CPA Practice Advisor - 7

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draw on it, but make sure the funds are
easily accessible so that you can handle
your emergencies without a delay.

payments. Emotionally it feels like a smaller
payment, and they're able to manage that
much more easily."

Having the ability to make the
r ight business decision at the
right time can ensure success for
your business. Whether you're looking at
a chance to expand your inventory, hire a
new employee, add to your physical space,
or upgrade technology, you don't want a
lack of available cash to be the one thing
standing in the way of growth. A business
credit card or an established bank line of
credit can give you the wherewithal to move
forward with your plans.

Sales and payroll taxes are other
areas where business owners can
get into the weeds. The payroll is
over, the sales have been made, but still
there are taxes to pay. Stacy Kildal, founder
of Michigan-based Kildal Services, a bookkeeping, payroll, and administrative service
company specializing in QuickBooks,
recommends pushing sales tax and payroll
tax payments into a separate tax account
in real time, so that the funds are already
withdrawn from the company checking
account as soon as the liability arises. Then
the payroll taxes and sales taxes are paid
out of this account - the funds are always
there when needed.

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In addition to helping position
a company to take advantage of
growth opportunities, a business
credit card can assist you in navigating
the ebbs and flows of your day-to-day cash
balance in an incredibly smooth manner.
Many small business owners don't think
about getting a separate credit card for
their business. A business card gives you
the ability to separate your business and
personal expenses and might also provide
rewards that can be reinvested in the
business.

4]

Quarterly tax payments can cause
cash flow disruption in a business.
Dawn Brolin, CPA, CFE, and CEO of
Connecticut-based Powerful Accounting
works with small businesses and has
encountered this situation with some of her
clients, especially newly formed businesses.
"What ends up happening is people get
overwhelmed with the large quarterly
payments they have to make, and then
they start skipping payments. One of my
tips is to set them up with the IRS EFTPS
[Electronic Federal Tax Payment System]
and have them pay weekly installments
instead of the quarterlies. For example, if
they pay in $200 a week, at the end of the
year they've paid over $10,000 in estimated

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Negotiating is easier than you
think. If a customer of yours
experiences an unexpected cash
flow shortfall and asks to pay your bill in
a few monthly installments, you might be
agreeable to that plan. Maybe you'd tack on
a small interest charge for the late portions
of the bill. You'd certainly prefer a customer
come to you with that type of request than
just disappear for three months without
paying the bill or communicating at all.
Your vendors might react the same way if
you go to them and ask for an extension of
your payment term. Treat the conversation
like you would any business negotiation - be
professional and courteous and sincere
in your determination to make the full
payment.
The most well-organized businesses
can experience cash flow problems that
strike unexpectedly. Events out of your
control can interfere with your regular
business operations. There are several
types of cash flow emergencies that can
occur - here is a sampling of some common situations:
* Repairs: A major equipment or structural

breakdown occurs requiring massive,
expensive, unplanned repairs that weren't
accounted for in your budgeting.
* Late shipments: You planned for a big
store sale this weekend, but the shipments
didn't arrive, so unhappy customers are
leaving without making purchases.
* Theft: Merchandise is stolen, or a disgruntled employee raids the cash reserves
and you're left to deal with the shortage
* Mother Nature: Severe weather issues
can keep you from performing outside
work, thus delaying the job and the related
payments. Also the weather can keep
customers inside instead of bringing them
to your door to spend money.
* Seasonality: Seasonal businesses know
that cash flow variations occur, but the
rent is still due every month, and this can
cause cash flow headaches.
* Staff shortages: If you can't find workers
to complete the jobs you've contracted to
perform, your jobs are delayed, along with
the related revenue.
* Errors in budgeting: Mistakes happen,
and the person in charge of the budget can
err in such a way that causes unplannedfor shortages.
* Late payments and bad debts: When
your customers don't pay on time (or don't
pay at all), you can be left with a cash flow
nightmare.
When any of these events occur, it's
up to the small business owner or the
small business advisor to find a solution that will keep the business moving
forward. You need quick answers and
actions in order to maintain your good
standing with your creditors and vendors.
By adopting healthy cash flow solutions
like the examples given above, you will
have the ability to handle emergencies
and unforeseen events.

AUGUST 2019 ■

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