Is Your Tax Information Accurate?

Let me give you an example. When I was a student, I worked with a client, Raymond, who owned a successful wholesale auto parts business. Raymond really knew his business. He bought inventory well, and turned it over quickly. He was also one of the first computer users that I knew. Raymond had purchased this computer, actually a behemoth, which occupied its own room. The system had its own air-conditioned office that could have easily accommodated several people. While Raymond’s staff sat on uncomfortable stools in an open warehouse without air conditioning or ventilation, this computer was bathed in cool, fresh air, 24/7.

The computer was Raymond’s pride and joy. It stored a database of his inventory, provided some rudimentary accounting functions and printed invoices. The printing of invoices was particularly cumbersome, however. In order for the printer to operate, it had to have at least two invoices advanced in the tractor feed before it could print out a single one. This became an expensive process as each invoice cost fifty cents. His employees became slaves to this machine and subsequently they would only print invoices at the end of the day in order to save the cost and hassle of the five-part form.

When a customer telephoned in an order, the warehouse staff would pick up the parts from the inventory bay and bring it to the shipping desk. Then when the customer arrived at the pickup desk, the staff would write up the order and have the invoice printed at the end of the day. Customers would basically get their auto parts on credit and receive their invoice in the mail.

Raymond’s entire business was being run by an outdated computer that sat protected in its own air-conditioned office. It was useless to try and convince Raymond that this procedure was expensive and outdated. He blindly believed in the computer system and the way he was running his business.

Many people got rich living off that computer. The computer maintenance contract cost over four thousand dollars per month. Added to that was the cost of the invoices and the time in filing the five part forms: alphabetically, numerically, by customer, a copy to customer and an extra copy just in case!

That machine was a black hole sucking money from Raymond’s wallet but he insisted this was better than upgrading. In other words, he was happy with the devil he knew, and the fact that he could afford the costs was rationale enough that his decision to keep the computer was a good one.

In reality, the computer was a piece of junk. It was costly to maintain, expensive to run, created inefficiencies, frustrated employees and ensnared a business owner without even realizing he was trapped.

After Raymond died and his children took over the business, they relocated their offices to the old computer room. They now had air conditioning and ventilation. As for the old computer, it’s probably sleeping with the fishes somewhere.

The point is, when you’re married to ideas that are based on incomplete and imperfect information, you forego the possibilities that will allow you to do better. What you don’t know will hurt you. When you think you know it all, watch out! That’s when you are the most vulnerable.

When it comes to tax preparation, there are many options for dealing with any given situation. If the numbers are significant, it’s probably worth your while to get competent advice. Relying solely on your perceptions is like acting as your own physician. You often end up with a fool for a patient.