Does your stomach churn thinking about what surprises may be in store for you at tax time? Some of us love surprises…but never at tax time. Especially when they involve owing money.
Do you look at having a CPA as a necessary evil? The person you talk to once or twice each year who does your tax return while you hold your breath and hope you didn’t make too much money or that you can deduct the expenses you hoped you could?
If this is you- it may be time to look at what you are really getting from your CPA. A good CPA in today’s business environment is a strategic financial partner who is committed to deeper, better, and more frequent communication. An accounting expert who can help you plan looking forward vs simply looking backwards at last year’s results and ‘should haves.’ And, above all, your CPA should be a partner and trusted extension of your team who will work with you to create and execute the right tax planning and business strategy roadmap each year.
After all, you opened your business to be an expert in that business- not to interpret financial statements, figure out the taxable income implications of PPP loans, or create a plan to stabilize cash flow.
Here are 10 key things that should be taking place each of the four quarters in a good tax planning and business strategy roadmap.
- Tax Return
The focus of the first quarter should be on finalizing the plan from the previous year with absolutely zero surprises in the tax return and then filing the return. But, how do you get to zero surprises? The work you do with your CPA in second, third, and fourth quarters is critical…
- Business Recap from 1Q
- Income Projections
- Trends & Cash Flow Stabilization
- Business Strategy
Now that tax returns are filed, it’s time to set up your financial strategy for the year. Important topics of conversation include income projections for this year, looking at year on year trends, and cash flow stabilization. Have there been or are there plans for acquisition activity? New locations opening? How close is retirement? (If retirement or sale of the business is close, there are key items to consider for maximizing wealth post-retirement.) Additionally, has there been turnover in staff? What are the best profit sharing models to consider that put the business in the best tax position? Were there any goals not completed last year, and what are new goals for this year? This is also a great time to discuss process improvements (for example, QuickBooks vs QuickBooks Online) and review Key Performance Indicators (KPIs) and benchmarks against other businesses like yours.
- Income Trends,
- Tax Legislation Changes
Moving into the second half of the year, it’s important to look at how revenue is trending based on the initial goals and projections. Also, what is happening with tax legislation that needs to be considered? It’s also time to review staff compensation and benefit planning. For example, what insurance plan makes sense for your business? Are there changes that need to be made, and what does all this mean for cash flow? Do you need to adjust estimates for income?
- No Surprises
This is the perfect time of year to discuss wrapping up plans from second and third quarters, reviewing profit sharing, and looking at tax implications of any last minute purchases. At this point in the year, you and your CPA financial partner have done all the work, carefully planned the financial results of key business decisions, and there should be no surprises closing out the year and moving into the next.
Call to Action – What You Should Be Doing Right Now
Have you planned your year end meeting with your CPA? Do you know the balance you’ll owe on 4/15? Do you understand the PPP strategy and loan forgiveness? Are you working with your CPA on a quarterly roadmap similar to what is outlined here?
Quality partnership and frequent communication are key to your business’ success. If the answers to any of these questions are no, it’s time to look for a financial partner who is as committed to the financial prosperity and health of your business as you are to the clients you serve.