In hindsight, entrepreneurs should hold their accountants and/or CPA’s responsible for poor business advice….

I have often become involved with a small business owner who literally pulls all the money out of his/her company every year end.  The company becomes undercapitalized and if billings slow down or clients slow pay, the company either borrows money from the bank or slow pays their vendors.  Often the financial statements reflect favorable earnings, year after year…but there is no money.

And, I hear, over and over again:  “my cpa told me to pull all the money out so that I wouldn’t have to pay  any taxes.”  I then ask:  “where is the money?” and the answer is “oh, I spent it.”

I agree that reducing one’s tax liability is a prudent business practice, but, at the same time “cash flow” is the single most critical element in a business’s ability to survive.  Many of you know that (already).

Why not “pull the money out” and loan it back to the company?