Your small business’s financial statements give you a window into the health of your business. Working with a certified public accountant (CPA) gives you a deeper understanding of these figures, as well as a strategic partner to grow your business.
A small business CPA can ensure your financials are accurate and advise you on financial strategy during tax season and beyond. Learn more about the role of a CPA in your business, and the key questions to ask them to develop an effective and collaborative relationship.
What is a CPA?
CPAs are state-licensed accountants who earn their certification through a combination of exams, practical experience, licensing, and education in areas ranging from tax law to ethics.
While all CPAs are accountants, not all accountants are CPAs, as many accountants choose not to pursue the rigorous continuing education and licensing that’s required to become a CPA. If you’re not sure if your accountant is a CPA, simply ask them!
Why should I use a small business CPA?
Although CPAs can file your taxes and maintain your business’s financial documents, they can do so much more. Your CPA can work with you on financial planning, including important decisions regarding major purchases, expansions, and borrowing. They can also support you on estate planning, business succession, and a range of additional accounting services that can impact the short- and long-term health of your business.
The best business/CPA relationships are built on mutual trust, respect, and collaboration. When your CPA is fully integrated as part of your business team, they can provide the most relevant advice that will keep your business thriving.
What should I look for in a CPA?
Start your small business CPA search by reaching out to your business network for recommendations and referrals. You want to ensure that your CPA is someone that you can trust since they’ll be managing the financial records for your business. You’ll want to work with someone who’s accessible year-round and available to meet with you regularly.
Keep in mind that CPA services come at a cost. Do some research to confirm that you’re paying a fair price for an experienced accountant who’s capable of handling your accounting and bookkeeping needs.
As your business grows and evolves, it’s even more important for you to work with a seasoned accountant. The value they provide will often far outweigh the expense. With that being said, your business’s financial health and records are ultimately your responsibility.
Planning for profitability with a small business CPA
Before you sit down with a CPA, it’s important to strategize for your business’s profitability. Having a clear plan for reporting your net profits not only helps in managing your tax burden effectively but also sets the stage for future financial stability.
Steer clear of potential tax pitfalls by developing a strategy that anticipates your business’s net profit.
When discussing profitability with your CPA, here are some important points to cover:
- Allocate funds for taxes: Setting aside a portion of your profits throughout the year ensures you’re not caught off guard by a hefty tax bill at the end of the year. If you don’t pay your business taxes on time it can lead to tax liens, late fees, interest, and other penalties. Planning ahead is key to avoiding these hassles and penalties.
- Ensure your financial statements are accurate: Lenders rely heavily on verified tax returns and financial statements to determine your creditworthiness. The accuracy of these documents directly impacts financing decisions. A more profitable businesss is generally viewed more favorably by lenders, increasing the likelihood of loan approval.
- Impact on future opportunities: Your business’s tax returns and financial statements are also crucial documents for potential business opportunities, like vendor relationships or a future sale. It’s essential that these accurately reflect your business’s financial health to unlock favorable opportunities down the line.
- Strategic capital investments: While higher profits often mean higher taxes, strategic capital investments can offer tax benefits for your business. Expenses related to depreciable assets, such as equipment or software, can be deducted under Section 179 of the Internal Revenue Code. This immediate deduction lowers your current-year tax liability, offering a valuable strategy for managing taxes while investing in your business’s growth. Lenders recognize these investments as valuable assets and typically don’t factor in non-cash depreciation when evaluating loan applications.
Collaborating with a small business CPA to plan for profitability involves more than just tax compliance; it’s about laying the groundwork for financial success and seizing opportunities to grow your business. By adopting a proactive approach and leveraging tax strategies effectively, you can steer your business towards a smoother financial journey and unlock its full potential.
Key questions for your small business CPA
Whether you’ve worked with your CPA for years or it’s your first meeting, it’s important to know what to ask and how to clearly communicate your needs. Here are four questions to have ready to create a strong and effective working relationship between you and your CPA.
1. How often should we communicate? What’s your availability for meeting in person?
Clear, effective and frequent communication is critical to a healthy and beneficial relationship between you and your CPA. Whether you talk every week over the phone or meet monthly in person, it’s important to establish early on how often you’ll connect.
2. What should I consult with you about on an ongoing basis?
Your CPA should be familiar enough with your business that they can properly track factors that could potentially affect your bottom line. When you meet with them, ask them to outline these key factors so that you can check in on them on a regular basis.
3. How can you help me prepare for tax season?
As an expert in all things taxes, your CPA can provide excellent insight into improving your tax preparation and maximize your tax savings. Consult with your CPA about specific ways to organize your records, track your finances, and prepare or pre-pay your business taxes. Their advice can streamline your record keeping process and make the tax-filing process easier for everyone. Your CPA can also help you answer tax-related questions like:
- Are they any changes in tax law that could impact my business?
- Are there any industry-specific tax regulations I should be aware of?
- What is the best way to track my deductions?
4. What do you expect from me as your client?
No matter how qualified your CPA is, they are only as good as the information you give them. Take the time to sit down with your CPA to clarify both of your expectations and needs. Talk to your CPA about how you can better prepare, document and organize your finances so that they have all the information they need.
A small business CPA is a great resource
The right small business CPA can be one of the most valuable people on your team, acting as a trusted advisor as well as an accountant. They can save you time and money, allow you to put energy and focus into your day-to-day operations, and keep your business on the road to success.
When you need funding to take your business to the next level, your CPA will ensure your financials are organized and ready for the application process. Pursuit offers more than 15 different loan programs in New York, New Jersey, Pennsylvania, and Connecticut, and we can help you find the funding that best fits your needs.
