ChApter 7 | YOUR CASH FLOW FORECAST AND CAPITAL SPENDING PLAN | 133
case, you qualify and may choose the
quarterly option.CAUTiON
Please note that paying these taxes
every three months instead of every month is
a dangerous option because it means that you
will be using your employees’ money in your
business. By far the simplest, safest, and best
way to pay the government is to pay the total
withholding amount every month.- Withholding Tax Payments. Skip this item
if you’ll be paying your employees’ taxes
monthly instead of quarterly. Otherwise,
add together three months’ worth of
withholding from line 6 and enter the
total amount every third month on line
7. That is the amount you must write
every three months to the IRS. If this
little exercise seems confusing to you,
take your confusion as a sign that you
should not attempt this option. You’ll
be much better off simply paying the
withholding taxes every month. - Depreciation. As discussed previously,
depreciation is a fictitious expense
you charge the business for using up
fixed assets. Look at your Profit and
Loss Forecast, which you prepared in
Chapter 6. If you included an amount
for depreciation in line 4h of your Profit
and Loss Forecast and reduced your
profits accordingly, you must enter the
same numbers here to get your monthly
cash flow.
If you wrote nothing in line 4h of
your Profit and Loss Forecast, you can
leave this line blank and skip to line 9.- Principal Payments. In your Profit and
Loss Forecast you calculated how much
interest you’d pay every month. You’ll
also make regular payments on the
principal of your loan, which are shown
in your Cash Flow Forecast. To get the
amount of the principal payment, just
subtract the interest payment, taken from
line 4g of your Profit and Loss Forecast,
from the total loan payment. (Review the
chart in Chapter 6, line 4g, if you have
trouble.)
If you have a loan with interest-only
payments and a large principal payment
every few months or at the end of the
loan, it’s essential that you write in the
scheduled principal payments. That way,
you’ll be able to plan for them and avoid
the nasty surprise of having to make a
large loan payment you forgot about.
CAUTiON
interest and principal. Be sure that
the interest expense from the Profit and
Loss Forecast (Chapter 6, “Profit and Loss
Forecast: Year One,” line 4g) and the principal
repayment line from your Cash Flow Forecast
add up to your total monthly payment.- Extra Purchases. Let’s say that you plan
to have a big sale sometime during the
year and need to buy extra merchandise
for the sale. These extra purchases are
above and beyond normal inventory