Launching a small business is an exciting but stressful time. It’s easy to feel overwhelmed with all the decisions — and, all the expenses.
While many small business owners will look for ways to cut costs to generate positive cash flow, there are some situations when cutting expenses might not be the best long-term decision.
Undervaluing the experience of a certified public accountant (CPA) is one of these instances. No matter the size of your business, there are substantial benefits to having a CPA in your corner.
There is a Difference Between CPAs and Accountants
Did you know that CPAs and accountants don’t necessarily have the same qualifications? It’s okay if you didn’t – most people use the terms interchangeably. But the thing is, there can be a significant difference between the two professions.
One difference between the two is that in most cases, CPAs are also accountants — but, not all accountants are CPAs.
Accounting is the recording and reporting of financial transactions. In essence, anyone who performs these functions can call themselves an accountant. Although an accounting-related degree is helpful, one can be an accountant with a degree of any kind!
CPAs, on the other hand, are accountants who have met state licensing requirements. Those requirements vary from state to state, but in general, this amounts to satisfying minimum education and experience requirements and passing the CPA exam. CPAs are also required to complete continued professional education on an annual basis to keep their license in good standing.
Advantages of a CPA for Your Small Business
Clearly, the rigors of obtaining and keeping the CPA designation suggest that an individual is committed to the accounting profession and has unique skills. While there are skilled accountants who have not obtained the CPA license, most business advisors will recommend hiring a CPA or CPA Firm over a standard accountant.
Whether you’re a solopreneur or running a small business with employees of your own, chances are you can benefit from hiring a CPA. Here are three advantages of working with a CPA.
CPAs are More Familiar with Tax Laws
Understanding tax laws and optimizing business operations to find ways to take advantage of deductions are not areas with which most business owners are unfamiliar. However, CPAs, especially those with years of tax experience, can help you find ways to increase your bottom line by operating in a more tax-friendly manner.
Not all CPAs are tax experts, but the average CPA is more knowledgeable about tax law than the average accountant. After all, taxes and regulation make up a significant part of the CPA exam. Plus, many CPAs take tax courses and seminars to help them stay up to date with changes in the tax code.
While accountants may be able to prepare tax returns for your small business, the “accountant” designation doesn’t provide assurance of certification. Unlike a CPA who is specifically identified by the IRS as a professional permitted to represent their client before the IRS, an accountant does not have the ability to represent you in the event of an IRS audit. Accountants who are not CPAs are only permitted to represent clients in limited circumstances.
If you’re paying a professional to prepare your taxes, make sure you hire a CPA who has the authority to represent you in front of the IRS.
CPAs Provide More Assurance of Financial Reporting
Another significant difference between CPAs and regular accountants is that CPAs offer more assurance when preparing financial statements, such as a balance sheet or income statement. This is of particular importance to publicly traded companies because they must legally provide accurate financial statements to the public.
Moreover, clean and accurate financial statements are excellent sources of data by which managers can make strategic decisions. For instance, if you are unaware of how much short-term debt you have at a particular moment in time, it can make it difficult for you to make appropriate decisions about future investment opportunities.
If you want to increase the accuracy of your financial statements, consider hiring a CPA.
CPAs Can Help You Grow
When you first started your business, surely you envisioned growing and building something special over the years. While you might not have the resources to commit to an account or CPA at the start, over time you’ll discover that those day-to-day operations become more time-consuming. You can relieve some of the pressure of managing the financial aspects of your business by handing those tasks over to a trusted advisor.
A knowledgeable CPA can help you with a wide variety of tasks, from budgeting and forecasting to maintaining accurate records. As your business continues to expand, you may even reach a point where it might make sense to purchase new assets, build or lease additional facilities, or hire additional employees. These added expenses might require you to open a line of credit and borrow money to facilitate additional growth.
Have a CPA on your team early on can help you navigate the financial waters throughout the life of your business. Moreover, if you work with the same CPA or CPA Firm, they will have a broad understanding of your business and can offer strategic insight on which to make important decisions.
Working with a CPA can position your small business for short-term and long-term financial success.
A Few Final Thoughts
When it comes to your accounting needs, it’s important that you get the job done right the first time. Not all accountants and CPAs are created equally. It’s critical that you understand your business well enough to know what your needs are and how you can benefit from hiring someone who can help you reach your goals.
If you’d like to talk to a local CPA Firm about your small business and whether a CPA can help you reach your business goals, then contact Rivero, Gordimer & Company today!