A certified public accountant (CPA) can play a crucial role in the tax filing season as they help business owners navigate the tax code and ensure they meet all of their required deadlines. They also play a vital role in looking at your business accounts critically and help you fix financial issues hurting your business
“I play financial therapist every day,” says Paul Miller, CPA and founder of accounting firm Miller and Company. “I look at numbers all day and I solve problems all day. You can’t buy that value. I see things that nobody sees. That’s the best thing about numbers – numbers don’t lie.”
While a CPA can help you maximize your deductions and calculate the tax you owe, what happens in the months leading up to tax season is crucial in making you and your accountant’s life easier. By preparing ahead of time, you can start off on the right foot and help your accounts – and your business – run smoothly into the new year. Here are some resolutions to follow in 2025.
1. I will stay on top of my bookkeeping
One of the biggest bottlenecks for CPAs is sifting through endless business documentation – or lack thereof. Saving your bookkeeping until the end of the year can cause you to miss out critical deductions, or result in you owing more taxes than you expected when you file.
“Be diligent in your record keeping. If you come in and you’re prepared, you avoid a lot of the obstacles,” Miller says. “The books and records are the backbone of your business. So if you get your books and records organised, you have a very good idea of how your business is doing.”
Diligent bookkeeping allows you to evaluate the health of your business throughout the year, stay on top of the deductions you can take and stay compliant with the taxes you owe. This all serves to help you avoid having to pay a hefty tax bill you may not be able to afford later on.
If they can afford it, business owners should consider hiring a bookkeeper or an internal accountant to help with your records, freeing up time for you to focus on your business and offering a second set of eyes on your accounts – especially as you look to expand.
“As your business grows, the more connected you are to your accountant, the better the results will be,” Miller says.
2. I will conduct a cash flow analysis
A cash flow analysis is a key tool in analyzing the health of your business. It tells you where your money is going, how much you’re making in sales, how much you’re spending and, ultimately, if your business is profitable.
It’s also a requirement from many banks and lenders when you apply for a business loan. Knowing how your cash flow operates from month to month can tell you ahead of time whether you’ll qualify for a loan.
You can conduct a cash flow analysis yourself, or have an accountant, a bookkeeper or a fractional CFO conduct it for you, depending on the size and complexity of your business. It’s also a good idea to conduct a cash flow analysis on a regular basis, such as monthly or quarterly.
3. I will stay aware of the deductions I can take
Business expense deductions can massively reduce your tax bill when filing time comes around. Unfortunately, many small business owners miss out.
“I know what your deductions are,” Miller says. “People think they know their deductions, but they don’t.”
Common mistakes in recording expenses, Miller says, include using your personal phone or internet connection for their business, both of which can be recorded as business expenses more easily if you have a separate line.
Incidental expenses such as taking a client out to lunch can also be counted as business expenses, which add to your deductible amount. Staying aware of what counts as a business expense or deduction – and recording it as such – can make maximizing your tax return much easier in the following year.
4. I will create an inheritance plan for my business
If you’re the sole proprietor or owner of your business and you want to leave it to a family member after you pass, you will want to have your paperwork in order to make that process fast and easy.
Inheriting a business isn’t as simple as willing it to someone in your will and testament. Different business types have different rules around where the business, its assets and its liabilities go if the owner dies. Some other things to be aware of include:
- Sole proprietorships dissolve upon the owner’s death, with the assets and liabilities being distributed into the deceased’s estate.
- Partnerships depend on the partner agreement, with options for the surviving spouse or relative automatically inheriting the deceased’s share, or being able to be made a partner in advance.
- Limited liability companies (LLCs) dictate inheritance based on the operating agreement, if there is one. If there isn’t, the LLC may be dissolved upon the owner’s death.
- Corporations offer options for the surviving spouse/relative inheriting shares and the deceased’s shareholder position as defined by the deceased’s will and testament and the company’s shareholder agreement.
With this in mind, if you don’t have an inheritance plan in place for your company, you should start making one now. Otherwise,your family may lose out on inheriting the business and assets as you wish them to.
“I had a lawyer who had an aneurysm and died, and his wife couldn’t access the business money,” Miller said. “It’s crazy.”
To prevent this, consult a qualified estate planning attorney and ensure that your spouse or relative has power of attorney over your business bank account and assets in the event of your death or incapacitation.
You may be considering making your spouse an employee or partial owner of the company, though this comes with certain requirements and tax implications depending on the state you live in and the business structure. Don’t do this without consulting a qualified estate planning attorney and tax official.
Sole proprietorship companies, for example, can be operated by spouses, so long as the only members are the married couple, if you file a joint tax return and so long as both spouses materially participate in operating the business.
5. I will build up my cash reserves
Cash reserves are crucial to keeping your business afloat. Like an emergency fund, having cash reserves allow you to pay for unexpected costs or support your expenses during slow months. This can help you retain staff, avoid defaulting on your business loans and prevent your business from going into further debt.
As a rule of thumb, you should save about three to six months’ worth of operating expenses in your cash reserves. Depending on the nature of your business and if you have a predictable “slow season” in the year, you may want to build in separate cash reserves for your operating expenses and for covering emergency repairs.
Cash reserves are also helpful for taking advantage of limited-time opportunities, such as buying equipment from another business, acquiring other businesses or hiring more staff during an unexpected rush.
6. I will work with a CPA before next year’s tax season
Time is money, and the more time you give your CPA, the more time they have to help you save on your taxes and get your records in order.
“Sometimes tax is paralyzing, and people don’t know how to pull it together,” Miller says. “My advice to everybody is to try to be proactive with your accountant or proactive with your CPA so that you can know what your numbers are. I see people not being prepared, people running out of time and saying, ‘Oh, I didn’t know that or I wish I would have known that.’”
Connecting with a CPA in advance of tax season can allow both you and them to organize your records, get your accounting processes in order and get on board with how your accountant’s workflow operates. A CPA can also help you gain a good hard look at your finances during the year and help you build a cashflow analysis, set up accounting records and maximize your deductions.
Bottom line
Running a small business is no easy task. However, by working closely with a CPA and making a commitment to running your accounts smoothly throughout the year, you can make evaluating the health of your business, handling emergencies and filing your taxes easier in the future.
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