CPA… accountant… bookkeeper… they’re all the same, right? Wrong. Sure, a Certified Public Accountant (CPA) has the word accountant in it, but the profession can save money for small businesses in ways that accountants may not necessarily know.
Licensing is the greatest distinction between a Certified Public Accountant (CPA) and other accountants. All CPAs have passed a four-part exam with strict education prerequisites to become certified with their state board. All CPA candidates need 150 hours of college coursework in specific accounting, auditing, and core business courses. In addition to the 4 part exam, those with CPA aspirations need a year of work supervision under a licensed CPA before being granted licensure. The NASBA tracks the different state board requirements if you’d like to dive deep into the specifics.
All those hours of education and exam prepping help CPAs take on fiduciary responsibility for audited financial statements, increase their knowledge in tax and accounting regulations, and meet the profession’s high standards and code of ethics. License maintenance requires continuing education (typically about 40 hours a year), which keeps them updated on changes in the accounting industry and transfers them into new knowledge to help them reach your financial goals. When you use a CPA, you’re investing in a business partner who has invested in becoming and staying informed in accounting practices.
Cool, cool, cool… So. How does a Certified Public Accountant use all that knowledge to help YOU as a business owner?
1. Save Money!
Biggest and best first. Using a CPA can save you money. There is usually a tipping point in building your business where you go from “bootstrapping” to feeling like you’re making real money. Many people think they can continue to do everything themselves and figure it out as they go along. But right up at the top of the list of things you should invest in (when you are making money) is accounting.
Oh, the horror stories I could tell you… The cost of fixing a mistake or lack of knowledge of tax laws brings the Benjamin Franklin axiom “an ounce of prevention is worth a pound of cure” to mind. Consulting with a CPA can ensure you pay your taxes appropriately and on time, avoiding costly tax penalties. Professionally prepared tax returns and planning help you only pay what you’re responsible for and not a penny more by alerting you to tax deductions and tax credits buried in the tax code or new legislation and tax laws.
Taxes are not the only way a CPA can help you save money. CPAs often spot trends in spending and help you be more strategic with operational expenses.
2. Save Time
What I would give for 2-3 more hours in my day… What would you do with the extra time? More time is something we all crave. Handing your financial tasks over to a CPA could give you hours back.
If numbers aren’t your thing, you may procrastinate before and when you sit down to review your financial records each month. Classifying transactions or reviewing the final product to determine if your expenses increased could turn your stomach. How about researching the latest tax law that Congress put out? What if you could spend that time with your family or to close more sales?
You need a CPA when your life and how you earn and save money get complicated. The tax code and its related materials came in at over 73,000 pages long in 2013, according to Wolters Kluwer, CCH, a firm that has analyzed the federal tax code since 1913. (dealnews.com)
Handing your books and records over to a CPA gives you your time back so you can focus on your business and family while we do the heavy lifting, interpreting the data and regulations.
3. Develop Insights into Cash Flow
Once all that heavy lifting is completed, your CPA knows where your cash went. With a financial check-up or business review scheduled, you’ll know where you want your money to go and where you need adjustments.
Having a good handle on where your cash is going can help you plan your expense payments and catch up on any outstanding invoices. It creates the ability to plan, both in the short and long term, supporting you in making sound financial decisions.
Businesses that don’t understand their cash flow often fail. Those with a firm grasp on where their cash is going can plan for success.
4. Prepare & Interpret Financial Statements
Whether you are a Fortune 500 business or a small Mom-n-Pop shop, having professionally prepared financial statements provides a beneficial snapshot of your business’s financial health. You gain insight into your performance, operations, and cash flow.
All that from a snapshot? Yup. If only our selfies provided so much.
While having QuickBooks spit you out a Profit & Loss and Balance Sheet is all well and good, it doesn’t do YOU any good if you can’t decipher what it means for your business’s performance. A CPA can help you interpret that data into meaningful information. Are your margins up from last year? How’s your liquidity look? Would the bank approve the loan you’re going for? We can help you answer all those questions and more.
5. Loan Applications
Speaking of loans… CPAs often assist their clients with pulling together documents for loan applications. Banks frequently ask for prior-year tax returns, financial statements, and projected financial statements. CPAs also ensure these documents are presented correctly. I often see DIY financials with negative accounts, accounts classified incorrectly, or personal accounts mixed in with the business. Having your documents prepared by a professional accountant provides that they don’t include any errors or omissions.
Applications can be filled with legalese and complex requirements. When in doubt, consult with your CPA. Most recently, we assisted our clients with the PPP loan process.
6. Operational Business Decisions
Are you ready to hire an employee?
Looking to buy a large piece of equipment?
Ready to sell the business?
Whatever your next big long-term business decision is, your CPA can help you analyze its effect on your bottom line. We often see people “just do it” and plunge headlong into a big decision without consulting with a CPA. A conversation with your CPA before you present them with “fait accompli” may save you heartache and dollars later on.
7. Tax Planning & Preparation
Tax planning is genuinely an art and is essential to any business strategy. Check out why we think it’s vital in our article: No one actually LOVES doing tax planning…but it’s a necessity. The highlights include:
- Controlling your tax burden by only paying the taxes you responsibly owe
- Avoid surprises created by unknown changes in your financial situation
- Achieve your business goals
Tax planning is an involved process, but it’s worth sitting down with your CPA a couple of times a year to ensure your estimates are on the right track. Thorough tax planning also makes tax preparation less painful. When you communicate with your CPA throughout the year, you already have most of your financial documents pulled together when tax time rolls around.
Of course, CPAs also prepare tax returns. It’s probably the number one thing we’re associated with, and the first question I’m asked when people discover I’m a CPA. While many people are tempted to prepare their taxes solo, business tax returns generally need more TLC. Beyond plugging numbers into boxes, tax preparation allows your CPA to review your business’s financial records, optimize tax deductions and tax credits, and identify planning opportunities for the upcoming year.
At Tax Time CPAs, we aim to develop long-term relationships with our clients. We view you as a business partner, not a quick buck. It’s why we’ve designed our Business Advisory Service Packages. We look forward to meeting with you throughout the year, not just in tax season, to assist you in meeting your targets.
We’d love to discuss your goals and how we can help you meet them. Contact us today to schedule an appointment.