Wednesday, June 8, 2011

Cleaning up the cash flows

With all of the inburgering challenges, it’s may be hard to tell that I’m still building businesses.  Work life does go on, although mostly after 3 pm (unlike the gardening business).  Lately, though, I’ve felt that my accounting was becoming more and more scattered.  Income was sputtering in from multiple sources, flowing into personal accounts as well as business, expenses seem to be mingling, taxes are falling out of sync, it’s harder to track whether I’m paid the right amount.

I sat down the other night to sort things through and ended up with three pages of questions, ranging from areas that I might be double- or under-taxed to pending contracts and employment agreements.  This was a wake-up.

So I called Patricia, my accountant, and hit the train north immediately after Dutch class today.  We spent two hours going over my situation: here are the highlights:

  • Feed revenue through the Dutch corporation.

This solves all of my cross-border issues.  Set up every job as a contract with my corporation for my services, then invoice them for my salary and direct expenses.  They pay without deducting payroll or social security tax; I avoid any hint of excess taxation.  And, most wondrously, my time in the UK/US is considered an “expat assignment” from the perspective of my Dutch corporation.  Thus, previously unreimbursed expenses like rent and utilities now become Dutch business expenses. 

  • Put expenses on the company cards.

I’ve used my personal cards exclusively, reimbursing through the corporation.  Not only does this impact personal resources, but it builds up debt that the Dutch government treats as a loan.  They assume 4% interest and charge tax on the debt.  Adds insult to injury, as we say: From now on, company expenses go on company cards.

  • Agree on records to exchange

I spend a day each month preparing an expense summary, which the accountants find incomprehensible when they try to use it.   It gums up tax reporting, VAT refunds, expense deductions, and payroll taxes.  We’ve now agreed on a simple list of documents that I’ll provide, with a check-up in three months to make sure that things are going more smoothly.

I left the meeting feeling like I had simple solutions and a lot more confidence that I was keeping as much of my income as I could.  I’ve always advised students to seek competent financial and legal help; I’m now going to add the importance of a yearly review.

   P.S.: It was a beautiful day in Amsterdam, especially the light along the canals and the flowers along the streets.  That, alone, would have made the trip worthwhile.

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