It’s that time of year again – perfect for a mid-year financial review with your accountant!
This financial health check is essential, no matter the industry – SaaS, startup, e-commerce, crypto – you name it.
Plus, it’s ideal timing. The workload and availability of financial advisors fluctuates a great deal, depending on the season, but their slow season falls between Memorial Day and Labor Day.
That’s why a mid-year financial review is such a good practice for business owners. It’s situated perfectly in the year as one of the best times to ask an accountant for strategic help.
How Do You Capitalize on Your Tax CPA’s Schedule?
It’s as simple as these two steps:
- Schedule something! Ask an accountant to meet with you between the end of May and the beginning of September.
- Come prepared with a good list of questions (more on that below)!
10 Vital Questions to Ask an Accountant in Your Mid-Year Review
Here are 10 important questions that you should bring to your tax expert in your mid-year review. If you ask an accountant each of these questions, it will help you to better understand your business’s financial standing.
1. Is my financial data accurate?
Reviewing the accuracy of your financial statements ensures all transactions are properly categorized, and financial data is up-to-date. This important for several reasons.
Accurate financial data helps you understand your business better, prepare for taxes, and manage your money. It also builds trust with anyone who might invest in or lend money to your business.
For instance, a SaaS company might discover that a recurring software subscription charge had been misclassified, causing expenses to appear higher than they should be. This would cause all kinds of issues, including distorted financial decision making.
2. Can we forecast my year-end financial results?
Projecting year-end financials during your mid-year review can help guide strategy for the remainder of the year.
Say your projections show a higher profit than anticipated, and you’re on track to exceed your business’s revenue goals. You might choose to invest in new initiatives or set aside more funds for taxes.
Conversely, if projections indicate lower than expected profits, you could identify areas to reduce expenses or increase sales to improve the outcome.
3. Should I update my quarterly estimates?
Based on the current year’s financials and projected year-end results, you might need to adjust your quarterly estimates in your mid-year review.
Estimating your quarterly taxes is an important part of financial planning and tax compliance for businesses. The amount you pay is based on how much you think you’ll earn.
But sometimes, your business might do better or worse than you expected. If you’re earning more than you thought, you might end up owing more taxes. So, it’s a good idea to increase your quarterly payments to avoid a big tax bill at the end of the year.
On the other hand, if your earnings are lower than expected, you could lower your payments. That way, you don’t pay more taxes than you need to.
This is why checking in on your finances mid-year is so important!
A growing tech startup, for instance, might realize that its quarterly estimates are falling short due to a rapid influx of customers.
4. What’s changed since last year?
Talking about big changes in your business from last year helps you see how these changes could affect your future. This could mean changes in how much money you’re making, how much you’re spending, or what your customers are doing.
For instance, if a SaaS company sees that more customers are leaving than before, they might need to rethink how they keep customers happy or take a closer look at what their product offers.
By understanding these changes, you can plan better for the rest of the year, whether that means adjusting your budget, improving your product, or finding new ways to reach your customers.
5. How will upcoming future changes affect my business?
If you’re planning changes to the business for the rest of the year – like ownership changes, large asset purchases, hiring new employees, or operating in new states – you should discuss these with your CPA.
That’s because these changes can affect your taxes and your bottom line. For example, buying a big piece of equipment might mean a tax break, and hiring more people might change your payroll taxes.
If you’re thinking about expanding into new states, there could be new tax laws to consider along with different tax obligations.
By talking these plans over with your CPA, you can make sure you’re ready for what’s ahead.
6. What tax strategies and laws should I know about?
Keep an eye on the future. Ask about tax planning strategies that might be applicable to your business and any new tax laws that could affect you.
A startup, for example, might decide to invest in research and development (R&D) to take advantage of specific tax credits, leading to both improved products and significant tax savings.
7. Are my expenses deductible?
Understanding the deductibility of specific expenses is critical, as it helps to reduce your taxable income and boost your profits.
This is an important tax question to ask an accountant because they can help you make informed decisions throughout the year to optimize your business taxes.
Generally speaking, many common business expenses such as rent, wages, insurance, advertising, and equipment purchases are tax-deductible if they are considered to be ordinary and necessary for the operation of a business.
For instance, a SaaS company might learn that the costs for a recent server upgrade are fully deductible, significantly reducing their tax liability for the year.
8. Is my business structure still the best fit?
As your business evolves, your CPA can help you evaluate whether your business structure (LLC vs. Inc/Corp or S-Corp) is still meeting your needs.
They’ll help you consider factors like:
- Optimizing your taxes
- New compliance requirements, such as annual reporting
- Management structures
- Your business goals, including fundraising and exit strategies
This conversation can help you ensure that you manage your cash flow effectively, stay compliant, and plan for the future.
A growing e-commerce business, for instance, might find it helpful to switch from an LLC to an S-Corp. This change can sometimes save money on taxes because, in an S-Corp, not all business profit is subject to certain taxes.
9. Am I keeping the right records?
Confirm that you’re tracking all necessary information, such as:
- Revenue and payroll by state (if you operate in multiple states)
- Loan balances and documents
- Retaining receipts for charitable donations
For example, a startup operating in multiple states might discover they need to change the way they’re tracking revenue and payroll to ensure accurate tax filings.
10. How can I better prepare for next tax season?
Lastly, ask an accountant how you can start planning for your business tax returns next year. The decisions you make now can make a significant impact.
For example, your tax expert might recommend shifting certain income into the next year and making a substantial year-end purchase for a write-off, a common tax situation for SaaS companies.
The mid-year financial review is a crucial checkpoint on your entrepreneurial journey. By asking these ten questions, you’ll gain valuable insights to guide your business decisions and propel your venture forward.
How Acuity Can Help
Ready to speak with a tax advisor? We’re here to help!
If you’re looking for a new CPA to help you think strategically about your business’s tax situation, book a free consultation with our team.
Frequently Asked Questions
A tax CPA (Certified Public Accountant) is an accounting professional who has passed the CPA exam and met the necessary educational and professional experience requirements.
Tax CPAs know a lot about tax laws (hence the name). They use this knowledge to help clients with their tax returns and finding ways to save money on taxes.
If a client has a problem with the IRS, like an audit, a tax CPA can help with that, too. They often give advice on financial planning, planning for retirement, handling estates, and other money-related topics, too.
A tax CPA can cost a business anywhere from $1,000 – $5,000+ per year, depending on what tax services you need – tax returns, 1099 services, tax planning, tax consulting, tax strategy, etc.
We recommend outsourcing your tax services rather than hiring a full-time person on staff because it’s more economical. Our tax services start at $250 per month and cover:
- Federal income tax
- State income tax
- Franchise tax
- 1099 services
- Personal tax returns
- Tax planning
- Tax strategy meetings
- Tax consulting
And at Acuity, we make pricing packages simple and customizable for each entrepreneur. That way, you can get the financial help you need while staying within your budget.
Hiring the right tax CPA for your business is crucial – for staying compliant, saving on taxes, and making informed business decisions.
When it comes to picking a tax CPA to work with, here are a few things we believe at Acuity:
- We believe that people and processes are just as important as technology.
- We are fully remote, even before the pandemic! We believe that companies should work with the tax CPA that makes the most sense for their business and their industry — not just one that’s located near them.
- We strive to provide flexible solutions that grow with your business. We have customers that come to us to clean up their books. From there, they sign up for ongoing bookkeeping services and tax help.
As some customer grow, they’ll start to take advantage of our more advanced solutions, like our controller services or working with a CFO. It’s the best of both worlds, because you only pay for what you need at any given time. And if you need additional services in the future, we’re prepared to offer that to you.