Taxes Are Not Cash Flow

© THE PROFIT LINE Reprinted with Permission

Every small business owner in Canada collects or withholds some form of tax, whether it be GST, PST, employee remittances, or some other form of government levy. As the money from these tax collections flow into your bank account, it's tempting to use the cash for short-term spending - but don't do it.

Taxes don't belong to you; you're just holding onto them for a time. Business owners who use tax remittances as cash flow typically find themselves scrambling to pay the government when the filing comes due. Late payments carry stiff penalties that eat into your profitability, not to mention your peace of mind.

Make it easy on yourself and your business. If necessary to keep yourself from spending tax remittances, set up a separate bank account into which you can funnel what you collect or withhold. When the filing comes due, a quick cheque covers your tax obligation on time and in full. Most importantly, keep on top of your books so you always know what's yours and what belongs to the government.