Your Guide to Successful Tax Planning for Your Small Business

As a small business owner, you know it’s important to keep your finances in order. But did you know tax planning is one of the most important aspects of financial management? Unfortunately, many small business owners don’t do any tax planning at all. This can lead to big problems down the road.


In this blog post, we will discuss why tax planning is so important for small businesses, and we will also give you some tips on how to prepare for a successful tax planning session.

Why Tax Planning?

There are several reasons tax planning is so important for small businesses. First of all, it can help you save money. By planning your taxes ahead of time, you can ensure you are taking advantage of all of the deductions and credits you are entitled to. This can lead to a significant reduction in your tax bill.


We strongly recommend having a tax planning meeting with your CPA in October or November to take advantage of the actions your CPA suggests. If you are part of our virtual CFO services, your vCFo will attend the tax planning meeting and help implement those actions.


Tax planning can also help you avoid problems with the IRS. If you don’t take the time to plan your taxes, you may end up making mistakes that could trigger an audit. By taking the time to do some tax planning, you can avoid these potential problems.

Tips for Tax Planning Success 

Now that you know why tax planning is so important, what do you need to do to have a successful tax planning session? The first step is to gather all the information you will need. This includes your income statements, receipts, and any other documents that will be relevant to your taxes. If you are working with First Steps Financial, your dedicated accounting support will be able to provide all the reporting you and your CPA will need.


There are a few different ways to approach tax planning. You can do it yourself, or you can hire a professional tax planner. If you decide to do it yourself, there are a few resources that can help you. The IRS website has a lot of great information on tax planning, and there are also many software programs.


If you decide to hire a professional tax planner, make sure you choose someone who is reputable and who has experience working with small businesses. If you need references for a CPA, we can provide a list of CPAs we recommend.


No matter how you do it, tax planning is an important part of financial management for any small business. By taking the time to plan ahead, you can save yourself money and avoid potential problems with the IRS.


Don’t wait until tax season to start planning! Now is the time to get started.

Our Latest Insight

Protecting Your Investment: What to Consider Before You Sign a Small Business Partnership Agreement

By Alisa McCabe • February 24, 2026
Defining Roles, Authority, and Accountability Partnerships struggle most when responsibilities overlap or remain vague. Each participant should understand their scope of authority, operational duties, and decision-making rights . Consider how daily choices will be handled. Determine who oversees operations, who manages finances, and who represents the organization externally. Clarity supports efficiency and reduces friction. Written definitions also help when circumstances change. Growth, staff additions, or market shifts can test informal arrangements, while documented expectations provide stability. Capital Contributions and Ongoing Commitments Money is often the most sensitive topic in any business partnership agreement. Initial contributions should be clearly documented, including cash, assets, or services provided at the start. Equally important is understanding future commitments. Decide how additional funding needs will be handled. Will partners contribute proportionally, seek outside financing, or pause expansion plans? Addressing these questions upfront avoids resentment and protects working relationships. Transparency around financial considerations builds confidence and aligns priorities. Profit Sharing, Draws, and Cash Flow Planning Sharing profits seems simple until timing and distribution enter the conversation. Agreements should outline how earnings are allocated, when distributions occur, and what happens during lean periods. It is also wise to distinguish between compensation for active involvement and returns on ownership. Mixing the two can cloud performance discussions and strain cash availability. Clear policies help ensure stability, especially when one partner depends more heavily on income from the organization than another. Exit Paths and Conflict Resolution Even strong partnerships can change over time. Planning for exits does not signal mistrust. It reflects foresight. Outline how ownership transfers occur, how valuations are determined, and what triggers a buyout. Include processes for resolving disputes without disrupting operations. Having a roadmap for difficult scenarios protects both the investment and the people involved. Turning Planning Into Financial Clarity A strong business partnership agreement is more than a legal formality; it's an investment in your business's future and the relationship at its core. The effort you invest in planning now pays dividends through smoother operations, fewer misunderstandings, and stronger trust between partners. However, partnership agreements don't exist in a vacuum. They need to align with your actual financial realities: cash flow patterns, equity structures, and long-term sustainability goals. At First Steps Financial , we help businesses gain financial clarity through fractional bookkeeping and financial consultation services. We’ll navigate the numbers so you can focus on running your business and building a solid partnership. Let's connect.

Accounting for Small Business Owners: 5 Red Flags That Your Books are Broken (And How to Fix Them)

By Alisa McCabe • February 9, 2026
1. Your Financial Reports Never Match Reality If statements show healthy margins, but the bank balance feels tight, something is off. This disconnect often points to missing entries, timing issues, or misclassified transactions. Start by reconciling accounts monthly. Compare statements against source documents such as invoices, receipts, and bank activity. Consistency creates trust in the numbers and reduces surprises when reviewing performance. 2. You Are Always Behind on Updates When records lag weeks or months behind, visibility disappears. Decisions become guesses rather than informed choices. Create a recurring schedule for updates. Weekly or biweekly check-ins keep information current and manageable. Smaller intervals also make it easier to catch errors early, before they compound into larger issues. 3. Expense Categories Keep Changing Frequent shifts in how costs are labeled make trends impossible to track. Without consistency, comparing periods lose meaning. Establish a clear chart of categories and stick to it. Adjust only when operations evolve in a meaningful way. Stable classifications help reveal spending patterns and support better planning. 4. You Rely on Your Bank Balance Alone Checking available cash may feel sufficient, but it only tells part of the story. Outstanding invoices, upcoming obligations, and recurring commitments are invisible without proper reporting. Use cash flow summaries to understand timing. Seeing inflows and outflows together provides clarity and reduces stress during slower periods. Awareness supports proactive choices instead of reactive ones. 5. Corrections Happen Only During Year-End Waiting until the end of the year to clean up records can feel efficient, yet it often creates confusion and rushed fixes. Important insights are lost along the way. Build in periodic reviews. Quarterly assessments allow adjustments while details are still fresh. This habit improves accuracy and reduces the burden of large-scale corrections later. Turning Clarity Into Confidence Addressing these red flags takes time and discipline, but the payoff is control. Reliable records support smarter pricing, steadier cash management, and calmer leadership. First Steps Financial partners with organizations that want clarity without adding internal strain. Through fractional bookkeeping and financial consultation, our team helps bring structure, consistency, and insight to financial systems so leaders can focus on running their operations with confidence. If you are ready to replace uncertainty with clarity, let’s connect .

Business Savings Emergency Fund: How Much Should You Keep in Cash Reserves?

By Alisa McCabe • January 27, 2026
Why an Emergency Fund Is a Financial Anchor An emergency reserve exists to protect daily operations when income timing shifts or expenses spike. Unlike growth capital, this money is not meant for expansion, hiring, or upgrades. Its purpose is continuity. Having accessible business savings allows payroll, vendor obligations, and essential overhead to continue even during short-term stress. That breathing room preserves relationships and credibility, which can be difficult to rebuild once damaged. Just as important, it reduces emotional decision-making. Leaders with a cushion can pause, assess options, and choose the most strategic path forward rather than acting out of urgency. How to Calculate the Right Reserve Size There is no universal number that fits every company, but a common benchmark is three to six months of core operating costs for business savings. Start by identifying predictable outflows such as compensation, rent, utilities, software subscriptions, and insurance. Next, evaluate revenue reliability. Organizations with steady contracts may lean toward the lower end of the range. Those with seasonal income or client concentration often benefit from a larger buffer. Also consider access to external funding. If credit lines are limited or expensive, holding more liquidity internally can provide flexibility when timing gaps appear. Where to Keep Your Cash Reserves An emergency fund should be easy to access and separate from daily transaction accounts. Mixing reserve money with operating cash increases the temptation to use it for nonessential purposes. Many companies choose high-yield business savings or money market accounts that preserve principal while earning modest returns. The goal is safety and availability, not aggressive growth. Clear labeling and internal guidelines help reinforce the purpose of the fund so it remains untouched unless a true disruption occurs. Common Mistakes to Avoid One frequent misstep is building business savings but never revisiting the amount. As operations scale, expenses rise, and your client mix changes, the business budget should be adjusted accordingly. Another issue is using the fund as a convenience account. Tapping reserves for planned purchases defeats its protective role and can leave the organization exposed when an actual emergency arises. Finally, some owners delay building reserves entirely because margins feel tight. Starting small and contributing consistently is far more effective than waiting for a perfect moment. Building Confidence With the Right Financial Guide Determining the appropriate reserve level and maintaining it over time requires visibility into cash flow patterns and expense behavior. This is where First Steps Financial can serve as a steady guide. Through fractional bookkeeping and financial consultation, our team helps organizations understand real operating needs, set realistic reserve targets, and monitor progress without adding internal complexity. If you want clarity around cash reserves and long-term financial resilience, let’s connect.

CONTACT US

Contact Us