While today’s entrepreneur may have expertise in their profession or industry, they must also learn to be the marketing director, salesman, office manager, chief financial officer and accountant. They usually do not have the experience or aptitude to make the best financial and accounting decisions. It is not surprising that new owners often have a great business idea, but “running the business” ultimately overwhelms the entrepreneur. Poor accounting is one of the leading reasons small businesses fail.
A small business owner, usually limited by time and resources, has 3 choices to handle accounting functions: a) do it yourself, b) hire and in-house accountant or c) outsource to a professional. Most entrepreneurs come to realize the first option is not the best use of their talents and time, and the cost of hiring in-house is prohibitive. Outsourcing is usually the optimal choice.
When choosing an outside accounting professional such as a CPA (Certified Public Accountant), your goal should be to develop a relationship with someone whose expertise will contribute the success of your business. The first step is to understand what services a CPA can provide, and which of those services will meet your needs. Some examples of services are:
• Help you decide what kind of ownership structure and tax reporting entity (e.g. S-Corporation or Limited Liability Company) is best to start your business
• Develop a business plan, income projections and/or budgets
• Design and set up an accounting system
• Help you understand your financial statements
• Make sure tax reports are correctly prepared
• Ensure employee payroll and outside contractor payments are properly classified and reported
• Explore the best choice for financing options (e.g. applying for a loan, or lease vs. buying equipment)
• Explaining strategies to minimize or defer taxes
How to choose the CPA
Here are some factors to consider when looking for the right CPA:
• Experience – Ask what experience they have with your industry and the size business you have. Make sure they are current on accounting principles and taxation issues. Ask how much time they spend on continuing professional education in areas that may affect you.
• Cost – Does the firm charge hourly rates or a flat fee. Who will be performing your work?
• Delivery of information – Will they explain your financial information in an understandable way that helps you reach your goals?
• Accessibility – Will they be available for advice or services when needed?
What you can do to get the most value from the CPA
The CPA professional can help you make informed decisions, but your relationship will be maximized if you are prepared as well.
• Know your company’s objectives –What do you want to accomplish to move your business forward. This could include increasing sales, adding products or services, adding physical space, hiring employees, or cutting costs. Let the CPA know where you are headed so they can help you make informed financial decisions.
• Understand the financial data – Use the financial data as a planning tool. Ask how current financial results compare to prior period reports. Focus on key items that affect profitability and/or cash flow.
• Know why your business is succeeding or not. Ask what improvements may need to be implemented.
Gary Kaplan has been practicing as a Certified Public Accountant for 15 years. Gary has expertise in all aspects of accounting, business and personal tax and strategic planning. He listens to each client and helps them achieve their own, unique goals. Gary welcomes you to ask how his services can meet your business needs.
