Financial Management is Not about Accounting and End of Year Tax Filing

– although both are relevant for your business.

It is about strategic decision making in areas of your business concerning money profits pricing costs cash flow the use of capital, income revenue expenses wages employee benefits on-costs hiring & firing retirement planning finance tax investment acquisition

Of course it is how the cost free source of funds is applied in your business that will determine the ultimate benefit – which should not be squandered.

Whichever form of tax improvement your business can obtain it should not just be looked at in terms of impact on net trading results for the year.
It should be evaluated with respect to short, medium and long term impact on the business, profits, business growth and value.
An additional source of funds such as an indefinite or even shorter term deferral of tax should be utilized within the business to produce more sales, customers, profits and business growth.

Not just added to the bottom line profits at end of year. As tax deferral can be determined during the course of business, Its ability to make money obtain finance and capital

the application of funds and credit

and everything else which influences the running of your business,

and used as a strategic finance strategy the improved cash flow should be utilized either as it occurs or as part of a broader financial management and development plan.

For instance the extra cash available can be applied towards expanding your marketing budget.

As that activity is geared to produce Sales and Profits there should be a regenerative impact on your business – which when integrated with the marketing programs compounds the benefits exponentially.

Deferred Tax is also useful in providing investment capital –

as demonstrated by George Soros and the billions of dollars of tax deferred investment profits he was able to amass with a strategy of investing deferred tax.

Not only are those funds able to be used directly as additional investment capital they can also be applied to servicing investment loan interest expense.

The free source of money when applied to cover the cost of investments can unlock a massive amount of additional funds to enable highly leveraged investment strategies with exceptional ROI when managed appropriately.

For example:

say your business is able to defer tax each year of $100,000.

That money could be simply invested – externally at a conservative return of between 10 to 15 percent – in a number of investments, including real estate and equities.

Each year the additional $100,000 could be used as a deposit or down payment on properties – which are able to be purchased on leverage and structured to be self-servicing.

That is loan interest can be paid by the income generated from the investments.

A third scenario might be the $100,000 can be used to pay interest on a larger capital borrowings,

which assuming an interest rate of 5% might be in excess of $2million – as the effective interest rate should be lower than the nominal rate in view of the tax-deductibility of the $100,000 as loan interest.

Even assuming a net investment return of just 7% a year, largely capital in nature –

the investment could be doubling every 10 years.

Ignoring the tax element on profits – which could be structured to be tax free –

profit in 10 years would amount to $2million,

and in 20 years $6million.

Although a prudent investment strategy of regularly gearing up on capital growth could produce a much greater result.

However, Instead of external investing at a compounding rate of 7% a year

a better return should be achievable by

reinvesting the extra free capital yearly at more than a 30% ROI (achievable by most profitable businesses).

My clients are often able to achieve a 300% ROI when marketing budgets are expanded

or when the funds are used as part of an acquisition strategy.

If you are bent on constructing dream sheets extrapolate the numbers.

But, if you are a realist focus on

the end game of exiting with a tidy sum of


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