As a efootball esports athlete, you may be able to make money that’s on par with athletes who play traditional sports. However, if you do not have a basic understanding of efootball esports athletes bookkeeping, accounting, and tax planning, you may find yourself making a profit but not having the cash needed to pay your rent, much less the taxes.
The Role of Cash Flow and Profitability in Efootball Esports Athletes Bookkeeping
When you hear others talk about profitability and cash flow, you may think these two related terms discuss the same thing. They are not technically the same, but they both usually play a major role in business and personal financial strategy.
When a efootball esports athletes CPA talks about cash flow, they are discussing the flow of cash in and out of your business. When they discuss profitability, they are talking about when your e-sports business has more money coming in than going out. However, just because you have more receivables than payables, it doesn’t mean that your business is making a profit. Your business could make a profit but have a negative cash flow.
Is Your Cash Flow Positive?
Your efootball esports athletes accountant sees cash flow as the money that goes in and out of your business during any day. This may include payments for tournaments, purchasing gaming gear, travel expenses, etc.
Profit is something that only exists on paper. A good efootball esports athlete accountant uses the profit to give you a basic idea of how much money you have coming in and out of your business each month. It does not tell you about your day-to-day operations.
If you use accrual accounting for your efootball esports athletes tax planning, you will record expenses and revenue whether the cash has been exchanged or not. This means that you could win a tournament for $100,000 on the first of the month and that money will be included in your bookkeeping, even though you may not get paid for six months.
On paper, you are profitable. However, since you haven’t been paid yet, you may not have sufficient cash flow to cover your rent payment, buy groceries, or keep the lights on in your home office. You are profitable on paper. But you have a negative cash flow because there’s no money in the bank for you to use.
Calculating Your Cash Flow
Your efootball esports athletes tax planning should take in to account your cash flow. Your cash flow plan should take in consideration the consequences that come from generating income during different parts of the year. Using the accrual basis accounting method may give you some leeway in the timing of recognizing income. This might minimize your tax liability by allowing you to defer income from one year to the next and prevent yourself from going into a higher tax bracket.
What Are The Benefits of Partnering with Efootball Esports Athletes Financial Advisers?
Here at Fusion CPA we work with e-sports athletes and help them understand financial management, tax planning, and general accounting. As efootball esports athlete financial advisers, we can work with you to create tax strategies focused on minimizing your liability while increasing the amount of money you keep in your pocket. One element of our efootball esports athletes CFO business advisory service includes reviewing your current business structure and to make recommendations for changes based on your financial history and your goals for the future. Would you like to get more control over your cash flow? If so, you can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.