Why Electrical Business Owners Need To Avoid Pre-Tax Purchasing

There are a few things you could do ethically to reduce taxes, such as purchase Forward Tax Time. You can also consider converting your cash into an asset because you're buying something. The judgement on pre-tax purchasing is out there. Most of the tax-advisers would recommend that you do some pre-tax purchasing, but if you were to study its repercussions in detail then you’d conclude that it is not worth it.

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It is not worth doing pre-tax purchasing because it can affect the cash flow of your electrical contracting business. If you use your cash which you are holding on to pay debts and use it to buy assets which are not used or generate money straight away then it’s a mess. Chaser, drills, and more tools are good to have but they won’t generate massive revenue and profit right away. So, you should keep all the money in your bank rather than buying all the assets for tax purposes. Thus you should not convert all your cash into assets just for the sake of saving a few bucks on your taxes.

When planning your taxes, you have to remember:

Don’t run your business for tax purposes, but run it for profit.

If you are a profitable business, you will be paying taxes. The more profitable you are, the more taxes you will pay. That’s how the system works. So if you keep focusing on taxes, you might not generate enough profit and you will end up giving all of your cash away to turn it into assets. As a result of this, you will have a major cash flow problem.

So, it is really important to consider the operational costs of running your business and cash flow management before making any pre-tax purchases. Here are a few other things that you might want to consider before you purchase any big asset like a car for your electrical contracting business.

What’s your take on pre-tax purchasing? Do share your thoughts, comments, and opinions with us.

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