When you first started your business, you hired a CPA to check the “tax compliance” box off of your to do list. Your CPA helped maintain your legal and financial obligations by submitting taxes and required financials to the government and doing periodic bookkeeping. It’s been five years and you have grown a lot. More recently, you’re starting to think more strategically about your business. You’re being asked to go deeper in the numbers, so you reach out to your CPA to see if they can help you with your projections and forecasts. You had a meeting, but you can’t quite pinpoint why that meeting didn’t feel like your needs were met. Here’s the deal, your CPA accounting is not a sure bet for your growing business.
Why? You require a lot from your accounting beyond tax compliance.
It’s a no brainer. You’ll always have to be tax compliant. But as a growing business you need more than taxes. You need more detailed accounting and forecasting in order to understand your trends and make data driven decisions.
It’s most likely that your CPA focuses on tax compliance and strategy. This means that the accounting work they do is simply to satisfy Uncle Sam, and not necessarily to have integrated conversations about the operations of your business. If your company is looking for engaged conversations about what is happening in your financials and in your business, your current CPA may not be the only person you need. As your business expands, so does the work of accounting inside it. In order to provide the details, metrics, and reports necessary for you to have a 360 degree view of your business, you might need to expand your accounting team.
Why? “CPA” is a title, not a specialization.
A majority of the people referred to as “CPAs” are accountants who hold a CPA license and most likely focus in tax strategies. However, a CPA license does not provide any information on what this accountant specializes in. In fact, CPAs can specialize in any aspect of accounting, and it varies firm by firm.
Some firms focus solely on tax compliance. They might be able to do business projections for you, but they don’t give them as much attention as they do tax strategy. Let’s say your CPA studied tax law. That is great for tax compliance and when you’re starting to sell your products out of state. Your CPA helps you understand how your investment in your business impacts your personal taxes. They can help you decide if you should alter the amount you allocate between your salary as a worker inside your business vs. dividends. That is great. You have a CPA who is skilled in this area. If tax compliance is the only need you have, then an engagement with a tax firm is good enough. But if you’re looking for help outside of taxes, it might be worth having a conversation on what they are comfortable with and specialize in.
Why? You haven’t assessed your accounting team.
Every accountant is unique in their approach to accounting. As your business grows, you need to interview the different accounting partners in your team and clarify what aspects of your business each teammate is responsible for. As your business grows, your needs expand. Assess your current partnerships to make sure that they’re good enough. If your needs aren’t being met, it might be time to add someone else to your team.
If you have a CPA partner who clarifies that they are good at tax and are only interested in managing your taxes, it might be wise to ask for recommendations for other accountants who specialize in different aspects of your business that can help you meet your goals.
When you are interviewing accounting partners, identify their specialty. They might be able to help you with forecasting, but if they aren’t the best at it, it might be wise to find another accountant to add who specializes in that. That way you have the best teams doing their best work for your business.
Things to consider when you reassess your partnership
Only you can make the decision on whether or not a partnership is working for you. Here are some things to look at when you’re reviewing a partnership.
- What is their specialty? Look on their website, review their work. What reports have you been given? What information is clarified for you? What have they done well in the past? What do they seem to dislike? What do they seem uncomfortable with doing for you?
- Who are they accounting for? Your business operations or for Uncle Sam? What area of your business has benefitted the most from your CPA? What are you looking for at the end of the year? Who are they giving that deliverable to?
- What is your business doing right now? What do have questions about? Can your CPA answer them? What do you need to know right now in order to make decisions for your company? Does your firm have the capacity to give you that?
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