Probably one of the most needed skills in accounting is good financial management skills. Financial management refers to the planning, controlling, directing, monitoring, and organizing of monetary resources. Good financial management skills are needed to make sure that a company or individual can live to its means and avoid unnecessary financial crisis. There are many accounting outsourcing companies that offers financial management services for other companies to take care of their financial health. For individuals, they can seek professional help or take care of it themselves. But an individual looking to take care of their financial health should take extra caution especially to that one area they should keep a close eye on: tax management.
In the 16th amendment of the US Constitution, the Congress have had the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. This requires Americans to pay corresponding monetary value to the government. These funds mostly go in supplying the army, protection of the people, funding government projects, enforcing the law, and carrying out federal duties. The 2015 tax rates have 7 tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The amount of tax you owe depends on your filing status and income level.
According to the US Internal Revenue Service, the average annual tax gap for 2008-2010 is estimated to be $458 billion with a net compliance rate of 83.7. It has improved by little compared to $450 billion tax gap and net compliance of 83.1 for tax year 2006. Tax gap refers to the difference between the amounts of tax that should, in theory, be collected against what is actually collected. The compliance rate reflects that there are still margin of citizens that fail to properly pay their taxes. Since tax payment is a federal obligation, the law imposes punishment for those who won’t be able to pay their taxes.
Tax evasion or tax fraud is the purposeful illegal attempt of a taxpayer to evade assessment or payment of a tax imposed by the Federal law. Conviction of this tax crime may result in fines and imprisonment. According to the Internal Revenue Code section 7201, “any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
Tax evasion cases follow rigorous investigations. For companies, tax non-compliance can put the legal status of the company in a tight situation. To avoid tax penalties, it will be a lot smarter to comply with the law of the land. Because in your attempt to save money, you might just end up spending more in the legal procedures and causing you to lose more than you should.
Funds are vital to a business as it serves as its fuel. With enough funds in hand, together with big ideas, business managers are prepared in making necessary improvements for their businesses. It allows business managers to buy materials and equipment needed for their business processes. However, to efficiently use every peso of your investment, you, as a business owner, equally need an effective financial management service provider.
Financial management refers to the effective manner of organizing a business’ funds including all the income and expenses made. It does help in making decisions that can subtly and greatly affect the whole business. It is the act of keeping an accurate set of books and balance sheets containing each and every financial function made within the business.
Although there are a lot of companies that offer financial management services, there are still important points you (business owners) should understand before you fully commit your businesses to outsourced financial management service.
Outsourcing financial management service allows managers to focus on the development of the business’ products and services. Since finance is a matter that greatly needs attention for studying, outsourcing the service from the right professionals will allow you to just focus on the things you can do for the development of your business instead of allotting so much time in self-studying financial statements. Having financial management outsourced from a pool of financial professionals, moreover, can help you understand what financial statements tell you about.
On the other hand, there are cases in which you spend a lot for financial professionals than for business processes. This is why you need to also emerge yourself on the process of financial management though you have outsourced it from the professionals. Understanding is a process, and if you spend enough time understanding how financial professionals do the process, you would be able to do financial management yourself or with a little help from the professionals. So in choosing the service provider, make sure that they are all willing to not just do the financial management process but to also impart knowledge to you as the business owner.
Moreover, your chosen financial management service provider helps you avoid possibly dangerous mistakes. Since funds are vital in making your business processes successful, knowledgeable professionals can help you not overlook simple yet important details about your finances. So it is equally important that you outsource the financial management service from established providers who have handled finances of different businesses. Although you are assured that your chosen provider can really help you according to their experience, it is not a reason for you to lose awareness of the key factors of your business.
Outsourcing financial management service, like other outsourced services, has its own set of advantages and disadvantages that affects how managers run businesses. Since finance is an important factor that you cannot lose in managing your business, you need to be careful enough in choosing your service provider. Generally, in outsourcing financial management service, you need to balance its advantages and disadvantages and learn from its process.
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