Business Expenses Holiday Season

5 Tips To Manage Business Expenses During The Holiday Season

By Maric De Castro

December 22, 2022 | 9:03 pm

Christmas is the most magnificent time of the year and the busiest! Before merrymaking, prepare your business activities for a stress-free holiday season.

You should pay attention to a few things while preparing for Christmas and the work holidays ahead.

1. Holiday-related business expenses are tax-deductible

It is common for businesses to hold Christmas parties for their employees. Sending gifts to clients, employees, and suppliers is also customary during the holiday season but subject to the gift policy and guidelines of the Company.

These expenses can rank high on the budget for this season. But did you know these are also tax-deductible expenses?

Tax may be far from your head now as the festivities kick in. But do not let it spoil your fun by not keeping a record of the information needed for tax deductions.

To ensure tax deductibility, official receipts, sales invoices, and other documents must support corporate giveaways and Christmas party expenses.

Take the case of your Christmas party, details of all party costs, who attended, and the venue. As you gather information, request official receipts for services or sales invoices for goods received consisting of every item for the party.

The same goes for gifts given to employees, clients, and suppliers. Record the cost of each present and get receipts to prove that it is a company expense.

2. If possible, extend your cash balance ‘til year-end

Pay using a credit card or with credit terms extending beyond the year-end date. Doing so optimizes the cash that will appear on your balance sheet.

Extending payment terms gives less headache to your accountants doing bank reconciliation too! That’s the best gift for them, right? They can also enjoy the holidays with less stress on cash balancing and reporting.

Extend payables after the New Year, so your cash balance is healthy at the year-end reporting. The collection of receivables can also be higher after the holiday break, covering the payables due next month.

3. Schedule all your cash flows

Banks are not open on Christmas and other holidays like Rizal Day on the 30th. Many of your employees will be on a break too!

Schedule all your cash flows- manual cheques and automated wire transfers - to effectively and efficiently support operations for the remaining weeks until year-end.

Ensure that cash tracking is up-to-date. Seasonal cash flow patterns have to be taken into consideration also ahead of time to ensure that you will have enough cash during the holiday season.

Put off expenses that can wait so as not to drastically affect the cash flow, such as delaying repairs or maintenance work until after the holiday.

Postpone big purchases like new office furniture. Delay big-ticket items and other expenses after the New Year if not critical to the business operations.

4. Ensure to replenish all your petty cash and even revolving funds

Petty cash and even revolving funds are sources of allowable business deductions to help you save on income tax before the tax deadline.

Allot some time to record all your expenses and submit the supporting documents to your Finance department or accountant to recognize the costs and update the year-end petty cash and revolving fund balance.

But don’t forget to put aside a contingency amount so your petty cash will be enough to cover any unexpected expenses for the remainder of the year.

5. Don't forget to withhold tax on your business expenses

Witholding tax on your business expenditures, especially for those businesses under Taxpayer Account Management Program (TAMP). A deduction will only be allowed if the tax withheld was paid. Expenses where taxes were not withheld, are not considered tax deductible.

Taxpayers use Revenue Regulations No. 2-1998 as the basis to determine if the expense is subject to withholding tax. Taxes on expenditures not adequately paid will have penalties.

To avoid this headache, you may consult with tax experts to comply with the rules accurately.

To Wrap Up

Christmas is a time to enjoy and should be stress-free. Prepare well, so your business has the finances to operate during the holidays.

Remember as well that business expenses need supporting documents to be tax deductible. Having the proper documents lessen the headache of your accountants during the holiday and the coming tax season.

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