Small business owners can face financial pressure even when revenue looks strong. In Episode 31 of It Depends, Brittany Maynard, a partner at Hantzmon Wiebel, offers a practical reminder: “You should be having conversations with your accountant throughout the year, both to plan better for your taxes and to make decisions for your business.”
Running a small business requires more than generating revenue. You need a clear view of profitability, cash flow, taxes, and the decisions that will shape your next stage of growth. Asking the right questions throughout the year helps you spot issues earlier and make decisions based on information, not emotion.
Look Beyond Revenue When Measuring Financial Health
Revenue matters, but it does not tell you whether you are actually making money or just generating sales. Look at your gross profit margin, net profit margin, and cash flow together. These measures help you understand what remains after costs, whether operations are producing sustainable results, and how much cash is available to meet obligations.
Reviewing profitability alongside cash flow gives you a more complete picture than relying on sales totals alone.
What Numbers Should You Review Each Month?
Checking your bank statements each month is a good start, but a regular review should go further. Your balance sheet, profit and loss statement, and cash flow statement each provide a different view of the business. Accounts receivable can also show whether you are collecting the money you have earned quickly enough to support operations.
Key performance indicators (KPIs) add another layer. The right KPIs depend on your industry and business model and may relate to sales, customers, marketing, or operations. Our team can work with you to identify which ones are worth tracking for your business.
Treat Cash Flow as More Than Expenses
Reducing expenses or increasing revenue can improve cash flow, but they are not the only levers. Inventory management and how quickly you collect accounts receivable also affect how much cash is available to the business.
The best response depends on what is driving the cash flow pressure. Review these factors with your CPA to identify the cause and decide which changes make sense for your business.
How Much Should You Set Aside for Taxes?
As Brittany puts it, the answer is the name of the podcast: it depends. No single set-aside amount fits every small business. Book income does not equal taxable income, and what you need to set aside depends on your circumstances and the decisions you make during the year.
Your business structure deserves the same ongoing attention. The structure that made sense when you started may not fit your current or future goals. Revisit the conversation with your accountant as the business changes.
Watch for Red Flags Early
Decreasing profit margins, taking on more debt to continue operating, or struggling to make payroll can signal that something needs attention. Identifying the cause early is usually easier than fixing it after it has snowballed.
Historical information shows what has already happened. Forecasting helps you anticipate what may happen next and decide where to focus before a problem becomes harder to address.
Plan Before Hiring or Selling
Base hiring decisions on financial data and business needs, not emotion. Consider capacity, hiring costs, and turnover costs. Your accountant can serve as an objective voice of reason and help you model different scenarios before you commit.
If selling your business is part of your long-term plan, start preparing years in advance. Buyers look for profitability, organization, and a business that can operate without depending entirely on the owner. Training your team and building repeatable processes helps the business run without you, which makes it more attractive to a future buyer.
Make Your Accountant Part of the Conversation
Your accountant can be more than the person who prepares your tax return. An ongoing relationship gives you a third-party perspective when you evaluate decisions, plan for taxes, review cash flow, or prepare for a change in the business.
As the leading independent accounting and professional services firm in Central Virginia, our advisory and tax teams help you evaluate your financial information, plan for upcoming decisions, and connect day-to-day activity to your broader goals. Fill out our Request Services form to tell us about your needs and start the conversation.
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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.
