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Case Study: How We Helped a Self-Employed Professional Save Big on Taxes


By Shamez Kassam, CFA, MBA


At Northfront Financial, we make it a priority to help business owners and professionals create a solid wealth management strategy built on sound financial habits. We do this by first analyzing our clients’ current financial situation and examining any potential obstacles in their current financial plan. We then recommend solutions to any gaps that we see in their plan, while also suggesting innovative strategies that could help our clients maximize their investments, bolster their retirement, and mitigate any existing tax burdens.


The result is that, with our clients, we can create individualized financial plans that will pay dividends in the long run and create tax-efficient investment opportunities for business owners in the short and long term. Below we describe how we helped our client Tom (1) (who runs a successful gardening company) use his cash balance and bank financing to grow his money for retirement and create tax-efficient investment opportunities for his company.


The Client

Tom runs a successful gardening company. Because his business is more seasonal—conducting more work in the spring and summer rather than winter and fall—the business’s cash flow is also seasonal in nature. Naturally, this prompted Tom to keep large amounts of cash in his business account year-round. The large cash balance was sitting in his bank account, not being used for 6 months or longer during the year. Tom was also proud of not having to utilize bank financing to supplement his company’s cash flow.


The Goal

During our initial meeting with Tom, our advisors quantified the true opportunity cost of not using bank financing and demonstrated how he could use capital more efficiently in his business. Through introductions with experienced professionals at local financial institutions, we helped Tom put in place an asset-backed line of credit using inventory and receivables. This enabled $3 million of what was idle cash to be invested in low- to medium-risk investments, generating a 5% to 6% return.


In total, utilizing the idle capital generated an additional $180,000 of annual investment income. This allowed Tom to invest in retirement wisely and with ease. Now he’s also less tied to the seasonal nature of his income and has more flexibility when it comes to his cash flow.


How We Helped

Tom is now excited to look at his long-term savings plan and learn more about tax-efficient corporate investing, including where and how he should save and grow his wealth for retirement. He also benefits from planning strategies to liberate cash from his corporation using the capital dividend account (commonly referred to as a CDA). A CDA is a special corporate tax account that provides its shareholders designated capital dividends, tax-free.


We’re Here to Help

We at Northfront Financial serve as a business advisor to our clients. Whether it’s planning and forecasting, cash flow budgeting, tax-efficient corporate investing, using financing effectively, putting together partnership agreements, reviewing buy/sell insurance or group benefits, or planning a business transition, Northfront and our professional network has your needs covered. Our goal is to help you have your business’ financial house in order, so you can focus on what you do best: operating and growing your business. Call 403-571-8960 or email info@northfront.com to schedule a meeting today!


About Northfront Financial

Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit our website and schedule a complimentary appointment.

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(1) Name changed for confidentiality


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