Given the unique tax season for California taxpayers (i.e., most of us have until October 16, 2023, to file and pay 2022 taxes and 2023 Q1, Q2, and Q3 estimates), cash flow and budgeting are more crucial than ever. Here are three things to keep in mind:
1. Include Quarterly Tax Payments in Your Financial Plan
Although most California taxpayers can enjoy delayed quarterly tax payments for 2023, October 16, 2023, will be a big payday for the IRS and the Franchise Tax Board and requires diligent budgeting. We recommend communicating with your accountant quarterly as if it was like any other year and setting those funds aside so that you’re prepared.
2. Improve Cash Flow
With high inflation and rising interest rates driving up operating costs, cash flow is back in the limelight. Having enough cash on hand could mean the difference between a business surviving the current economic turbulence or getting pulled under. Follow these guidelines to keep your cash levels stay at a healthy level:
- Send invoices to customers as soon as possible.
- Negotiate more favorable payment terms with suppliers.
- Tighten your payment terms with customers.
- Closely monitor cash inflows and outflows.
- Review loan options now so you can apply for a loan if needed.
3. Don’t Forget your Emergency Fund
Ensure your emergency fund has 3-6 months’ worth of expenses. If your tax bill is higher than expected, or your software had a 30% increase instead of a 10% increase, you must be prepared.