage their financial obligations efficiently without having the need of a full-time CFO, all at a reasonable rate that can save you a lot on startup costs.

Every dollar counts when it comes to running a business, and having an accurate report of your cash flow and how it is affected by taxes is crucial to staying afloat.

If you’re starting up a business, let us help you sort out all of the tax information and create a financial plan that is right for you.

Schedule a Consultation Now

More

5 Ways to Avoid Making Mistakes With Strategic Business Planning

5 Ways to Avoid Making Mistakes With Strategic Business Planning

Implementing processes to advance your organization’s long-term goals is one aspect of business management. However, one of the more critical components to running a profitable company involves strategic planning, or documenting and establishing a direction for your business, including assessing where you are and the direction it’s trending. 

Strategic planning is not only an opportunity to record your organization’s mission, vision, and values, but to also lay out your business’ goals and to develop an action plan to achieve them. A well-prepared strategic plan will play a pivotal role in the growth and success of your business, and will offer leadership and support staff the means to respond to opportunities and challenges that arise. 

Notwithstanding, the best-laid plans can sometimes go awry. When developing and implementing a strategic plan for your organization, there are ways to avoid making mistakes as you move forward.

Making the Right Decisions: Avoiding Mistakes in Your Strategic Business Plan

1. Employ an internal facilitator with experience leading planning sessions. An outside qualified consultant may offer the best way to run any planning sessions. An additional benefit of hiring an outside consultant is that they bring in an objective (and outside) perspective, while encouraging others to participate and offer their own opinion. 

2. State your objectives clearly. Exercise a measure of structure and lay out objectives to avoid the session going off track. Clear objectives help guide sessions and offer a way for people to remain on task. 

3. Establish an environment that invites trust and openness. Brainstorming as a group is critical, and it’s important to do so in an atmosphere free of judgment. On occasion, the most out-of-box ideas create meaningful change. Not offering an environment where participants are able to freely speak their minds may stifle great ideas. 

4. Engage in follow-up for ideas from your strategy session. Strategic planning sessions involve taking leadership away from their busy schedules, so it’s important to utilize that time wisely and to implement action items that emerge from the session. Lack of execution is a common way to remain stagnant and miss out on opportunities to advance toward greater success. 

5. Invite the right people to the planning session. Small group sessions offer opportunities to get things done more swiftly and with greater ease, whereas larger groups with more participants offer improved opportunities for great ideas. 

The larger the group, the more responsibility a facilitator must undertake. Including individuals from different disciplines and levels of expertise who offer broader perspectives is a surefire way to develop strategies that are innovative and effective. 

In summary, strategic planning sessions can help ensure your business advances in the direction you expect for success, but adopting the right framework and working with the right people are critical to a positive outcome. 

Gonzalez & Arrambide, Inc., Offers Their CPA Services to Help Your Business Succeed

With 25 years as one of the most trusted and respected accounting firms in the Rio Grande Valley, Gonzalez & Arrambide, Inc., has guided individuals and businesses in addressing their financial and accounting needs.

Call us today at (956) 447-9009 and learn how we can help you grow your business! 

Request Your FREE Consultation

More