The Benefits of Using Certified Public Accountants
The world of small business is rife with opportunity. If you have a great idea, you can demonstrate that there’s a quantifiable market for that idea and you can get enough people excited about it, the digital age offers you more opportunities than ever to translate your dreams into a working reality. Not only is there a wealth of free information out there from business experts in how to start up, run and grow a business, there are numerous resources to help you to find funding, market your products or services and start to build your brand to lay a firm foundation for future success. But let’s be real here, the path to entrepreneurship is not paved with gold. If it were, we’d all be running thriving businesses and we’d never need to subject ourselves to the daily grind, locking ourselves in a cubicle for 40 hours a week for a few crumbs from the corporate table. Owning your own SME is an inherently risky prospect. But then, there’s an old Italian proverb; it’s better to live one day as a lion than to live one thousand as a goat. While some people’s risk aversion will lead them to spend their lives playing it safe, sticking to their cubicle and thinking about what might have been, others will happily accept risk as a consequence of doing something they’re passionate about.
Besides, risks (even the scary ones) can be mitigated. When you have the right infrastructure in place, and know the warning signs when you see them, any risk or challenge is surmountable. In order to stay as risk free as possible in business, conventional wisdom dictates that you need to keep your overhead costs down, do what you can to keep profits up, maintain a healthy cash flow throughout your enterprise and treat both your customers and suppliers well. And while conventional wisdom may, for the most part, be right there’s a level of oversimplification at play there. Sometimes, it behoves us not to cut costs but to invest in the best. This applies when you’re making a capital investment in equipment, hardware or software, it applies when you’re hiring new employees and you’d better believe it applies when it comes to your business’ taxes.
As one of only two things that are certain in life, taxes are an important consideration, both for your enterprise and for you as an individual. Here we’ll look at why a Certified Public Accountant or CPA is the only choice for your personal and business finances…
There’s a time for saving money and a time for doing things right
There are many areas in business where cutting costs is advisable, but the proper representation when it comes to your enterprise’s taxes is not one of them. Let’s not forget that the IRD is a powerful organization that has brought even big businesses to their knees for failing to honor their tax obligations. While you may be numerate and financially savvy enough to think that you can handle your own tax return forms, please keep in mind that even the smartest of us can make mistakes and those mistakes can come at a serious cost to you and your business. Moreover, it’s almost certainly the not the best thing on which to spend the working hours you’d need to invest in doing it properly. You’d be much better served by keeping your attention on steering your business in the right direction and letting the experts handle your tax affairs.
Right now you may be thinking; “Okay, so I’ll get an accountant, do I really need a CPA?”. Delighted that you asked! Here we’ll take a look at the difference between a CPA and your average accountant and what a CPA can do for you and your business…
What’s the difference between a CPA and an accountant?
At the risk of sounding elusive… Nothing, and everything! All CPAs are accountants but not all accountants are CPAs. A CPA firm is an accountant and much more, they’re your partner in an ongoing business journey. They have skills and facilities that even the best businesses do not have. If you own a business, rent out a property, have a grantor trust, have any investments that generate K-1s, have large investments in marketable securities or have large retirement accounts and 401k balances then you need to engage a CPA firm. Here are just some of the reasons why…
There’s so much more to a CPA than accounting
A CPA firm offers services far beyond the remit of any accountant. As well as being invaluable when it comes to your business’ taxes, most CPA firms also incorporate bookkeeping into their services. This not only makes the accountancy side of things easier, it also makes it much easier for you to be able to spot consumer trends and act accordingly in an agile manner which can cause you to capitalize on upward trends while curbing any aspects of the business which may be hemorrhaging money. They are also better positioned than the average accountant to conduct financial analysis of data gleaned from their bookkeeping. This means that their advice can be vital in steering your business in the right direction.
They can help you to make judicious investment choices in line with your goals and even help you as an individual in a variety of ways outside of business including life changing actions like divorce, retirement, buying a home or paying for your children’s college education.
CPAs are licensed, accountants are not
If there’s one thing all small business owners could do with a little more of, it’s peace of mind. While there are many accountants out there doing sterling work, they are not licensed, and there is nothing (outside of their need to keep a steady stream of clients) to incentivize them to be at the top of their game.
A CPA, on the other hand, must be licensed by the state and the CPA exam is an extremely rigorous process that takes place over the course of several days. Pass rates rarely exceed 55%. What’s more, in order to retain their licenses a CPA must comply with ongoing educational requirements. This means that when you hire a CPA you’re getting the best of the best.
Tax laws are always changing
One of the ongoing educational requirements for CPAs is that they must stay abreast of the ever changing landscape of tax laws. The Trump administration’s recent tax reform act is a relatively high profile example, but the state of tax law is in a constant state of evolution. While one might assume that accountants keep abreast of this, they are under no legal obligation to do so. For a CPA, however, it’s a key requirement to hold onto their license.
A CPA will be your best friend and most devastating weapon in the event of an audit
Whether it’s as an individual or an organization, everybody dreads the prospect of an IRD audit. It’s not only an extremely nerve-wracking experience, it can be an extremely time consuming process for which to prepare. The good news is that a CPA can hold your hand throughout the process (not literally… in most cases), giving you the peace of mind that comes with knowing you are as prepared in the event of an audit as humanly possible.
Just as a lawyer argues your case and fights for your best interests in court, a CPA can do the same for your business should the IRD deem you audit-worthy. They can also work with you to reduce your risk of being audited in the first place (which we’ll discuss shortly). An accountant, on the other hand, cannot represent you in the event of an audit, even if their name is signed on the return.
The IRD requires all tax preparers to have a preparer tax identification number. They make a clear distinction in these numbers between preparers who are enrolled agents like CPAs, attorneys, and unenrolled preparers. Accountants are classified by the IRD as “unenrolled preparers” and resultantly, their ability to represent you before the IRD in your tax affairs is extremely limited. What’s more they’ll even help to find ways to minimize the cost of representation. For this alone, a CPA is worth every penny of their fee.
A CPA can keep you out of the IRD’s ‘hit list’!
Of course, in a perfect world you’ll avoid being audited altogether, and a CPA can be incredibly helpful here, too. CPAs are better placed than regular accountants to identify the ‘red flags’ that usually provoke suspicion within the IRD and increase an enterprise’s risk of being audited. They can advise you against positions that have a high chance of being challenged and disallowed while also helping to prepare the proper disclosures to ensure that penalties will not be assessed is an IRD challenge is sustained.
A CPA is here for you today, and they’ll be there for you tomorrow!
An accountant is there to fulfil a function and help your business to check an (admittedly important) box. When you have the right relationship with your CPA firm, however, they’re more than just an add-on to your business, they are an intrinsic part of its financial infrastructure. The advice that they provide can not only keep you on the right side of the IRD, they can assist you in virtually every financial aspect of your business which in turn can influence your operations. They can prevent you from financial missteps, help you to keep unnecessary costs down and advise on where best to focus your attention for maximum return on investment. What’s more they can help with long term strategy not just for your enterprise but for you as a private individual. They can help you to set up the right retirement provision, put the provision in place to ensure that your family and business are taken care of if you die or are unable to work and stick by you through every financial step you take throughout your entrepreneurial career and beyond.
A CPA will usually save you more than they cost
As you can see, while a CPA may cost you more than a regular accountant, in the vast majority of cases, they will save you much more than they cost. Moreover, their financial knowledge and insight will allow your business to potentially generate more revenue. That’s right, they not only pay for themselves, they essentially make money for you!
Now that you’ve seen just a few of the ways in which a CPA can benefit you and your business, get in touch to see how our dedicated CPAs can benefit you and your business!