Why having a tax bill to pay is OK

What is the primary financial challenge facing most eye care business owners today? For California-based optometrist and business owner of Invision Optometry, Dr Michael Kling, the answer is simple: “poor cash flow.”

Speaking to delegates at SECO 2019, New Orleans (20–24 February), Dr Kling said too often business owners focus on top line revenue growth, while ignoring the increasing expenses and debt that accompanies growth.

Without a plan, practice owners can find themselves “living insurance check to insurance check,” he explained.

“Are you wondering how you are going to make payroll, are you financially overwhelmed and stressed out?,” he asked.

Dr Kling told delegates that cash flow management is essential for any business to survive and grow. This approach can “immediately improve practice profitability, eradicate unnecessary business expenses, and assist practice owners to manage their business debt.”

Using the analogy of toothpaste, he encouraged delegates to consider how they are likely to “squeeze the last drop” out of a tube, but then squeeze out an overly generous amount of toothpaste when opening a new tube. “Does that make business sense?” he asked.

Recommending the business advice text, Profit First, by Mike Michalowicz, Dr Kling said that business owners need to appreciate the difference between “profit and the compensation the owner should be paid.”

Consider using separate bank accounts for each revenue stream he suggested, which also includes individual accounts for government tax and for operational expenses. This approach helps to “remove temptation,” Dr Kling said, adding that it helps him to keep “profits and taxes separate.”

Dr Kling closed by reminding delegates with a smile that “having a tax bill because you have made a profit is OK.”

Image credit: Pixabay