Other taxes which need to be managed are the PAYE/NI deductions made from staff salaries which can be high. However as they are due on the 19th of the following month, it is quickly apparent whether or not these amounts can be paid to HMRC. The corporation taxes on the business are normally due 9 months after the financial year end. Business taxes for sole traders and partnerships are a little more complicated, but normally they are paid in two installments in the following tax year the profits are earned. The first installment is due 31 January and the 2nd installment is due 31 July, for example, profits earned in the tax year 2006/07 will have tax due on 31 January 2008 and 31 July 2008. In addition there is a Payment on Account due also on the same dates for the current year. The impact of these taxes is significant, so its understanding is crucial to accurate forecasting. Nobody wants an unexpected tax bill – especially a large one.
Meanwhile, a good cashflow model should include all relevant data to give a complete as possible picture of the business. It is also important that timescale is sufficient to illustrate variability over a long enough period, for example the business may have enough funds for six months of operations under normal circumstances. A good cashflow model would give advanced warning and thus alert the managers of the business to take problem-solving action. It is better to catch a problem early – to be active in solving it – than react later when it has become a crisis.