By Steve Cohen
Federal tax laws are undergoing major changes and there will likely be subsequent impacts on state laws and liabilities, too. For these reasons and more, it’s recommended that small business owners work with certified public accountants, or CPAs, to help with both tax preparation as well as tax strategy. Here’s why it’s wise to work with a CPA and how to find the right one for your small business.
What is a CPA?
It’s important to know that not all accountants achieve CPA designation. Certified public accountants earn a high-level certification that’s based on a combination of examinations, practice experience, licensure and education in topics ranging from tax law to ethics.
While licensing requirements vary from state to state, the minimum requirements for designation include passing the Uniform Certified Public Accountant Examination, 150 semester units of college-level education and at least one year of accounting experience. In addition, CPAs must take annual continuing-education courses to maintain their licenses and stay up-to-date on evolving tax laws.
Why do you need a CPA?
For small businesses, CPAs are preferred for tax preparation and strategy. While a tax preparer can perform the basic functions of filling out tax returns, he or she can’t (or shouldn’t) provide you with strategic direction related to your business. For this reason alone, small business owners who don’t use CPAs lose out on invaluable guidance on everything from how and when to make equipment purchases, to whether to buy or lease property and how to maximize deductions. This kind of strategic input can help small business owners save significant amounts of money and leverage opportunities that have bottom-line impact on profitability.
In addition, CPAs:
- Perform functions that include representing clients before the Internal Revenue Service (IRS) for tax matters.
- Conduct corporate and non-profit financial audits and other “assurances services” that non-certified accountants and other bookkeepers and tax preparers cannot, by law.
- Ensure that your bookkeeping program is well-organized and accurate, and that you understand your business’s financial statements and how to use them. Separately, you may also have a bookkeeper who handles your day-to-day business financials.
- Aim to develop longstanding relationships and will proactively suggest strategies or pivots that can make significant differences to your business’s growth and success.
While it will cost more to use the services of a CPA instead of a tax-preparation service or online software program, it’s well worth the investment for your business’s long-term financial health, as well as your peace of mind.
How to find the right CPA for you and your business
Now that you understand why you need a CPA, here’s how to find the best one for your business.
The first step is to find some CPAs to interview. The person you choose will be an invaluable part of your small business team, so it’s essential to find the right match. While you could simply do an online search for CPAs in your area for recommendations, some good places to start include:
- Asking colleagues and peers in your field
- Finding out who your successful competitors use
- Attending industry-related meetings to find CPAs familiar with your field
- Asking your attorney or banker for recommendations
Once you’ve found a few candidates, schedule time to meet with them. Because these are essentially job interviews, treat them as such and ask questions like:
- How long have they been practicing as CPAs?
- Do they have experience in your field? If so, how many years and how many clients have they helped?
- How do they view their roles as part of your small business team? (You’re looking for a CPA that wants to contribute to your strategy and success.)
- Are they familiar with your bookkeeping software program and would they be available to help you optimize how you use the program?
- Are they willing to provide guidance and advice on tax and financial decisions related to your business? If so, how often and how much do these services cost?
- Are they available year-round?
- Can they give you any client references?
In addition, look for online reviews for your CPA candidates to gain further insight.
A strong financial strategy is about more than tax preparation
A great CPA will be one of your best business allies, helping you develop smart tax strategies for your business and providing thoughtful and informed guidance on major financial decisions. And should you ever have complications or an audit with the IRS, your CPA can represent you and your business, which can make a stressful event far less so.
Find the right CPA and build a solid relationship, and you’ll find that this is one of the wisest financial decisions you’ll ever make for your small business success.
Steve Cohen is the President of Excelsior Growth Fund. At Excelsior Growth Fund (EGF), our mission is to help New York businesses grow by providing small business loans and advisory services.