What one of my clients has done, I think is really outstanding.  They have tucked some money away during this year to cover some large items.  Among these items are:

1.  Income tax distributions.  The company is a sub-S corporation, so their money needs to be distributed through the shareholders to cover for the tax effect of the income that’s reported to them on the K-1s for filing with the IRS.  In this circumstance it can be very easy to not have money put aside and get caught being short.  I’ve seen it more and more than one instance.  It’s time for taxes and that 40% of the income has already been spent on other purposes.  The owner needs to scramble to find money to be able to pay for the estimated taxes during the year.  Save yourself the heartache if you are the sub-S and tuck money away during the year.  That should be one number that you track in your financials, perhaps as a memo line in the balance sheet.  How much money are you going to need to have put aside to cover for your income tax liabilities on each of the four tax deposit dates?

2.  Bonuses.  This client pays some generous bonuses at the end of the year to a wide number of people in the company.  They’re setting aside money now to have ready for those bonuses.  Once again, this can save them some year-end surprises.  What you wouldn’t want to see happen is smaller bonuses because money wasn’t put aside and, somebody is way short on the money and can’t afford those level of bonuses to their employees.

3.  Donations.  This client has a foundation setup and makes some generous donations to the foundations at the end of the year.  By tucking away money during the year, that makes sure they’re going to meet their designated level of money to the foundation.

Those are just a few areas, you might have some others.  For example, perhaps there’s a big payment coming up on a bank loan or some other large payment due under a contract or, perhaps, you anticipate some large capital expenditure coming up in the near future.

Whatever the circumstances are consider putting a fund together so that you can have the money set aside by yearend and be able to meet the obligations that you intended to.