[Aggressive Management] Why do companies that 'should have saved money through tax avoidance' end up struggling with cash flow?
Hello. I am Tomoko Tsuji, a consultant specializing in fundamental cash flow improvement.
"If you're going to make a profit and pay taxes, it's better to use expenses to lower your taxes." Have you ever heard these words at a gathering of fellow business owners?
The more "aggressive" a president is about expanding their business, the more sensitive they tend to be toward costs and taxes, and they are prone to honestly following advice from their peers.
However, after watching the cash flow of many companies on the front lines for many years, I have realized something.
That is...
The reality that "the more a company works hard at tax avoidance as advised, the more they find themselves struggling with cash flow, despite having sales, because they have no money on hand."
The risk of "1 million yen in expenses" versus "350,000 yen in taxes"
Please think about this a little more concretely.
When you are about to make a profit of 1 million yen, suppose you use "1 million yen in expenses" to bring your profit to zero because you don't want to pay taxes.
Your taxes will be 0 yen, but 1 million yen in cash will have left your company.
The cash remaining on hand is 0 yen.
On the other hand, suppose you don't engage in unreasonable tax avoidance, but instead make that 1 million yen profit and pay about 35% (about 350,000 yen) in taxes.
You will have 650,000 yen in cash firmly remaining on hand.
The answer to which option leaves you with more funds to "aggressively attack" next is clear, isn't it?
"Handing over 100 yen in cash to be exempted from 35 yen in taxes"
This is the calm essence of tax avoidance that involves spending money.
"Tax avoidance" itself is not bad
I don't want you to misunderstand; I am not completely denying tax avoidance.
If you have thoroughly calculated your company's cash flow and investment plans for several years ahead, and you are performing tax avoidance based on a rational judgment that "using this tax avoidance measure now will lead to maximizing cash on hand," then there is no problem at all.
Rather, you should do it strategically and proactively.
What is truly dangerous is ignoring your company's cash flow and...
'Just because it feels like a waste to pay taxes'
'Because other CEOs are saying so'
running toward tax-saving measures that involve spending money easily for those reasons.
What is explained in the main blog post
In this blog post, we delve deeper into the 'tax-saving traps' that aggressive CEOs often fall into.
1 million yen in expenses vs. 350,000 yen in taxes (how cash actually remains)
The trap of financial statements: 'Profit earned does not equal cash remaining'
The reason why lowering profits for tax savings also cuts into your 'bank loan (aggressive funding)' capacity
The decisive difference between 'strategic tax saving' and 'bad tax saving' based on cash flow
Rather than reducing immediate taxes, it is about 'how to keep real cash on hand for future business expansion'.
This is content I would like every business owner who is serious about growing their company to read.
If you are unsure about year-end tax measures or tax-saving strategies, please use this as an opportunity to review your company's cash flow and check out the main article via the link below!
