Does this type of thinking apply to your individual financial decisions? Could you improve your decision-making to maximize your financial wealth and security? Can you learn from the mistakes of senior financial executives of major corporations?
It was reported by CFO.com that senior finance executives believe that their companies do not adequately incorporate their tax professionals into their strategic decision making. While these executives recognized the value of being in tax compliance with respect to tax preparation, most realized that they were underutilizing their tax professionals for tax planning services.
This CFO.com survey found executives realized that “Fostering an effective and efficient working relationship between tax and the business not only leads to lower tax rates, but also is vital for avoiding the kinds of tax mistakes that can turn a bold strategic move into a financial disaster.” Survey respondents were asked to identify the most valuable benefits they thought their companies could realize by improving the performance of their tax functions. Topping the list were a lower effective tax rate (less taxes paid means more cash is retained by the company) and higher earnings per share which Wall Street watches, followed by better business decision making. The study also showed that while these finance executives appreciated the value that the tax professional can add, they were not as consistent in acting on that belief. This is what I experienced when serving as the VP of Tax or Tax Director for a few Fortune 500 companies. These CFOs were foolishly focusing on “earnings before taxes” rather than “earnings after taxes”. Think about it. If you make a million dollars and most of it is eaten up by taxes, shouldn’t you be considering how to reduce those taxes? The answer is obvious. One of my former employers, GE Capital, understood the importance of cash flows and earnings per share. Realizing the importance that insightful tax planning had on its business units, GE required that all business decisions be signed off by the tax director of that business.
Whether you are an individual worried about the amount of taxes you are paying or worrying if you will have sufficient funds in your retirement to last you through your lifetime, or you a business owner expanding his business to additional states, purchasing a business, creating a new line of business, or measuring the success of your business, you need to realize that involving your tax professional is vital to the financial success of your goals. You do not want to underutilize the benefits of having your tax professional sitting by your side.
If you want to learn more about how you can better utilize your tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA officeto discuss your situation. You can also schedule a consultation at Click Here.
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