02 Sep Why Should Your Small Business Hire a CPA?
CPA services may seem expensive for your small business, but in the end they will pay off.
All of your business transactions (every sale, every bill you pay, every distribution you make), your form of entity, and how you set up your processes will impact your profits and cash flows. The right CPA for your business will take the time and make the effort to gain a clear understanding of what you are doing and what your goals are. The CPA could take this knowledge and work with you to make recommendations for improving your processes and capturing information in your financial statements. He or she could assist you in building out a set of management reports that will provide you with the detailed information you need to understand your margins and may also make sure that you are using the right type of entity to minimize your tax liability.
CPAs are required to have a minimum of time spent working on company audits. In simple terms, an audit is an official inspection of an organization’s accounts by an independent party. Most audits don’t start with the numbers, but rather the processes that generate those numbers. Auditors spend a good deal of time studying and documenting their clients’ processes and assessing them to determine if they generate accurate financial data or provide opportunities for fraud. Only after studying these processes will the CPA be able to plan and begin the audit.
As a result of the experience gained from working with a variety of companies and studying best practices, the CPA can help a client improve processes to maintain accurate financial statements and prevent fraud or theft.
CPAs are trained in GAAP (Generally Accepted Accounting Principles) and are experienced in working with financial statements. Basic financial statements (Statement of Profit and Loss and Balance Sheet) compiled by an experienced CPA will be done in accordance with the standards required by your industry. Having financial statements that follow GAAP can help your business’s image in the eyes of stakeholders and make your taxes easier to prepare.
Working with Clients
Some people consider accountants pencil pushers and bean counters, but a good accountant with a busy practice is always in touch with their clients and should be a good listener. In order to come up with the right solution for a business, the CPA should develop questions to learn about the business and then document the results. Armed with this knowledge, the CPA can make recommendations that can be implemented right away to help increase profits, solve problems and address any other needs that arise in their interaction with their client.
A Second Set of Eyes on Your Business
Are you the only set of eyes on your business? A fresh perspective can help you identify threats and opportunities for your business. If a CPA goes over your transactions from month-to-month, he or she can provide a detailed analysis on what your strengths and weaknesses are, whether or not you are managing your key assets (such as cash) properly, and whether or not everything you have done in the set period is accounted for. A CPA can also drill down into how you are spending your business’s funds and flag items that may be taking away from your bottom line.
Professional License and Code of Ethics
Every CPA is required to adhere to a code of ethics and take continuing education courses to stay current on what that code means. Acting unethically or outside of the profession’s best interest will put a CPA’s license in jeopardy. Additionally, a CPA is forbidden from actively participating in the management of a client’s business. A CPA cannot write checks, handle cash or make management decisions. All of these rules help your CPA to truly be your trusted advisor and an independent third party who can take an objective role in your business.