So you want to bring in a qualified accountant, but you’re unsure what a Certified Public Accountant (CPA) can do for your small business. There’s a reason I’ve titled today’s article rather awkwardly. The question “What does a CPA do for a small business” reflects the depth of uncertainty small business owners feel when the see the cost and not the return. You can’t make a decision if you don’t know what you stand to gain.
Today’s article tells you exactly what you get for what you spend: a list of the benefits and outcomes that’s easy to read and makes hiring a CPA easier. When 70% of small businesses don’t have an accountant,¹ there’s a communication problem. That ends now.
Here’s what your business can achieve with the help of a CPA:
- Get on a path to long-term financial stability
- Reduce your tax burden now and in the future
- Boost growth with solid financial data and decision-making
- Root out waste and identify unnecessary spending
- Deal with an IRS audit
Below, you’ll find the benefits expressed in more specific terms. All you have to do is follow the list for more information.
1. Ensure long-term stability with the help of a trusted advisor
In an ever-evolving financial landscape, a CPA plays a crucial role in ensuring financial stability over the long term.
Now, not all CPAs are created equal. That’s why it’s so important to choose who you work with wisely. (I wrote a blog on what to ask your prospective CPA. Give it a read here.)
But as a general rule, accountants give you the information and advice you need to make informed decisions. That’s why 87% of small business owners consider their CPAs a trusted advisor.²
2. Lower your tax burden now and in the future
The US tax code is around 9,000 pages.³ Add new federal laws and the regulations inferred from those laws. CPAs like me actually enjoy reading and parsing that information. Your bookkeeper or in-house accountant does not enjoy it.
At a baseline, the value you get back from a curious and proactive CPA outstrips the cost. Why? Because the tax code is huge, CPAs know it, and the Supreme Court has stated in the clearest terms possible that businesses and taxpayers should use the tax code to maximum effect. Within the confines of the law, a CPAs ability to reduce tax liability expands as the code grows. And it will grow. It always does.
Create a strategic tax plan for lower and lower tax liability over time
CPAs recommend tax-efficient strategies and guide you in making informed financial decisions. That means taking full advantage of the tax deductions and credits that your business qualifies for now, then fine-tuning bookkeeping and accounting practices to open up a new set of deductions and credits.
Improve stability and well-being in business and life
Let’s talk about the outcomes of a strategic tax plan. Again, we’ll focus on three big-picture items.
- Ensures financials and tax documents are accurate and optimized for maximum tax savings over time.
- Provides a step-by-step plan for retirement
- Keeps your business adaptable to new laws or regulations that could impact your business and personal financial and tax situation.
Change is not disruption. It’s an opportunity.
3. Grow faster with financial and operational synergy
CPAs play a vital role in fueling the growth of a small business, and it’s typically through financial insights, business experience, and directing the financial and operational sides of your business toward the same objective.
With the guidance and support of a skilled CPA, a small business can expand operations and achieve long-term success.
Set goals based on data, not hunches
CPAs can look at past and present data to predict future financial performance. A skilled forecaster helps you set realistic goals and create effective business plans.
4. Cut unnecessary costs and spend on what’s profitable
A great CPA doesn’t just hand you accurate financial data and exit the building; he or she transforms that data into actionable recommendations.
If we keep it simple, we’re talking about the difference between efficient and inefficient businesses, scalable and non-scalable businesses.
Think of a great CPA’s value in the same terms as you would an on-demand Chief Financial Officer (CFO).
Let’s say you offer two different services, and your business can offer both at the same level of quality. Which way do you go?
A CPA will be able to look deeply into your financials and find which service produces the better R.O.I., which service comes with hidden costs or embedded inefficiencies, and, finally, which of the two services is more profitable and sustainable
5. Defend against and prevent IRS audits
Scenario: 1:00 PM. You flip through your business mail. It’s the usual cast of characters: a check, an invoice, the new credit card, and then you see it: the overly-ornate letterhead, the pompous lettering, the lightness of the envelope. It is the mark of the Internal Revenue Service (IRS). “I’m getting audited. It’s over,” is what comes to mind, then, “I hope not. Maybe not.”
If that’s you, you’re not alone. But it is a sign that you may need to adjust your thinking regarding CPAs.
Because out of all the forces in the universe, there’s none more powerful, persistent, and persnickety than the IRS. So what does a CPA do for a small business? Your CPA is the only one standing between your prosperity and the power of the federal government.
Get a professional to defend you—trade hope for security.
Run your business. Let your CPA handle the audit.
During the audit (if it happens in the first place), A CPA represents you in your interactions with the tax authorities. They answer questions and provide a clear defense of your position. They can even help minimize potential penalties or additional tax liabilities.
And working with a CPA is the best way to prevent an audit
Bookkeeping mistakes, accounting oversights and misclassification, and flawed tax returns—these trigger audits. Larger items are more attractive to the IRS, but, unfortunately, the agency is poorly-funded and prefers to stick it to small businesses. It costs too much to audit the big guys.
CPAs bring a team of bookkeepers, accountants, and tax specialists who know how to keep your books in order and your accounting practices compliant with the latest changes in tax laws. CPA firms have built-in redundancy, drastically reducing the possibility of error. It’s a matter of reputation, and a CPAs reputation is his or her’s most precious asset.
Contact me if you’d like to work with our firm or need advice to start
It’s important to align your business’ location, culture, and size with those of your CPA firm. We’re a Fort Worth-based CPA firm that works with clients bringing in between 500K and 10M in annual revenue. Maybe you’re just shy of 500K, but you’re on your way.
Call me. I like to know my clients, their business’, and their goals. So if you’re inclined, tap into our twenty years of experience helping businesses of all sizes with tax planning, accounting, financial leadership, and business advisory services.
Schedule a discovery call with us today.
Jeremy A. Johnson, CPA
- Brown E. 2019 small business finance and HR report. OnPay. 2019 [cited 2023 Jul 20]. Available from: https://onpay.com/hr/basics/2019-small-business-finance-hr
- Babu S. 61% of small businesses are satisfied with their accountant. Small Business Trends. Small Business Trends LLC; 2020 [cited 2023 Jul 20]. Available from: https://smallbiztrends.com/2020/05/onpay-business-accountant-survey.html
- Bishop-Henchman J. How Many Words are in the Tax Code?. Tax Foundation. 2014 [cited 2023 Jul 21]. Available from: https://taxfoundation.org/how-many-words-are-tax-code/