Why not declaring cash sales is a bad idea!
Firstly, it is illegal!
As a business owner, it could be tempting to take cash out of a business and not declare it on the financial records; but this constitutes Fraud and ultimately falls under the category of Tax Avoidance. Be warned, severe penalties apply when you are caught!
Secondly, when the time comes to sell your business, how will you prove to a Buyer the Cash Component you are stating is true when it does not appear on any financial records? Businesses are valued on a multiple of earnings basis. Therefore, showing a lower profit on your financials will ultimately put a lower figure on the final value on the business. Even if you can prove to a potential Buyer through methodical record keeping in your secret Black Book of all cash that has been taken out, why would someone pay you a multiple on an amount you have already benefited from in the first instance?
Show me how to steal!
As a business owner, you could potentially establish a culture within the organisation showing staff how to take cash out without anyone knowing about it as well.
Will a Buyer then believe anything else you are telling them about your business if they cannot trust you in the first place?
Do the right thing & benefit in the long term
Declare all cash takings in a business so that you can reap the rewards when you sell with a higher multiple on the final sale price and keep the taxman happy!
Disclaimer: All articles provided herewith are for general informational purposes and not to be construed as financial or legal advice. Consult you accounting & legal team for advice on selling or buying a business.