How Does a Small Business CPA Promote Growth?
Behind every good business is a great accountant.
It’s true! There’s a highly knowledgeable certified public accountant (CPA) behind every small business owner who wants to grow their business. Accounting is the lifeline of any growth-focused entity, as it provides the information needed to make sound decisions about your business.
Through accounting, you can manage your cash flow, plan for future expenses, and even make tax preparation more effortless than ever before.
So, why do small businesses need CPAs, and how can they promote business growth?
Let’s find out.
Why Do Small Businesses Need a CPA?
Accounting is a vital part of running a successful business. It helps you track revenue and expenses, calculate taxes, and understand where your money comes from and goes.
The best way to find out if you have an accounting problem is to ask yourself:
- Am I spending too much on overhead or not enough on sales?
- Am I getting paid what I’m owed?
- Is my cash flow positive?
If you don’t know the answer, you may want to consider hiring a professional.
The best time to hire a CPA is when starting a new venture because they will provide you with all the necessary financial reports and advice you’ll need to get off on the right foot. The best CPA firm can also advise you on whether you’re paying too much in taxes, which could mean saving thousands of dollars over the years.
You might think that you can handle everything yourself, but you’ll be surprised by how much accounting-related tasks can take up your time – and you have a business to run! For example, if you’re managing inventory, you’ll need to know how much stock you have, how much it costs to buy it, how much it costs per unit, and how long it takes to sell it. A CPA can help you figure out how to optimize your inventory to maximize profits.
How is a CPA Different From a Regular Accountant?
Though they both hold the accountant nametag, CPAs are pretty different from regular accountants. According to the Accounting Institute for Success, only 50% of accountants in the U.S. are CPAs.
The difference mainly arises from the level of education and qualification requirements. Both the CPA and the regular accountant have a bachelor’s degree in accounting. But, the CPA has advanced training in tax law, auditing, and other specialties.
CPAs must pass rigorous certification exams and acquire licensing from state-approved boards before practicing as one. That means they must keep themselves updated with any changes made to accounting laws and regulations.
Due to these certifications, The government considers a CPA to be an expert in the field and adhere to strict ethical guidelines. Therefore, a CPA is able to perform certain tasks that a regular accountant cannot, such as preparing an audited financial statement or acting as a taxpayer or company representative in discussion with IRS Revenue Officers or Counsel.
CPAs and Tax Preparation
One of the critical roles of a small business CPA is preparing tax returns. It’s no secret that filing taxes can be a hassle. However, a good CPA can make this process easier, so you can focus on growing your business.
But tax preparation is more than just the mere filling out of forms. Good CPAs understand the complexities of the IRS code and can use this information to find ways to minimize your tax bill while maximizing your return. They can also help you file your taxes accurately and efficiently.
A good CPA will not only provide small business tax help but also advise you about how to structure your business to lower your tax burden. But that’s not all; you’ll also enjoy expert advice on estimated tax payments you should make throughout the year so you’re prepared come tax time and avoid penalties.
Here are a few more reasons you should trust a qualified small business CPA to do your taxes:
- If you’re self-employed, your CPA can help you determine whether you qualify for certain deductions.
- If you hire people, whether employees or contractors, your CPA can guide you to classify them correctly.
In short, a good CPA helps you take advantage of all the tax breaks available to you.
How Can CPAs Fuel Business Growth?
When it comes to promoting growth, CPAs play an essential role. A good CPA can help you save time and money by providing expert advice on how to run your business. Here are some ways CPAs promote business growth:
Assistance with Financial Analysis
Financial analysis is critical to running a successful business. While most companies rely on financial reports prepared by accountants, CPAs are uniquely qualified to analyze these reports.
They’ll be able to identify which questions are urgent and which are irrelevant. They can also identify trends and patterns in your finances that may indicate problems.
Ensuring Compliance With Government Regulations and Requirements
Ensuring your accounting procedures comply with government regulations and requirements is another way CPAs promote growth. Their expertise can save your business thousands of dollars in fines and penalties.
A good CPA is always up-to-date with filing tax returns, balancing your books, ensuring that payroll is handled correctly, among other requirements.
Classifying Independent Contractors Correctly (Not as Employees)
When hiring someone, a company may incorrectly assume they hired a new employee, when, in fact, they hired an independent contractor. The difference is important.
An employee is on a company’s payroll and receives wages and benefits in exchange for working exclusively with the company. The company is responsible for withholding taxes from their wages. A contractor is an independent worker who has the flexibility to contract with multiple companies, but does not receive benefits such as health insurance and paid time off from any of them. An independent contractor is responsible for paying their own taxes.
There are legal implications to treating independent contractors as employees, making you liable for back taxes, interest, and penalties. A CPA can help you avoid this costly mistake.
Tax planning involves finding ways to reduce your overall tax burden. It includes maximizing tax credits, minimizing capital gains, and reducing your liability.
CPAs are experts at tax planning because they understand the rules and regulations governing each type of tax credit.
Helping You Make Sense out of Your Financial Statements
Financial statements such as balance sheets, income statements, and cash flow statements are essential tools when managing a business. However, they aren’t always easy for the average business owner to interpret, and there’s no room for error.
That’s where CPAs come in. By reviewing your financial statements, they can explain what each number represents and why it matters. This makes it easier for you to see the big picture and make sound decisions about the future of your company.
Preparing Financial Reports at the End of the Year
At the end of every year, your accountant prepares various financial reports. These may include details about your sales, expenses, assets, liabilities, and equity.
These reports give you an idea of how well you’re doing financially. This enables you to strategize for the next financial year and make more informed decisions geared towards business growth.
Providing Guidance on How to Grow Your Business
While a team of CPAs looking at your accounting can help with essential services such as account management and tax preparation, they also do much more than that. They provide guidance on how to grow your business.
They do so by offering insights on cash flow patterns, inventory management, pricing, and business financing.
Advising on Property and Equipment Leasing vs. Purchasing
Leasing property or equipment is often cheaper than purchasing it outright. But, if you lease something without considering how much money it’ll cost you over time, you might find yourself paying more than you bargained for.
Thankfully, your CPA will be knowledgeable on the advantages and disadvantages of leasing versus buying and apply that insight into whether you should buy or lease based on your company’s needs and goals.
Working with You to Create a Budget That Matches Your Business Goals
Budgeting for small businesses is tricky. While you need to allocate enough funds for essential costs, you don’t want to restrict yourself in a way that prohibits growth.
That’s why it’s best to leave budgeting to CPAs. Not only do they know what types of expenditures are essential, but they also know how to match these expenditures with your business goals.
Helping With the Sale or Acquisition of Your Business
If you want to sell or acquire your business, you’ll need professional help. A good CPA will advise you on how to structure the deal, negotiate the best price, and manage the transaction’s risks.
It’s safe to say that a good CPA doesn’t just show you numbers on a spreadsheet – they play a critical role in fueling your growth. The right CPA will guide you through all aspects of your business, including tax preparation, accounting, cash flow management, financing options, inventory management, payroll services, and more. They’ll also offer invaluable guidance and advice on how to grow your company while remaining compliant with local laws and regulations.
hiline is a premium tech-driven accounting firm that provides accounting, finance, bookkeeping, taxes, HR, and other essential service plans to growth-focused businesses like yours. We’re a team of highly-skilled CPAs who love working with entrepreneurs, startups, and small businesses to achieve success.
Our primary goal is to support business owners with that next level of expertise and help them realize their full growth potential. So, if you’re ready to take your business to the next level, let us help! Contact us today and we’ll explore how we can help you achieve your goals.
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