Jorge de Lara
Vice President and General Manager for GCS
American Express Mexico and Latin America
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Expert Contributor

Why a Robust Tax Strategy Is Part of Any Successful Business

By Jorge de Lara | Fri, 01/14/2022 - 12:48

Apart from generating profits and ensuring long-term sustainability for colleagues, communities and shareholders, companies have to make sure they are complying in full with fiscal and operational responsibilities. 

However, it’s not uncommon for small and medium businesses (SMBs) to overlook an element that is crucial for both financial health and fiscal compliance: an appropriate tax strategy. Without a doubt, the most important thing when it comes to taxes (both at a personal and at a company level) is to have timely and accurate information to better design your taxes strategy. Keeping up with regulatory changes and calculating taxes can be very complex. A lack of understanding can lead to either defaulting or not meeting payment due dates, overlooking potential benefits, or both.

According to the Mexican Tax Administration Service (SAT), from January to November 2021, tax collection saw an annual increase of 0.8 percent, with SMBs contributing a large portion, thus playing an important part in fostering economic recovery. SAT has defined March as the deadline for companies to present annual filings corresponding to the previous year, making the first quarter of every year crucial for financial teams to define and implement a successful financial strategy that will not only help meet deadlines, but also have a more robust financial, treasury and accounting position, even from a cash-flow perspective, which, as we all know, is the main resource companies need.

Depending on multiple factors, such as geographic location, specific industry or activity your company operates in, there are a number of different taxes or obligations companies should consider. Some apply more broadly to most organizations while others change by industry or activity. Having full visibility of all (local, state or federal) mandatory fiscal regulations, as well as each part of the business, including all revenue generating streams, and all cost-related items (including staff) are all necessary to design a strategic approach to tax obligations.

Aside from recurring tax filings, an organization should always consider state or local taxes, which may apply to the use of different services. In many cases, state or local tax collection authorities differ from SAT in terms of processes, platforms and time frames, making proper compliance potentially challenging.

Because of these complexities, taxes cannot be seen as an afterthought or just a recurring process to be fulfilled, and they certainly shouldn’t be left out of a company’s financial health analysis. Taxes have to be part of the overall strategic plan from the very beginning. This means having a solid understanding of regulations but also looking into potential tools and alternatives that can make tax handling easier, more efficient, and even financially wise.

Tech As an Ally

The mix of differing elements means each business requires a unique tax strategy, making a customized and well-organized approach absolutely essential. The Enterprise Resource Planning (ERP) solution is a tool used by multiple organizations to help them comply with their fiscal obligations. These tax-enabled ERPs allow businesses to integrate tax requirements with their payment methods into their systems, improving clarity over data, risk management and enhancing overall efficiency.

Once decision-makers have a clear understanding of each requirement, a new array of possibilities open up. Tools that enable information automation and integration, payment process optimization and even financing can help a business optimize its cash-flow usage, avoiding a lack of capital during rough  periods. Resource optimization enables a seamless integration of tax compliance within the organization’s overall financial health.

There are a number of public resources and playbooks that can be used as guidance to make each process easier and more efficient. Some platforms even allow the user to divide taxes by institution, type and in some cases, even showcase deferred payment options, which can also greatly contribute to free up much needed short-term cash flow. A bit of research can also lead to multiple manuals and guidance tools made available by SAT. Moreover, seeking the opinion and advice from a tax expert is always necessary.

These are tools commonly used by entrepreneurs, business owners and administrators. Above all, it is crucial for the financial team of any organization to be well informed and advised by tax experts while constantly keeping on top of updates, potential changes and the overall regulatory scenario within their market. Understanding that an optimized tax strategy is an integral part of a successful business allows companies to have full control over the health of their organization, while clearing the way for growth and success. 

Photo by:   Jorge de Lara