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SMALL AND MEDIUM ENTERPRISES (SMEs) AND ITS TAX IMPLICATION (2)

In our last edition, we considered the common challenges facing SMEs. Among others, we dwelled on tax matters and promised to provide some hint on how the challenges can be managed through effective tax planning. TAX PLANNING Generally, tax is a compulsory levy charged by Government or her agents on individual or corporate body to finance her projects and administration. Since tax is back up by law, the effective way to manage it is to comply. The best use of all available allowances, deductions, exclusions, exemptions, reliefs etc., are the legal means, as only a very thin line exist between tax avoidance and tax evadance.   BEST BUSINESS PRACTICES Best business practices and good corporate governance demand that business owners and operators conduct their business in a manner to avoid negligence. That is why a proper understanding of the industry and compliance issues cannot be overemphasized before starting a new business or venturing to any project. This best business practices is very key and a good business plan or feasibility study will X-Ray this. For an existing business a total system review or revised business plan is ideal while for new venture - business plan is the answer. Startup businesses The most classic business planning scenario is for a startup, for which the plan helps the founders break uncertainty down into meaningful pieces like sales projection, expense budget, milestones and tasks. The need becomes obvious as soon as you recognize that you don’t know how much money you need, and when you need it, without laying out projected sales, costs, expenses, and timing of payments. And that’s for all startups, whether or not they need to convince investors, banks, or friends and family to part with their money and fund the new venture. In this case, the business plan is focused on explaining what the new company is going to do; how it is going to accomplish its goals; and - most importantly - why the founders are the right people to do the job. A startup business plan also details the amount of money needed to get the business off the ground, and through the initial growth phases that will lead (hopefully!) to profitability. Existing businesses Not all business plans are for startups that are launching the next big thing. Existing businesses use business plans to manage and steer the business, not just to address changes in their markets and to take advantage of new opportunities. They use a plan to reinforce strategy, establish metrics, manage responsibilities and goals, track results, and manage and plan resources including critical cash-flow. And of course they use a plan to sets the schedule for regular review and revision. Business plans can be a critical driver of growth for existing businesses.
Do you know that businesses that write plans and use them to manage their business grow 30 percent faster than businesses that take a “seat of the pants” approach? In the next edition we will be focusing on business documentation and many more financial advisory services, we do all these and many more in J. O. AWOYEMI & CO (JOA) as a value added firm.

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