Why Should Small Business Owners Hire A CPA?

September 8, 2022

Regardless, the size and nature of the business – there is one constant variable which every company requires: CPAs which stands for Certified Public Accountant”. This role is incredibly significant to ensure healthy cash flow and manage money of the company, in particular, small businesses which are just kick starting their journey.

As a small business owner, you may be hesitant to increase expenditures to simply hire CPA to sort out the company’s accounts and bookkeeping. However, it has been reported that small business owners tend to spend up to 120 hours per annum to complete their bookkeeping activities. By engaging the services of CPA, it would save a great amount of time, effort and resources which can be channelled into other aspects of the company so that the business could continue to flourish.

What is the role of CPA for a small business?

A certified public accountant is essentially a tax expert who is responsible to file your company’s business taxes, advise on crucial financial issues and to determine financial feasibility. Below are the roles of a CPA for better illustration.

  • Tax and financial compliance: If you are audited, CPA can reduce the expenses of auditing by negotiating with the IRS directly on your behalf. Due to their vast experience and knowledge, CPA can easily pinpoint any financial issues because it emerges, thus avoiding the dreadful audit.
  • Consulting: CPAs can assist you with important financial decisions, budgets, financial risk management problems, and other financial services. They can also provide valuable advice on complicated financial matters.
  • Forensic accounting: CPAs can assist in monitoring your financial position to prevent fraud.
  • Managing your Company’s Payroll: If you’re not already using top payroll software, CPAs can set your business up with a platform that works for your company.
  • Bookkeeping: CPA assists you to review and maintain trackable financial books throughout your business.

What Is the Difference Between CPA and Accountants?

Note that CPA must hold a bachelor’s degree, equipped with sufficient years of work experience and pass the Uniform CPA Exam and simultaneously fulfil the required state licensing requirements. Contrastingly, the standard accountants must be set apart from CPA because they are simply an individual which holds a bachelor’s degree in Accounting or Finance. Hence, CPA carries a fiduciary duty to their clients which is a legal duty act in the best interests of their clients.

When should you hire a CPA?

Hiring a CPA may be expensive but engaging a CPA during a certain period of the business lifecycle would be highly beneficial for your cash flow and company. So, we’d discuss the best times to consider hiring a CPA so read on.

1. Before you start your business

Starting a company is no easy job, especially when a great number of resources have been invested into setting up the company. Regardless, hiring a CPA to kickstart can act as a compass for your financial positions could in fact help you save more money in the long run.

  • Your business structure: CPAs can recommend the best business structure for your company since there are various types of entities that would affect your filing of taxes and liabilities. This is extremely important because it is very difficult to alter later on due to licensing requirements, insurance and so on.
  • Your accounting practice: A CPA can determine the most feasible accounting method such as cash or accrual accounting for your business.

2. Tax time

CPAs can assist in filing tax documents and tax returns. Business taxes are very complex and differ substantially from personal taxes.

Alternatively, CPAs can assist you with your taxes as follows:

  • Compliance with tax laws: CPAs are well-versed with tax laws and tax code changes so you can make informed decisions according to the statutory requirements and regulations.
  • Appropriate deductions: CPAs identify as to which deductions you are qualified for and avoid being audited.

3. Special circumstances

Special circumstances are inevitable while running your business. For instance, CPA is required if you’re audited by the IRS which could solve your issue effortlessly.

These are other instances where services of CPA can be considered. For example, in contemplating which type of small business loan to go for, a CPA can weigh the pros and cons for you to decide which loan would suit your business model. CPA usually consider the repayments that will impact your cash flow, size of the loan and prepare the necessary financial statements in applying loans.

Besides that, if you’re ever facing any personal matters that may potentially affect your company’s financials. For example, in the event a family member who is also your business partner then a CPA can step in to advise you on the potential tax implications and evaluate the business or prepare financial statements if decided to sell the business.

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