Here’s something that every growth-stage business owner needs to know: There’s a difference between an accountant who only handles your taxes and a full-service CPA-led advisory firm for businesses that are experiencing rapid growth.
The difference is this: an accountant or traditional CPA firm handles your taxes and communicates with you about tax reduction within a set period of time, usually tax season. A CPA business advisory firm performs a robust variety of services, including:
- tax planning
- accounting
- financial analysis, and
- business advisory services.
When your business is growing quickly and has reached an annual revenue of, say, $500K, these services become, in a real sense, mandatory.
Where’s the evidence?
A 2018 survey from Client Accounting Services found that businesses using an accounting firm’s client advisory services report higher profits and greater financial insights.¹
So, higher profits and better insights are the baseline positives of using a CPA business advisory firm. But what does that mean for you as a growth-stage business owner? I’ll explain.
Year-round tax planning is a prerequisite for growth-stage businesses.
As your business grows, your taxes get more complicated. That’s the case for federal and state income taxes, payroll taxes, and retirement planning.
A CPA business advisory firm works with you to create a proactive tax strategy that uses deductions, credits, and varying business structures to maximize your tax efficiency.
An outsider’s perspective helps: A study from Intuit Quickbooks, which interviewed 4,000 small and medium-sized businesses, found that those using external financial advice reported their income increased 11.5%.”¹ That’s money that you can invest back into your business so you can continue to grow.
Putting accounting, tax, and financial data in one place ensures consistency and accuracy.
You want reliability in your accounting records. First of all, you need them for compliance purposes. More than that, though, quality records give you a stronger foundation for decision-making.
CPA business advisory firms offer expertise in maintaining accurate records, and they can help you leverage that information for better strategic decisions. This prevents costly errors, so your business is more secure in terms of compliance and planning. The study I mentioned before found that “half of the businesses that use client advisory services say they worry less about mistakes.”¹
Financial analysis and forecasting lead to better decision-making.
Once you’ve built more accurate, thorough records, you need an advisory firm for businesses (led by a specialist in finance and tax) to turn that data into action. I’m talking about financial analysis.
Financial analysis means turning data into actionable insights. A CPA-led business advisory firm takes care of much of that work for you, offering budgetary, forecasting, and predictive insights that reveal causal relationships between cash flow, profitability, and key performance indicators. Good financial data leads to more informed business decisions.
Increased revenue is not the same as growth.
Growth doesn’t happen in a vacuum, and it’s not reducible to revenue figures. It requires strategic decision-making and long-term planning. Think of a CPA-led business advisory firm as a partner who you can rely on for help navigating the bigger challenges, like scaling operations or entering new markets.
“[A full-service CPA] knows better than anyone just how successful a business is and, in many cases, what a business can do better, including ways to boost revenue and cut costs, improve cash flow, manage inventory, and secure small business financing.” — Forbes³
Business owners who stay with firms whose primary service is tax compliance rather than tax planning and business advisory risk being left behind by competitors that benefit from:
- Increased revenue and cash flow through financial and tax strategies
- Solutions to compliance issues as financial complexity increases
- Funding and financing plans for your businesses.
I’m not talking about abstractions. I’m talking about real monetary value through business performance and forecasting combined with tax planning.
Growing businesses inevitably see more opportunities for credits and deductions.
Growth-stage businesses will leave money on the table. Why? Here’s an incontrovertible fact: maximizing tax deductions and credit is not an end-of-the-year issue, nor a tax season issue. It’s an off-season issue. As I’ve pointed out in other articles, significant, consistent, and mature strategies require planning well ahead of tax time.
A CPA-led advisory firm for businesses that are growing is a force multiplier when it comes to present savings and long-term wealth-building.
Businesses without guidance are also at risk of compliance issues.
As your revenue and business grow, tax and financial complexity grow. More transactions and expanding compliance requirements make it harder to stay on top of your recordkeeping. Without expert guidance, one mistake — for example, misreporting income — could lead to audits or fines.
A CPA-led advisory firm for businesses is going to integrate critical functions of your business: accounting, tax, financial, and operations, as well as wealth management. A business with fewer transactions, transactions of a similar nature, and overall accounting, tax, and personal considerations that do not involve large sums of money should save its money. Your business demands more.
Growth-stage businesses and their owners must recognize that complexity is part of growth. Any system that grows must deal with complexity. So, whether it’s this tax season or the next, you, the business owner, are going to have to confront this truth and take appropriate action to protect your company from IRS meddling.
Make sure you’re ready for the next five years.
A CPA-led business advisory firm helps you build a plan for the future. Whether it’s planning for expansion or preparing for an exit, advisory-focused firms ensure your business’s growth aligns with your vision.
Move beyond growth-stage to maturity with an experienced business advisory firm.
Every CPA firm should be an advisory firm for businesses, regardless of size or maturity. If you’re not happy with your CPA, or you want your business to stay competitive in 2025 and beyond, schedule a discovery call with us today.
Talk soon,
Jeremy A. Johnson, CPA
References:
- Nearly 80 Percent of Companies That Outsource Accounting Are Likely to Refer Their Accountants, According to a New Survey From Bill.com and CPA.com [Internet]. www.businesswire.com. 2018. Available from: https://www.businesswire.com/news/home/20180724005571/en/Nearly-80-Percent-of-Companies-That-Outsource-Accounting-Are-Likely-to-Refer-Their-Accountants-According-to-New-Survey-From-Bill.com-and-CPA.com
- Tyler R. Accountants can pay their way [Internet]. Thetimes.com. The Times. Available from: https://www.thetimes.com/business-money/entrepreneurs/article/accountants-can-boost-business-revenues-enterprise-network-8085h2t70
- Mckee M. Council Post: Why Should You Have An Accountant For Your Small Business? Forbes [Internet]. 2024 Aug 12; Available from: https://www.forbes.com/councils/theyec/2020/08/18/why-should-you-have-an-accountant-for-your-small-business/