Need to cut your 7-figure e-commerce tax bill? We reveal the 3 non-negotiable clean-up steps you must take now to unlock massive savings and avoid an audit.
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The end of the year is the most profitable—and most stressful—time for 7-figure e-commerce brands. This essential guide cuts through the noise of TikTok “tax hacks” and delivers actionable strategies to position your business for maximum profitability and tax savings before December 31st. We focus on the core foundation of good tax planning: clean data.
Learn why an inventory reality check is non-negotiable, how proper expense classification directly impacts your profit margins, and the critical importance of reconciling your bank and sales channels. Finally, we dive into powerful year-end moves like timing income/expenses and avoiding unexpected tax bills from S-Corp owner distributions. Don’t be the reactive brand—watch now to start 2026 with confidence!
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⏰ Key Moments & Benefits:
[00:09:03] The Non-Negotiable Inventory Reality Check
[00:15:23] Why Your Expense Classification Destroys Your Profit Margins
[00:19:58] Stop Tax Surprises: Reconcile Your Sales Channels NOW
[00:25:03] Cash vs. Accrual: Accelerating Expenses for Tax Savings
[00:28:11] The S-Corp Distribution Trap That Creates Surprise Tax Bills
[00:33:31] Capital Expenditures: Spending Money to Actually Save on Taxes
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🔔 Subscribe for more E-commerce Finance Strategies: https://www.youtube.com/playlist?list=PLGX9DRMoXh9Bekx1AWfE1zP_TAZdwYet4
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What’s up Chris?
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What’s going on Jay happy holidays happy all of us
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I know for all those e-commerce sellers out there. It’s right in the middle of the busiest time of year
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The most wonderful time of year the the time of year that makes you a seven figure e-commerce brand, right?
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That’s right
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That and it’s it’s the glorious time of the year and it’s the most stressful time of the year and
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Yeah, and kind of we’re gonna hit on that stressful part because unless you timed it properly
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You know the busiest month is also the end of your year
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So, you know there’s some prep you got to do
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That’s that’s exactly right like there’s a bunch of things that you can do now because we’re the year’s not quite over
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Not quite so when we when we talk about that oftentimes what we’re talking about really truly is tax planning
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And that’s stuff that you can start today, and so what are those year in tax moves that that you’re now seven figure business
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That you can start to make right now that actually matter
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Well, there are there are a few different things that that we want to highlight for you here
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You know if the books are wrong at the end of the year like you’re you already got bigger problem you have bigger fish to fret for sure
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Most
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Most most business owners. This isn’t true to just e-commerce. It’s true to everywhere
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Most business owners often focus on deduction
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deductions right like you’re like how can I say it on taxes?
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How can I say it on taxes rather than the quality of your actual underlying numbers?
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Yeah, and and and to that to that point like clean
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Clean data is the core of you’re in tax planning because if you have bad numbers
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You’re you’re gonna have everything else isn’t gonna work properly, right?
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So you’re not for sure you’re not just buying stuff to write it off. That’s not the point
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You’re you’re you’re you’re buying them with intention and they also may be able to be written up right?
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That’s the that is what true tax planning is really about
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Not just finding all your deductions
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So you hit on the key point here, you know, we’re in just we’re in December, but you know
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Yes, we are in tax panic, but
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Tax panic is self-induced because if we start looking at tax planning in June and July and August
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We know what to expect when we get here and that’s what it’s all about tax planning tax planning tax planning
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So we’re gonna drive that point home for the next
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Three weeks. Yeah
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Absolutely the point and point to note here, right?
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This isn’t just a CPA checklist or some webinar that it’s a replay right?
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We’re intending to focus this specifically two brands and why you know, why do these things matter to you as an e-commerce seller?
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So so be aware that that’s
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That’s the the stuff that we’re talking about is things that you can you can do between now and the end of the year and
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Why they matter how they helped to position you better for quarter one and all of that kind of stuff?
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Yeah, and you you mentioned going out and buying things so you know
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You know December is always that time and you get that panic call and Christmas Eve. Hey
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Should I buy a car?
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I’m like well
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Do you need one?
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Well, no, but I need the deduction. Well, don’t buy a car by this and so there’s a whole conversation about that
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because you have to have a certain vehicle to depreciate the whole thing and
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You know the thing about that is
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You might not need to spend $90,000 to get that deduction
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And you might not be able to afford the $90,000 to get that deduction
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So you got to be smart. Yeah, so what we’ll get it all of that so
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Yeah, exactly so
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Obviously Jay jay alluded to this before that in the year it could be really really hard for you
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Thomas France you’re you just spent like a bajillion dollars on ads your conversion rates like you’re not really sure what you’re expecting because
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Two weeks ago they were awesome and now they’re like you’re really lousy
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But you know that they might pick up next year if you didn’t quite have
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Didn’t quite have the black Friday week that you were hoping for maybe your inventory is a little heavier than expected
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Or maybe it’s maybe alternatively you had a really really successful one in your you’re looking at stockouts or
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Or other issues like that like cash may feel tight even if the year has been just a smashing success
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And that is that’s true this time of year for everybody because all of that inventory that you needed to get through Christmas time here
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Through the end of the year you had to pay for that all in advance
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And so you may have some holiday special that you still haven’t slammed the last little bits through but you had you you had to pay that
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supplier so
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You you may end up in these situations where like everything feels like it’s super tight even though
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Even though you may have had a really successful year
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Yeah, and if this sounds really familiar to you
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Just know it’s not you everybody’s feeling the same stress and
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Yeah, the thing that Chris is talking about you know, it’s like you have these great sales
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but you now have products sitting in your warehouse and
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That is your profit. It’s sitting back there on the shelf
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So you have a couple more weeks
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This is the time to drop those prices and get them out you know convert that inventory to cash
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Because this is the time that really matters you don’t want to leave that stuff sitting in the warehouse because this could be your last chance to sell it
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You’re listening and there are other things that cause cash and strains and other like especially hard things to
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Right especially if you’re prepaying for ads like if you’re paying for ads a couple days in advance or something like that
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You may you may be really tight on cash and especially if you’re selling a bunch of your inventory through
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Through Amazon like you may you may not be getting those payouts for another week
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So you may have had a really successful black Friday, but you may not even have that money yet and that
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And that can be particularly challenging and so what that what that results in is that your financial statements through your financial position
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Often lags the real operational truth and so you you don’t know today
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If you’re looking at your finances necessarily you don’t know on December 9th
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Exactly how you stand or
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For the month of November because you may still be having some things clear you may have some some stuff you paid for already
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That that again they can sell in next week and so
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The things that people often do right is maybe a clearance cell which is which is a
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Which is driven by cash stress not some of those things that we’ve talked about in prior episodes where where
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Where it’s strategic clearance stuff where you take we’re taking your slow movers and getting them out of your warehouse
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If you’re if you’re just make if you’re just driving driving those discounts by
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In order to collect cash that’s not that’s not strategy. That’s just
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That’s that’s just stressful stressful cash management
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And so those decisions that you may be making maybe made without understanding or
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margins or the tax impacts right you’re just you’re just making them to to make ends meet as we talked about it through that whole cash flow
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Cycle that we had up the four episodes talking through cash decision making
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Right you we’re here to help to to guide you to make to make better decisions
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And so when we talk about that
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That’s what we’re gonna talk about the extra the things that you can do now
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In the face of all those pressures that we just talked about before the interview to make sure that everything is in
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Bit of order that your your your books and records are nice and clean
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and that
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That that’ll allow you to work with tax professional and to ensure that you do have a good
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quality and productive tax plan is planning and discussion and
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And so it’s important because these things are are like table stakes with respect to
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Making sure that the table that the tax planning is correct, right?
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when you have
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When you have that clean data right like that’s a mandatory thing that you need in order to be able to do the right to make the right decisions
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Because again if you’ve got a whole payout that you haven’t recorded from Amazon from Black Friday and you’re trying to make decisions on it
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You know that may be a bit of revenue that you definitely should be reporting
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But that you haven’t yet and that can make you make a bad decision because you may think that you
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You’re not as profitable as you have been
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Or a lot of or the opposite way or either could be all kinds of different impacts or factors that
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go into
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Those tax planning discussions. So what should you do right? We talk here always about actionable stuff
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And and that’s what we’re gonna start with today and so the first action that you absolutely absolutely
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Must take if we head into the end of the year is
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You need a you need an inventory and cost to sell reality check
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You need to know are your inventory counts the inventory that you should say you haven’t shop by or the inventory that Amazon has on
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On sale for you are they were you like is that act does that actually reflect reality or they wishful thinking right?
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Yeah, baby will have some inventory over there that kind of thing right
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Jay when you think about
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inventory management especially in the year like this. What are the things that come to mind for you?
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Yeah, it’s the existence. It’s that audit thing that you used to do is what actually isn’t that inventory currently and
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Is what is out on the shelf in inventory? Is it not is it overstated?
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Understooded is it valued at the right price?
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You know things like that and you know what we’ve talked about for
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What I feel is like years now is slow moving goods, you know things that you need to
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obsolete right off get rid of and that’s what I was talking about earlier
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You know you have these things in your warehouse. This might be your last opportunity to sell it
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So and I’m not saying that from a cash standpoint. That’s a strategy standpoint
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You know we don’t want to leave it sitting in your warehouse
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So get it out sell it now and you know
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So now is the time to run those reports in your IMS and
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look at at the
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Days sales that you have for those items and do you have something that’s sitting there with 600 days of stock on hand?
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Well, it’s time to look at that. Do you need to
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Liquidate it. Do you need to move it somehow? You know or are you sitting there with
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20 days and you’re playing purchase orders every 30 days for these products
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You know and that’s where having the data that helps you make these decisions is so so so necessary and
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That’s why you know, you know, maybe your numbers are wrong at 1231. They can’t be wrong at 1231
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because if they’re wrong at 1231
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Everything from that is going to be wrong including all the analysis that you’ve done
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So you’re just setting yourself up for failure and you know
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The truth is inventory truth is non-negotiable
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You got to know what you got you got to know what the value is you got to know what it cost you and
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When I say what it cost you it comes down to what what’s that Chris? Huh?
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That are what are later cost calculator the land of cost. Yes
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Yeah, so you want to make sure that you have the true lente cost that your valued your products at so you know
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now at the time get it in there understand it and
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Go into the new year with numbers that are true and are ready to go for 2026
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Yeah, and that’s really important because there are some spots where where you can run into problems
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It is it is a an issue occasion occasionally a common issue
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Shopify Amazon or you’re just your inventory management system integrations to
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accidentally inflate inventory like they made us not relieve a couple transactions like that kind of stuff
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And while it would be great to just have loads and loads of excess inventory the truth of the matter is if you’ve got overstated
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Inventory that means you have overstated profit that means that some of the costs that you should have been
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Recognizing haven’t been recognized and that and and ultimately for from the perspective of a tax conversation
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That means you’re paying higher taxes
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And so you really want that that inventory balance to be truly reflective of what’s on hand and like Jay alluded to it’s that
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One area that people may not think about that much are those those lost or damaged or
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Returns that you’re not going to be able to send back out
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Things that are too old now because you they’re a version one of your version three product here
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You’re that you’re just never going to be able to sell these
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It’s time to just write those off and get them out of the warehouse and and and Jay
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We talk about that a lot from a hey 600 days worth of stock
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We mentioned in the cash flow in the cash flow
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Conversation that we were having a couple weeks ago like the one thing that you don’t think about when you have that much inventory
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If that much excess inventory is that you’re also paying somebody to hold it for sure
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You’re gonna pay like a stocking fee or a holding fee and especially over the past couple months that stocking fee is increased as
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Amazon’s gonna get all their stuff through the warehouses, right?
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You want to just get rid of that inventory if you need to take it back if you need to throw it in the trash
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Like unfortunately like liquidating it is the best thing to do right now, right?
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This is your last opportunity before the end of the year that you can give it of that
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And if you just are not going to be in a position where you can again, maybe that’s version one of your third
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You’re now third or fourth generation product or you know if the loss just gone. It’s not even there anymore
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It’s it’s time to just write them off this it is good for you to get that inventory
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Level accurate and you say write it off and you know it’s this time of year so many businesses come to us and say well
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I’m gonna donate it so I can write it off and then take a deduction, right?
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Well, no you can’t you can’t double dip you have to write it off and then what you do is
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That the easiest way is to create an invoice and sell it and then write it right off the invoice
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That way you are claiming the sale and also writing it off and get it
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That’s how you claim your deduction
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So you can’t just write that inventory off and then give it away and then claim a second expense on that
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That’s double dipping and you know the IRS does not look very old to that
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That’s right. So yes
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Yeah, so again, so step one inventory and cost of sales reality check do it
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Make sure that you’re doing it make sure that you talk to those your third parties
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You’re to Amazon to validate the inventory that you got that you have on hand there
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And then and then mirror that with your inventory management system you want those to to agree
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That is a very very very important step as we get to the interview
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The next thing that the next actionable piece of advice here, right is
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Is that you want to make sure that your expenses are properly classified so it’s been classification
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Which helps with margin clarity?
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We’ve talked and talked and talked about how I end in costs are so important
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And so you want to make sure that you are separating and segregating true product costs from operating expenses
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You want to make sure that ads spend and merchant fees and the shipping that’s for outbound and and fulfillment and all of those different costs are all mapped correctly
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That helps you to be able to understand both like the operations of your business for broadly
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How your business is working and where you’re spending your money
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But it also makes sure that you’re not just you don’t have just one cost cost the sales line where everything is kind of all dumbled together
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And you don’t really know what’s what right those miscellaneous types of expenses that you just
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Want to make the cost of sales that destroys your margin visibility
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It does it helps you to or it doesn’t help you would it like hinders the ability to be able to make good decisions
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With the information that you have
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So I have a question for you based on just what you said there I
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Have eight commerce owners coming to me all the time
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I want my ad spend and I want my fees all in Cox
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Yeah, I mean it’s it’s not
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I mean it’s the cost of sales, but it’s not the cost of your goods
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So you know what I do in that situation is I will create a second P&L for them to have what they want
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But that’s not what we look at we in and we analysis we analyze
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The cost of goods based on the product cost not based on all the other
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Ancillary costs that are cost of doing that business
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Yeah, and I think Stephen Brown may may talk about that same exact set of information that you’re looking at is
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Instead of your your profit margin, right?
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Which is that which is that true product cost related to revenue?
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Yeah, that’s more this is more of your contribution margin where all of these costs are really important in evaluating the profitability and success of your business
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And so it really is important to make sure that that you understand what they are and that they’re properly segregated
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But if you’re looking at product viability and
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And profitability at a product level like that’s there
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There are important things to understand
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But they don’t always they don’t always necessarily go hand in hand like with with your gap based cost of sales
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Right and certainly
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And certainly when you think about states here like in Texas when you’re doing tax planning, right that that cost of sales number is one that
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Impacts your market tax like pretty directly
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And so you do want to make sure that that’s accurate so that you’re you are reporting properly
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The
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Poor poor classification there right if you’re just dumping everything into cost of sales
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It really does limit both your operational decision making because you don’t know where the problems are
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And so that’s why it is so important to
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Take all of those specific things right not just some Amazon fees, right?
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Like you need to understand this is the Amazon fulfillment charge and this is Amazon’s ads and this is Amazon’s
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Shipping or whatever their warehouse in the host or all of that you need to break those things out separately so that you understand
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It’s like where it is that your cost that that your costs are coming from
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The reason why that becomes a good decision making item right is because that helps you to evaluate like what what what your other
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Activities are right if you look at your outside activities as well. You can start to compare those right when you’re selling directly or fulfilling directly through your own store
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And that helps you to gauge like how competitive your own fulfillment charges are helps you to understand
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The return on those on those spins
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particularly
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Play product placement the ppc stuff with Amazon like it’d be really important to understand like how valuable that actually ends up being
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for
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For your products and the sales to go along with them and so that can be really really really important
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So you do need to make sure that you’ve looked it looked through your expensive classifications so that you do have margin clarity so that you can make both operational and tax decisions appropriately
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And then our third
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Our third to do item here third actionable piece of activity
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Is is you want to make sure that your core rec conciliations are completed now this may seem like a super basic thing
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Right and if you’re working with a team like cars here at high rock these things are happening behind the scenes
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Well, you don’t even have to think about it, but your bank and credit card reconciliation
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We need those to be up today and Jay. I’m not gonna. I’m not gonna beat this point home, but why might that be?
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Yeah, this is the no shortcut section you don’t take shortcuts with this you have to look at your bank
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reconciliation because you know, you know are
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How many times have you gone into an account and found something duplicated and
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It’s sitting there right and the only way to really see it is by looking at the reconciliation and
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You’ll notice it you have one item. It’s unreconsiled and you search for that amount. Oh, there it is right there coded to the same thing
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four days before or it came through and the bill came through
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Five days later and then you marked it as paid so it’s like you know these things happen
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It’s very easy to happen, but by paying attention to it
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You could actually pick up on these things and fix it really quickly and that ensures that your January first numbers
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Your 1231 numbers are correct
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So because that is the important thing
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Because again, yeah, if you haven’t captured those things properly
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You could be missing expenses or or and and importantly you could be duplicating expenses
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And so when Jay’s talking about those types of things that are sitting in reconciliation twice
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That’s a duplication of expense and then and that means that you’re again
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You’re gonna end up with the problem come tax time and it’s not just banks and credit cards that you need to reconcile
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You also need to make sure that you’re looking at the payment processors because it’s very very likely
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I mean, it’s 100% likely that if you’re selling through Shopify if you’re selling through Amazon at the end of the year
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You have some kind of receivable
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Like you have income that that you for products you sold
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That you have not gotten that money for you
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So you definitely want to make sure that those sales channels are fully reconciled and that all of that activity
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It’s all that everything that’s happened is actually actually taking care of and captured now
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Because like Jay mentioned if it’s if it’s already messy if there’s just a hot mess going on in there
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There’s just no way to make good decisions for tax planning purposes because you just don’t know what’s actually true
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And then an important thing to note to right is if you’re a smaller e-commerce brand and you’re trying to like do this on the fly
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And you’re like I still got cash. I’m in good shape. It’s gonna be fine. I’m not that worried about it
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I would say that that’s a that’s not the best way to look at it because those year up cleanup
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Meals year in cleanup. So they’re gonna be costly and more expensive later and less effective because you’re already
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I’m gonna miss the opportunity like if you come back in
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February or in an early March right before you got to get your 1065 off or whatever right like
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If you’re in those types of situations where you’re cleaning up at that point in time, you know
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There’s nothing you can do
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You cannot make any strategic decisions at that point in time for that tax year. It’s already finished
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So it’s important to stay up to date to make sure that you that you have all of those things capture
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And you mentioned that 1065 or or that 111120. So if you have a pass through that tax is doing March 15th
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And if it gets filed on March 15th and you
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Uncover you had too many expenses in
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the prior year in
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Let’s say April 15th now you’re looking at having not only fixing the books, but having to
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amend your tax return and that’s gonna be even costlier because if it’s a pass through
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Not only do you have to do the business you might have to do your personal again as well and amend that because the K ones are wrong
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So it’s really really important to hone in on proper data
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recording hygiene and reconciliation in the current report. Yes
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And that’s what and that’s what all these steps really are focused on right like if we’ve boiled it all down
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It’s hey clean up your data at the end of the year
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Make sure your inventory is good make sure your expenses are in the right place
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Make sure that your bank accounts are all reconciled like those are very easy action items and they’re very
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They’re they’re very much things that companies like Hyrock can
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We specialize in making sure that you’re ready to do
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And we do that so that we can help you with the next set of stuff
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Which are those year-end tax moves that actually matter and now now I want to be super super super clear here
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Right like there’s not some magic tax hack, right? We can’t you’re not gonna be able to buy in
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necessarily to like the super energy
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Discount thing or something like this right but a few intentional decisions they’ll often often outperform
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Along deduction list. So let’s let’s talk about some of those those year-end tax moves that you really that really can be powerful
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The first one Jay is the is the timing of income and expenses
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And so oftentimes and this is a this is definitely a thing that I see in a lot of practices, right?
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If you have if you have a little bit of extra profit
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Accelerating expenses can make a whole lot of sense, right?
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If you know that this year was a little bit more successful than maybe you were planning for
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Maybe you could pay the rent a month early or
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But but what in what situation does that make sense?
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Well you tell me Jay like when you
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Returns are based on that same bait set of data, right when you
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When your return is set on the cash basis because if you’re on the accrual basis you’re matching it
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You know, it’s gonna it’s gonna line up every time
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but if you’re on cash basis and
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You know you have 10 that 10 thousand dollars sitting in the bank and your rent is due on January 1st
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Take that deduction the prior year go ahead and pay that ahead if you have
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You know, let’s say pay on up here. Well taxes property taxes get those paid in the current year double up on them
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You know that way you got it covered, you know, it do things that make sense like that
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Right on it and when it when you when you say make sense. It’s not just like you know strategic sense
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It’s also cash flow since so if you have ten thousand dollars at the bank and your rent’s ten thousand dollars and you
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You’re like, well, let me accelerate that that may not be the right decision if you’ve got another pair
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Olden made or some of those types of things right there’s no sense putting yourself in a cash crunch just to just to pick up an
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Affirmative deduction for sure
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The the so very similar very similar to
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Accelerating expenses there is if you are on a cash basis you may delay some income that let that is a realistic
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Strategy sometimes it can occasionally be a little bit a little bit risky, but
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But it definitely can can be value before you if you’re if you’re on a tax basis J
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If you think about like delaying income for a cash basis taxpayers
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What what’s that even look like?
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Really the only thing I can think of is not going to the melt post office box to pick up your mail because if the check is in your
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Is in your desk it should be in the bank and you have it so you’ve received it you should record it
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So if you are in that mode don’t don’t check your mouth
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Just don’t check it that way. Yeah, that’s one thing, but you know
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You know, maybe strategically, you know some some customers are kind of doing the same thing
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Except they’re not paying you on time because they don’t have the funds. It’s like okay
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Don’t push them and things like that say you know what I’ll extend to terms 15 days and pay us in January
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So there are ways of doing it and you know
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being being a good vendor supplier that way, but you know, yeah
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Yeah, yeah, one other thing to think about is you get into the end of the year is older pay and the related distributions
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Obviously you you definitely if you’re if you’re if you are filing that 1120x
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That means that you still need to have reasonable compensation
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Or so for an escort you definitely need to make sure that you’ve gotten that compensation to yourself somehow
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By the end of the year
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They’re they’re obviously you want to you want to make sure that you’re balancing salary and distributions and also cash reserves, right?
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Like you need to be thoughtful of all of those different things
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But those are those are definitely things that you can look at
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But the the one thing to be really really cautious about though is that I’m planning to your and distributions can often create
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Surprise tax bills. So so be really thoughtful about about what you’re doing with
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With your with your money getting it to yourself
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Because you don’t want to you don’t create a tax surprise
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And then and then just as we mentioned before right your pay strategy should align with your catflow and taxes
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But you like you you don’t want to just you don’t just pay yourself to pay yourself
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You want it to be you want it to be a very
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reasonable
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Exercise
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Yes, you think about paying distributions. Yeah, go. Yeah, let’s jump back to those distributions
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So this is something that you guys hear from me all the time in December check for the basis of
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the S corp and partnership owners because if they take distributions in excess of basis
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That is now a capital gain and it is a taxable event. So you know, just
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Make sure if you’re running your business you haven’t taken too many
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deduction and distributions
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Because if you do you will get that surprise tax bill
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come April 15 because you exceeded your basis and your basis is
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Basically what your carrying value is in your stock you put in it’s quick numbers
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You put in a hundred thousand dollars into the business you start day one with a hundred hundred thousand dollars of basis
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You lose a hundred thousand dollars the first year you now have zero basis
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So think about that way now
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Next year is a great year you make five hundred thousand dollars
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five hundred thousand dollars for the basis, but if you take let’s say four hundred thousand dollars in distributions
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That reduces your basis you’re down to a hundred thousand dollars. So it’s simple math
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But there are a lot of moving pieces there. So you got to really be careful
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Yeah, absolutely
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One other thing to be careful about is one that we’ve already kind of talked about a little bit
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And that’s inventory write downs. That’s another you’re in tax strategy
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You can do but it is important that those write downs match operational reality
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And so again, you’re not just writing down inventory or costing out inventory to cost that
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You’re writing it down because it’s lost because it’s damaged because we can’t use it anymore because you can’t sell it anymore
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it needs to
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It needs to make sure it needs to match up and align with the operations of the business
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Clear sales right they don’t they alone don’t justify right downs just because you’re selling the product cheaply or on discount
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doesn’t mean you can just write off all the product it doesn’t work that way
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And you need to be really careful because of emotional decision making again
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If you’re do if you’re making decisions based on some cash stress or things like that
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They cannot create tax and in my and margin problems, right?
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You’re just running discounts because you you want to see some cash in the bank
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That that can be extremely problematic
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And so Jay you’d be better to talk about this I think but
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It is important that proper documentation and reasoning matters with these inventory write downs
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What’s the IRS thinking about this Jay?
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Well be consistent be consistency is the key to everything
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Treat it the same way every time you know
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I
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Have dealt with this in many different
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Lives in my career, you know whether as you know running a Siemens operation where the entire balance sheet was immaterial and
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you know
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having to write off inventory at that point and actually having an inventory
396
00:32:32,620 –> 00:32:38,860
Reserve at that point, you know you had to justify your reserve well. Oh, it’s the same as last year. Okay perfect
397
00:32:38,940 –> 00:32:45,980
That’s all you gotta do so keep be consistent with what you’re doing and you know if something is damaged right
398
00:32:45,980 –> 00:32:54,220
It off if it’s impaired right it off now remember your inventory should be carried at the lower of cost
399
00:32:54,620 –> 00:32:58,940
What you paid for it or the market value, which is what you sell it for
400
00:32:59,580 –> 00:33:01,580
so if
401
00:33:01,820 –> 00:33:03,820
the value of your inventory
402
00:33:05,020 –> 00:33:08,220
Is carried at $50 but you can only sell it for 35
403
00:33:08,940 –> 00:33:12,940
Well, you should be marking that down to $35 and at that point
404
00:33:13,740 –> 00:33:18,860
Get it out of your warehouse because it’s just a drag at that point. So and remember
405
00:33:19,740 –> 00:33:23,420
Donation is always good, but don’t double debt
406
00:33:25,580 –> 00:33:27,580
Absolutely
407
00:33:28,780 –> 00:33:34,540
One other one other area that’s really important to and it’s kind of funny because I noticed this at the at the bowling alley every
408
00:33:34,860 –> 00:33:36,060
every
409
00:33:36,060 –> 00:33:37,340
year end
410
00:33:37,420 –> 00:33:39,420
Is capital expenditure
411
00:33:40,140 –> 00:33:45,660
equipment warehousing improvements technology improvements maybe a new TVs for your bowling alley
412
00:33:45,900 –> 00:33:50,540
Maybe a nice new full new carpet. You know something like that that’s improving
413
00:33:51,340 –> 00:33:53,340
proving the user experience right?
414
00:33:54,460 –> 00:33:56,460
parking lot full of geowagons
415
00:33:56,780 –> 00:33:58,780
Yeah, maybe not that
416
00:33:59,260 –> 00:34:00,460
but
417
00:34:00,460 –> 00:34:04,860
But those types of things that are that are truly like helping supporting your business
418
00:34:05,500 –> 00:34:12,860
If it helps operations and you’ve got cash to do it like it may make sense to do some type of capital expenditure
419
00:34:12,860 –> 00:34:14,780
But it’s absolutely something that you should
420
00:34:15,500 –> 00:34:17,500
That you should consider
421
00:34:17,740 –> 00:34:25,500
Importantly just like with everything and everything else right like don’t just spend the money to reduce taxes at the expense of your cash
422
00:34:25,500 –> 00:34:30,300
The ability right you it doesn’t make sense to use all of your capital by
423
00:34:31,100 –> 00:34:39,020
Some some kind of equipment if you’re not going to be able to fund it or use it or use it properly because you don’t have the right cash to make it work
424
00:34:39,660 –> 00:34:47,580
Um, and so it is really important that you that you’re really thoughtful and strategic around the decisions that you make around capital expenditure is especially around
425
00:34:49,100 –> 00:34:56,780
So you know that’s there. Yeah, the one thing I’d like to point out there is yeah you you spend a hundred thousand dollars upgrading your facility or
426
00:34:57,100 –> 00:34:59,100
put it in carpet and TVs and
427
00:34:59,900 –> 00:35:02,620
You have to pay out a hundred K for that
428
00:35:04,140 –> 00:35:09,260
Or you you know you get a loan for a hundred K you’re at some point you’re going to pay that
429
00:35:10,220 –> 00:35:12,220
The tax benefit that you get from that
430
00:35:16,220 –> 00:35:19,020
20 or 21,000 30,000
431
00:35:19,660 –> 00:35:21,660
Depending on on how you’re taxed
432
00:35:21,820 –> 00:35:26,700
So it doesn’t equate dollar for dollar in tax savings. So keep that in mind
433
00:35:27,980 –> 00:35:32,060
Yeah, it’s uh, it’s the uh, it’s creek joke of uh
434
00:35:32,860 –> 00:35:38,300
You get to write it off and go right what does that even mean like no, that’s not how works right you have to
435
00:35:38,620 –> 00:35:42,540
You had to buy it and you only get the tax advantage of it
436
00:35:43,260 –> 00:35:48,620
Um, not it’s not a dollar for dollar right you know getting the entirety of whatever capital expenditure you got about
437
00:35:48,700 –> 00:35:51,340
It tax relief that’s not yeah, it isn’t how it works
438
00:35:51,820 –> 00:35:54,860
Um, and so again, that’s why it is so important to make sure
439
00:35:55,500 –> 00:35:58,780
Uh, that it’s strategically aligning with whatever your operations are
440
00:35:59,260 –> 00:36:05,180
uh, yeah like uh, like at the polling island again if your your car puts a little old and you know, it’s a good good time
441
00:36:05,180 –> 00:36:06,700
A year to get some new carpet right
442
00:36:07,260 –> 00:36:12,860
Uh, it’s a little bit dark in the polling alley right getting a getting a couple TVs to help lighten it up
443
00:36:13,260 –> 00:36:16,060
Really valuable thing right and it’s not just uh
444
00:36:16,620 –> 00:36:22,300
It isn’t just a tax consideration. It’s also an improvement of the business more broadly
445
00:36:23,100 –> 00:36:28,300
Uh, yeah, so that’s really good. Those are that’s really what what you should be thinking about not just the
446
00:36:29,340 –> 00:36:34,620
Acceleration of some deductions like yeah for sure and when you’re scrolling on tiptock
447
00:36:35,100 –> 00:36:39,420
mindlessly and that taxes rights comes on scroll past it
448
00:36:39,500 –> 00:36:41,500
I
449
00:36:41,500 –> 00:36:47,500
Should better yet put your phone down actually don’t put your phone down just call your CPA or your tax repair and say hey
450
00:36:48,060 –> 00:36:52,380
What do I need to do and that will be the best advice you get at that point
451
00:36:53,020 –> 00:36:58,860
Don’t take the tick-tock advice because a lot of it is not from authoritative
452
00:37:00,060 –> 00:37:07,660
Sources yeah, right right the last thing that I want to touch on here right everybody knew that you see this happened a lot especially with
453
00:37:08,620 –> 00:37:08,940
uh
454
00:37:08,940 –> 00:37:15,900
Soulfighters or owners and businesses right you want to make sure that you are maximizing your retirement contributions if you can
455
00:37:16,460 –> 00:37:21,820
Um, and this is the time to do it, but that should be a high level consideration only and it’s not a thing again
456
00:37:21,820 –> 00:37:25,580
That you should be doing at the last minute. This is a thing that you should have been planning for all year
457
00:37:26,460 –> 00:37:30,700
So that you’re not uh, you’re you’re not just making retirement funding contributions
458
00:37:31,260 –> 00:37:35,340
To at the expense of being able to make payroll or something like that, right?
459
00:37:35,740 –> 00:37:41,900
These are these are long-term planning things that that definitely should be considered that way and
460
00:37:42,300 –> 00:37:44,300
And definitely be like last minute
461
00:37:44,460 –> 00:37:49,260
uh, Jay any any final uh, tax strategies that you want to talk about before you move on
462
00:37:50,860 –> 00:37:55,580
You know the only thing I want to say is talking like these contributions, you know talk to your financial advisor
463
00:37:56,140 –> 00:37:59,820
You should be talking to them in December either you should be talking to them throughout the year
464
00:38:00,300 –> 00:38:04,540
And having the same conversations you’re having with us when we’re talking to this this planning
465
00:38:05,020 –> 00:38:08,540
Because you know there are a number of
466
00:38:09,500 –> 00:38:11,500
Retirement and investment vehicles
467
00:38:12,220 –> 00:38:13,500
that
468
00:38:13,500 –> 00:38:15,500
are tax advantageous and
469
00:38:16,940 –> 00:38:18,940
Those are the conversations you need to have
470
00:38:19,420 –> 00:38:25,900
In April for this coming year not for the past year so think about that and you know that that’s just
471
00:38:27,020 –> 00:38:31,260
Being prepared and heavy things lined up so that you hit 1231
472
00:38:32,060 –> 00:38:33,260
It’s just another day
473
00:38:33,820 –> 00:38:38,060
You it’s another day where you’re gonna go out and stay up late
474
00:38:38,620 –> 00:38:44,220
Have a good time and watch bull games the next day not a day. You’re gonna stress out about your taxes
475
00:38:45,180 –> 00:38:50,860
That’s right and and uh and one thing that you can do to uh to help you with that uh in in
476
00:38:51,260 –> 00:38:56,300
2026 is by is shifting your shifting your mind uh in in
477
00:38:56,540 –> 00:38:58,540
2026 to start to start doing that
478
00:38:58,700 –> 00:39:03,980
At planning at the beginning of the year right you’re in tax planning is it’s just it is just a checkpoint
479
00:39:04,060 –> 00:39:07,420
Right you if you if you develop the really good tax plan
480
00:39:07,820 –> 00:39:10,700
You know you started that in quarter one. That’s where you built the structure
481
00:39:11,020 –> 00:39:15,020
That’s where you built the strategy around this right. This is that’s when you made the election
482
00:39:15,020 –> 00:39:20,060
Then you’re gonna maximize your 401k contributions this year right like you did that all in quarter one
483
00:39:20,700 –> 00:39:24,620
Uh, and so you’re in tax planning is it is a checkpoint in the in the strategy building
484
00:39:24,700 –> 00:39:26,220
It’s not the solution
485
00:39:26,220 –> 00:39:28,700
Those things that we talked about aren’t aren’t the
486
00:39:29,260 –> 00:39:33,900
The end of the rope they’re the beginning of the rope or the beginning of 2026 is rope
487
00:39:34,780 –> 00:39:42,060
And so um, so i’ll reference back to some of the things that we talked on previous shows about right some key things that you need to do in quarter one
488
00:39:42,460 –> 00:39:47,420
So that you can set yourself up for success right you need to create a simple 12 month cash and tax forecast
489
00:39:47,500 –> 00:39:53,820
Like we talked about cashflow forecasting and using a 13-week model. You can do this as part of a budgeting process
490
00:39:54,780 –> 00:39:59,100
Or or engage somebody like like pyrox to help you to support
491
00:39:59,580 –> 00:40:02,140
To support helping you get this tax model together
492
00:40:02,860 –> 00:40:08,460
And cash model together for the year you also want to review your margins your cost of sales and your ad efficiency
493
00:40:08,940 –> 00:40:13,660
At least quarterly and probably more frequently. You don’t want to just be doing that at the end of the year
494
00:40:14,060 –> 00:40:21,340
Oh, and uh, we’re getting the final final final final steps and like we mentioned this just like explicitly on a previous show
495
00:40:21,420 –> 00:40:24,940
You need to establish a consistent financial review cadence
496
00:40:25,500 –> 00:40:30,460
I you should be reading with an advisor once a month to talk through what’s going on?
497
00:40:30,620 –> 00:40:32,620
What’s the right things to be doing next right?
498
00:40:33,660 –> 00:40:35,180
tax planning
499
00:40:35,180 –> 00:40:41,660
Business planning strategic decision-making it all happens throughout the year not just in December
500
00:40:42,940 –> 00:40:48,380
So so make sure that you’re that proactive brand that plans distributions that brand plans inventory buys
501
00:40:48,940 –> 00:40:50,940
That plans hiring with clarity
502
00:40:51,740 –> 00:40:56,220
That does all of those things with good strategy with clean data and all the information that goes along with that
503
00:40:56,300 –> 00:41:01,020
Don’t be the reactive brand that gets surprised by that April tax bill because you uh
504
00:41:01,820 –> 00:41:07,020
You uh triple count at expenses in your unreconciled bank account, right?
505
00:41:07,100 –> 00:41:08,540
Don’t be that guy
506
00:41:08,540 –> 00:41:10,540
We proactive
507
00:41:13,340 –> 00:41:16,380
And Jay if you think about q1 and transitioning q1
508
00:41:16,860 –> 00:41:18,860
Any other thoughts that you want to add there?
509
00:41:19,820 –> 00:41:21,820
We make the plan
510
00:41:22,220 –> 00:41:24,220
We implement the plan
511
00:41:24,220 –> 00:41:26,220
The plan goes off the rails
512
00:41:27,180 –> 00:41:28,940
We rewrite the plan
513
00:41:28,940 –> 00:41:37,020
That’s it, you know, and when I say goes off the rails your revenue could go skyrocketing up and you know have a profit problem
514
00:41:37,580 –> 00:41:41,660
And so now you’re you’re a your plan is completely wrong
515
00:41:42,540 –> 00:41:43,660
So
516
00:41:43,660 –> 00:41:50,460
Take that budget that you created based on what you thought you were going to do and then like Chris said build a 12
517
00:41:50,780 –> 00:41:52,780
12-month cash and tax forecast
518
00:41:52,860 –> 00:41:57,660
Well, you’re going to keep updating that forecast every month. We’re going to get closer and closer in December
519
00:41:57,980 –> 00:42:03,820
We’re going to look at those numbers and we’re going to update that forecast and we’re going to use that to do our planning
520
00:42:04,300 –> 00:42:07,180
And that’s how we’re going to know what you’re going to have to
521
00:42:08,060 –> 00:42:10,060
pay come April so
522
00:42:11,020 –> 00:42:17,180
Except that the plan is going to go off the rails because it always does
523
00:42:17,900 –> 00:42:19,420
Could be good could be bad. I mean
524
00:42:20,140 –> 00:42:21,420
but
525
00:42:21,420 –> 00:42:23,420
in essence
526
00:42:23,420 –> 00:42:27,420
Accept it don’t panic and just create the new plan
527
00:42:28,300 –> 00:42:30,300
And that’s what it’s all about
528
00:42:30,300 –> 00:42:31,500
Yeah
529
00:42:31,500 –> 00:42:35,180
Absolutely and so if we if we summarize this our episode today
530
00:42:35,980 –> 00:42:39,900
Clean numbers are the most important piece to effective tax strategy
531
00:42:41,260 –> 00:42:46,940
The that comes in monitoring inventory and making sure your expenses are in the right place it comes
532
00:42:47,980 –> 00:42:50,220
In making sure your bank accounts are reconciled
533
00:42:51,420 –> 00:42:59,100
Fewer smarter tax moves beat random deductions. So being strategic around the way that you’re planning is way
534
00:42:59,500 –> 00:43:03,180
Way more powerful than just trying to find a bunch of deductions at the
535
00:43:04,140 –> 00:43:08,620
And quarter one planning is where you set that plan that Jay just described
536
00:43:08,860 –> 00:43:15,340
Where did you can that you can then execute and respond to in a strategic way throughout the rest of the year
537
00:43:15,340 –> 00:43:17,900
So that when it comes to December of 2026
538
00:43:18,780 –> 00:43:24,700
You already know what to expect and you don’t have you don’t have this stress of what am I going to do with respect to taxes?
539
00:43:25,900 –> 00:43:27,260
And so
540
00:43:27,260 –> 00:43:30,780
Any other final thoughts before we get out of here today
541
00:43:33,580 –> 00:43:40,220
I just want to say you know use these last few weeks and start planning you know at this point
542
00:43:41,820 –> 00:43:47,420
Clean some things up, but start planning 2026 and get get that plan moving and you know
543
00:43:48,300 –> 00:43:54,060
It’s times like these when you can look back at the year and say hey we did these things right
544
00:43:54,700 –> 00:44:01,740
And you know what I wish I did these other three things better and you make that plan moving forward to do that and you implement that and
545
00:44:02,220 –> 00:44:05,820
You talk to your team and you build processes and SOPs and
546
00:44:06,860 –> 00:44:14,620
You just dive into it in the new year and you know what you’re gonna achieve what you’re what you’ve been trying to do because
547
00:44:14,940 –> 00:44:19,340
You’re paying attention to it. You’re tracking it. You’re measuring it when you measure it and track it
548
00:44:19,580 –> 00:44:21,820
You can change it and adjust it and that’s what it’s about
549
00:44:22,780 –> 00:44:24,780
So yeah, that’s that’s it
550
00:44:25,420 –> 00:44:27,900
And I think that’s a great way to end Jay. I know we went a little long
551
00:44:28,540 –> 00:44:30,540
We talked about
552
00:44:30,540 –> 00:44:37,740
I don’t think they’re necessary today. So thank you. Thanks everybody for spending some time with us this afternoon on on the rocks. I’m Chris
553
00:44:38,300 –> 00:44:40,300
He’s Jay and
554
00:44:40,860 –> 00:44:43,340
Let’s see you in the next one. See everybody
