Business owners are most often focused on running the day to day operations of their business. I want owners to take just 10 minutes to consider other aspects of their business that need attention.
Evanston IL (Vocus/PRWEB) March 29, 2011
The provocative host of It’s Your Business Radio, Richard Morris, opens the podcast by suggesting that profit shown on your taxes may be more a matter of opinion than fact. Joking that he hopes the IRS is not listening, he interviews Steve Moroni of Gallagher Lieb, Moroni & Associates who puts forward the idea that companies can benefit from keeping two sets of books – a completely legitimate management tool.
Most business owners and even some accountants believe that the only set of books one should use to manage a business is the one with financial statements prepared using GAP accounting rules for the purpose of taxes. Morris and Moroni take a different perspective. “The goal of keeping a second set of books is not to show income a business owner does not want the government to see. Rather it is a management tool that more accurately reflects the actual cash flows of the business and the true profit or loss it is making,” Moroni explains.
Morris, principal of ROI (Resource for Ownership Intelligence) Consulting based in Evanston, Ill., says, “Owners need to understand this distinction when looking at their financial statements. A privately held business should use the tax laws to its full advantage and show as little profit as possible to reduce the taxes paid. On the other hand, a publicly held company would want to take the exact same business and show as much profit as possible to entice people to purchase stock.”
Morris and Moroni point out the “true profit” depends on the legal choices your accountant makes when preparing your company’s books. They explain that the books presented to the IRS and lending institutions may not present management with the best numbers for guiding the business.
“One of the goals of Its Your Business Radio is to educate owners on business issues where they can have a differentiated advantage over publicly held companies,” says Morris. “Understanding the difference in how financials are compiled for publicly vs. privately held businesses in a fun talk radio format can give owners a great competitive advantage.” Listen to the complete interview at http://richroi.com/resourceCenter/ItsYourBusinessRadio.html.
Richard Morris is principal of Evanston-based ROI (Resource for Ownership Intelligence) Consulting which helps family owners expand and pass down their business to subsequent generations. He also provides family business education, consulting and strategic planning for cooperatives, franchises and associations, and is an adjunct professor at the Lake Forest Graduate School of Management. Previously, he managed marketing and acquisitions for his family's 80-year-old privately held company, Fel-Pro Incorporated, and served on its Board of Directors until the sale of the business in 1998. Morris also co-authored the book “Kids, Wealth and Consequences: Ensuring a Responsible Financial Future for the Next Generation” (Bloomberg Press).
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