These taxes are based on annualizing the net income from the business and caluculating the taxes due, and then dividing the amount by four to obtain the quarterly contribution. This calculation is done to avoid penalties for underpayment of estimated taxes. The minimum standard is 100 percent of last year's taxes or 90 percent of this year's estimated tax bill. Small business owners are urged to obtain advice from CPAs or tax attorneys in regard to estimated taxes. The cash budget is probably the most important.
Cash flow is the lifeblood of the business.
The bills must actually be paid at some point, and the revenue must be collected from the customers. If expenses and revenues are accrued, then the cash budget is even more vital. Collections of receivables must be carefully monitored, and, where necessary, enforced through the various legal processes available. The majority of receivables generated each month should be collected in the normal period for the business and industry. Likewise, payments of the bills due to various vendors and suppliers within the usual terms are necessary to preserve the good credit of the business.