Article originally published in the Orange County Business Journal.
Throughout Orange County and beyond, the collective sigh of relief is practically audible, as small business owners, multinational executives, and every leader in between ties the bow on their 2021 tax returns.
But with tax season coming to a close, the majority of business leaders are also set to mark another ending, at least until next year. For most, the end of tax season marks the end of thoroughly looking at their financial performance (good or bad).
Too often, the end of tax season is when companies stop seeking out opportunities to improve their business from a financial perspective, whether in the form of creating efficiencies, cutting costs, or taking advantage of new revenue opportunities.
Due to the past-focused, tax-focused engagements most business leaders have with their tax preparers, most leaders fall prey to a prevalent myth: the myth that accounting is merely reporting, and that its main function is to recap and present historical data so that they can file their tax returns.
In viewing accounting through this lens, leaders fail to recognize the strategic gains that would arise if they had accurate and timely financial information they can use every month, and if they utilized the power of financial data to drive business forward, not just recap last year’s revenue and costs.
Not only is the “once-a-year” approach to accounting detrimental from a monetary standpoint; it is also a stark reflection of your behavior as a leader — and whether you are being reactionary or responsive. When you solely place focus on your financial statements at tax-time, the results are likely as much of a surprise to you as anyone, as you set yourself up to frantically address whatever your totals signify.
While you may be able to get the job done, this reactionary approach is no more than a band aid. And who knows when that band aid might be ripped off, revealing the nonexistent financial planning underneath!
While you can’t always determine what outliers or external circumstances may impact your company’s financials, you can certainly minimize the impact by taking a more responsive approach. With a consistent eye on your numbers throughout the year, paired with a forward focused approach to navigating the data you find, you will be well- equipped to handle anything that comes your way, as you nip ineffective spending and unearthed costs in the bud and steer your company towards long-term goals.
Many businesses hope for profitability but crossing your fingers at the end of the year and holding your breath with your tax forms and calculator in hand is not enough to achieve it! Rather, you must map out where you want to be, and take consistent actions to carry you there. That way, when tax season rolls around again, you are prepared… Not panicked.