For many small businesses, the relationship with a CPA begins with taxes.
You gather your information, your CPA prepares the returns, you discuss what you owe, and you reconnect the following year.
That may work perfectly well for a relatively straightforward business. But as a company grows, the financial decisions tend to become more complicated too.
At some point, you may need more than someone who accurately reports what happened last year. You may benefit from a CPA who helps you understand what is happening now and think through what comes next.
Here are five signs your business may have reached that point.
1. Your Business Has Become More Complicated
Growth often creates complexity.
Maybe you've added employees, expanded your services, taken on debt, purchased significant equipment, added an owner or begun operating in another state.
Each development may create new accounting, tax, cash-flow or compliance considerations. And the more interconnected those issues become, the harder it can be to address them effectively during one annual tax-season conversation.
Your CPA should understand not only how your business is structured, but also how it is changing.
2. You're Making Important Decisions Without Financial Input
Business owners make decisions constantly.
Should we hire another employee? Can we afford new equipment? Is it time for a larger office? Should we borrow money? Can we increase owner compensation? Does this new opportunity make financial sense?
Experience and instinct matter enormously. But significant decisions are often better when they're supported by good financial information.
A CPA who understands your business can help you evaluate the numbers behind a decision, model different scenarios and identify financial or tax implications you may not have considered.
The goal isn't to have your CPA make the decision for you. It's to make the decision with better information.
3. You Don't Really Know How Profitable Your Business Is
You know what's in the bank account. You know sales are up. You know you're busy.
But do you know whether the business is becoming more profitable?
Revenue growth doesn't necessarily equal profit growth. Payroll, technology, insurance, rent, financing costs and other expenses may be increasing at the same time.
Regular financial reviews can help you understand margins, expense trends, cash flow and other measurements that matter to your particular business.
Financial statements become much more valuable when they help answer the question: Are we actually moving in the right direction?
4. Taxes Keep Surprising You
An unexpected tax bill once in a while doesn't necessarily mean there's a problem. But if you're consistently finding out what you owe only when the tax return is prepared, you may benefit from a more proactive approach.
Tax projections during the year can help estimate potential liabilities, evaluate estimated payments and identify planning opportunities before deadlines pass.
This becomes especially important when profits increase significantly or something changes in the business.
Tax preparation tells you what happened. Tax planning gives you an opportunity to prepare for what's coming.
5. You Only Talk to Your CPA at Tax Time
This may be the clearest sign of all. If your business is established, growing or becoming more complex, there are probably financial questions worth discussing outside of tax season.
A more advisory-focused CPA relationship might include periodic financial reviews, tax projections, cash-flow discussions, budgeting and forecasting, KPI development, or conversations around a specific decision or opportunity.
It doesn't necessarily mean meeting every month.
The right level of involvement depends on the business. The important thing is having access to experienced financial guidance when there is still time for that guidance to influence the decision.
What Does a More Strategic CPA Relationship Look Like?
A strategic CPA isn't there to run your business.
The role is to help you understand the financial implications of your choices, ask useful questions, and bring an objective perspective to important decisions.
Sometimes that means analyzing financial statements. Sometimes it means developing a projection. And sometimes it means working alongside your attorney, banker, financial advisor or other professionals, so everyone understands the bigger picture.
As your business evolves, the relationship with your CPA may need to evolve too.
Julie Moran, CPA works with small-business owners in Massachusetts and across the country who want to better understand their financial information, plan proactively and make informed business decisions.
Wondering whether your business could benefit from more proactive CPA guidance? Schedule a conversation with Julie.
Frequently Asked Questions About Working With a Small Business CPA
How often should a small-business owner meet with a CPA?
It depends on the business. Some owners benefit from quarterly meetings, while others may need a midyear and year-end review or conversations surrounding specific decisions.
What's the difference between a tax CPA and a business advisor?
Tax preparation focuses primarily on tax compliance and filing. Business advisory services can include interpreting financial results, projections, cash-flow planning and helping owners evaluate important business decisions.
When does a small business need advisory services?
Advisory support can become particularly valuable when a business is growing, hiring, taking on debt, changing ownership, experiencing cash-flow challenges or making significant investments.
Can my CPA help me decide whether to hire or expand?
A CPA can help you understand the financial side of the decision by reviewing current performance, estimating costs, developing projections and evaluating different scenarios. The ultimate business decision remains yours.
Do I need a full-time CFO to get strategic financial guidance?
Not necessarily. Many small businesses don't need a full-time CFO but can benefit from periodic strategic guidance from a CPA who understands the business and its financial information.
This article provides general educational information and is not intended as individualized tax, accounting, financial or legal advice. Business circumstances vary. Consult your professional advisors regarding your specific situation.
