Whether you’re running a business, are self-employed, or you are required to pay instalments on your taxes. There’s a myriad number of taxes to file and, more importantly, payments to make.
One of the biggest sources of stress I’ve seen amongst business owners, is when they get behind on these payments. It can be really hard to dig your way out. There’s a lot of money that you collect and need to remit, and if it accidentally finds itself used in operations you can find yourself exposed to penalties and fees, and even more stressful, scrambling to catch up.
One of the easiest ways I’ve found to keep on top of these payments, is to keep the money separate from your operating account. A High Interest Savings Account is often the best way to tuck those funds aside, whether it’s another bank account, or something held at a brokerage, keeping a separate pot to draw those remittances from is an easy way to make sure you have the money ready when you need it, and also reduce the risk that you use it for another purpose.
You can even automate the funding of this account, determine what your usual remittances are over the course of the year and set an automatic contribution to this account monthly. if most of your expenses fall early in the month, setting the contribution for mid-month can ensure that you’ll have the cash to set aside.
So if your total remittances tend to work out to $60,000 per year save $5000 per month. Your cash flow might not work out perfectly throughout the year, and if you need to pull out some money to make it through a month, just make sure you make up for it when you have the revenue.
Ultimately these amounts are part of doing business, in the case of sales tax it was money collected on top of your price. So it’s important to make sure you have the cash when you need it. Getting behind on your sales tax remittances is a hard hole to fill back in.
By saving your remittance funds automatically you can keep a pot of money ready to go whenever you need it, even if it doesn’t perfectly cover what you end up needing, being 90% of the way there is easier to figure out.
It might seem simple, but getting behind on your taxes isn’t a fun place to be when you’re running a business. Taking the time to be prepared before you run into trouble will save you a lot of stress and headache down the road.