CPAs are not just number crunchers – they are business and financial strategists.
Tax season is bearing down, and big businesses aren’t the only companies that can reap financial rewards from the expertise of certified public accountants. Many small business owners try to save money by handling their finances alone – but quickly realize that financial software can only take them so far.
Keeping your finances in order is key to running a successful business and making major mistakes on tax returns or routinely exceeding your budget can have dire consequences. A whopping 82 percent of small businesses that fail do so because of cash flow problems, according to a U.S. Bank study. Other poor financial decisions topped the reasons for closures as well: nearly 80 percent of small businesses fail because they started with too little money, 77 percent priced products poorly, and 73 percent were overly optimistic about achievable sales and the cash flow required to sustain the business.
CPAs are not just number crunchers. They bring invaluable expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help choosing new product lines. Even better, they will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.
Read on to discover the reasons a small business needs a full-service CPA.
- Unmatched knowledge. What’s the difference between bookkeepers, accountants, and CPAs? Put simply, a bookkeeper works with short-term finances, and an accountant focuses on the short and long-term. Even though a CPA is an accountant, not all accountants are CPAs. One of the most trusted professional designations in the business world, CPAs stand out from other finance professionals by the stringent qualifications and state licensing requirements they must meet. The CPA exam is a rigorous process over several days that demands takers demonstrate many detailed facets of financial and tax expertise. CPAs also are required to stay current in their knowledge by complying with continuing education requirements every year. Many also add tax courses to keep up-to-date on the ever-evolving tax code.
- Save time and money. Learning through experience isn’t always the best path for small businesses with limited resources. Unless you are a financial expert, chances are it’s going to cost you more time and money to figure out complicated financial matters on your own than if you hire a CPA. You also are denying your business the benefit of expertise. SurePayroll reports that 40 percent of small- to medium-size businesses pay an average of $845 in tax fines every year just from improper payroll withholdings and filings.
- Taxes properly filed. It’s well-known that CPAs can prepare and file your taxes. But what many small business owners don’t realize is that the IRS distinguishes between enrolled agents, CPAs, attorneys, and “unenrolled” preparers. Accountants who are not CPAs are considered unenrolled preparers, and they are not allowed to represent clients in many tax matters before the IRS. Bookkeeping software can also tempt small business owners hoping to cut costs by preparing their taxes on their own, but many quickly realize they are in over their heads. Business taxes can quickly become complicated, and mistakes can result in hefty fines. Businesses with Internet sales may have to file taxes in multiple states, for example, or failing to write off short-term debt properly can make it difficult to secure future loans.
- Audit support. CPAs are among the only professionals eligible to represent your business in an IRS audit, and they will carefully guide you through what can quickly morph into an expensive, stressful, and time-consuming process. They will also help ensure that you don’t violate any tax laws after the audit when the government is likely watching. Of course, even better than hiring a CPA after you are audited is working with one before. Not only will they create a proper audit trail, but many offer audit insurance that covers the fees they would normally charge to help your business respond to the IRS.
- Financial Statements. CPAs prepare financial statements that can be used to support your business in many ways, including loan applications, mergers, and acquisitions, investor reports, or to simply paint you a picture of the overall financial health of your company. The simplest are basic financial statements based on information you provide that is not verified by the CPA. Full-service audits are the most complex and require the CPA to verify the accuracy of your numbers by physically examining your inventories, bank accounts, and assets.
- Financial checkups. Think of it like a checkup for your business – the best CPAs perform a financial analysis of their clients’ companies several times a year. They may look at results from your sales data, profit margins, cash flow, inventory, and payroll to determine if you need to adjust your budget to avoid problems.
- Evaluate risks. While you are immersed in the day-to-day trenches of running your business, CPAs are trained to take an objective, big-picture view of your financials. This broad outlook can help you make wise long-term decisions and evaluate risk, and it can also help CPAs, who are familiar with your industry, offer sage advice for navigating economic downturns.
- Experts on ever-changing laws. For most people, staying on top of complicated tax codes was challenging before legislators passed the first major tax overhaul in 30 years at the end of 2017. It’s the CPA’s job to stay on top of the latest changes and to help you understand how they impact your business. Their knowledge of tax law and legislation helps them suggest ways you can free up cash flow, save money, and raise capital for expansion. They should also free you from handling most government paperwork, including legal and compliance documents for your business, annual statements of accounts and recording share/stock allocations.
- Insights for sustained growth. Rapid growth can lead to rapid change, and CPAs can help manage these transitions, so they don’t monopolize your time. They will keep an eye on details like payroll, employee tax management, property tax, and choosing the best health insurance package, leaving you free to focus on the bigger picture. Their financial analysis can also provide valuable insight into how to properly expand and even help determine the best time to introduce new products and services to your market.
- Mergers and acquisitions. CPAs can carefully assess the accounts of companies you are considering for a merger or acquisition to make sure there are no potential issues, such as outstanding debt or assets that are not paid off. They will also put your company’s financial records in order and produce documents that show your business in the best light to potential buyers. They will help with the due diligence process and can help you structure your financial affairs so that you get the most money from the sale after taxes.
- Securing loans. Your CPA can advise you on the wisdom of taking out a loan based on your cash flow, associated risks, and fines, and the impact it will have on your taxes. They can help you choose the best loan for your business and assess the terms offered, as well as prepare financial documents for the application.
Hiring a CPA is the best way for small businesses to avoid paying for costly mistakes in complicated areas that typically fall outside the owners’ wheelhouse, such as tax law or financial analysis. Whether they are supporting you through growth and recessions or helping you file taxes or secure financing, the insight and strategic advice that your CPA provides can help you feel confident in making high-level business and tax decisions for your company. Most important, their focus on your company’s financial details will ensure that you have time to fan the creative fires that make your business a success.
No Boundaries has been helping businesses like yours grow and thrive for over 25 years. Contact us today to find out how our expert staff can help you meet your financial goals.
