June 23, 2022

Do I need a CPA for my small business?

Lauren Kemp

No matter the industry or size of your business, there is one thing every company needs to survive: money. As a valuable resource, money can be managed most effectively by a CPA. CPAs can provide value and save company time. Fortunately, there are over 660,000 CPAs in the United States alone. On average, small business owners spend up to 120 hours each year performing bookkeeping activities. By adding a CPA to your team, you could spend those hours growing the business and helping customers.

What does a CPA do for a small business?

A certified public accountant is a designation provided to licensed accounting professionals that have passed a state licensing exam and have the qualifications necessary to provide accounting services. The Board of Accountancy offers the CPA license in each state. This license helps enact a set of standards in the accounting industry. CPAs thoroughly understand the GAAP (Generally Accepted Accounting Principles), which involves revenue recognition, balance sheet classification, and materiality. 

A CPA can help a business determine the most appropriate business structure and help run the numbers to determine financial feasibility. They can also assist in sticking to your company’s budget, which is critical in the beginning stages of a business. In addition to helping budget, a CPA can help minimize a company’s income tax as they are familiar with all legal deductions. Even small businesses should consider hiring a CPA to oversee accounting tasks. 

Why hire a CPA?

Business owners are generally experts in their industry; however, they are not always experts in the legal/tax environment. 

  • CPAs can reduce your workload as they know taxes, bookkeeping, and other day-to-day tasks. They are also experts on complex business financial processes. Hiring a CPA to oversee these tasks can reduce errors, saving valuable time. 
  • CPAs have a thorough understanding of tax laws, and they stay updated on current tax codes, which change every year. Accountants can legally prepare and sign business tax returns; however, there is no assurance of their competency.
  • CPAs can help businesses save money. These professionals can help business owners operate more efficiently; without one, business owners could pay more in taxes than required. For instance, operating payrolls are an essential aspect of business for companies that have hired employees. Unintentional misunderstandings of payroll regulations can result in dissatisfied employees and backdated tax bills. CPAs are familiar with the technology that can aid this payroll process and avoid errors. 
  • CPAs can provide in-depth analysis and explanation of financial reports and give trustworthy insight into the financial health of a business.
  • It is essential to utilize a professional accounting system for your business that allows easy access to company financial information. CPAs have knowledge that applies to the latest accounting system technology and software that facilitates the organization of statements and reports and new filing processes that provide easy access to company finances. This experience allows CPAs to quickly become familiar with your business’s assets, including the ledger balance, detailed credits, debits, and other areas of importance. Utilizing this information, CPAs can give their opinion and advice on improving or maintaining financial resources. 
  • A CPA can help manage business growth sustainably. Growth comes with a set of responsibilities, challenges, and needs. Employing a CPA can ensure funding is being handled properly, that cash flow is being taken care of, and can allow other employees to focus their attention on customers. CPAs are knowledgeable about navigating through unprecedented times and can secure the advantages of growth. They can also give unbiased advice or opinions on timely situations to notify others of opportunities. 
  • CPAs often have networks of other professionals due to their respect in the business community. These networks can assist in organic company growth, as your CPA may make referrals to other clients they work for regarding your company. 
  • CPAs can assist in appraising the viability of projects through profitability, gain, and loss forecasts. These activities are all used to prepare for future business proposals and plans that will assist in growing your company. 
  • In the unfortunate case of an audit, a CPA can represent your company before the IRS and execute claims on your company’s behalf, something an accountant cannot do. 
  • Lastly, a CPA can provide you with greater peace of mind. Running a business can be stressful, and having a CPA to protect you from filing mistakes and to provide representation in case of an audit is worth the investment. 

Hiring a CPA for a small business

How can a small business find the right CPA?

Before hiring a CPA, business owners should evaluate their company's tax advice and planning, management consulting, and bookkeeping. Do you need a CPA for accounting and payroll alone, or do you need an in-house financial advisor? After identifying company-specific needs, you can begin the search. 

The Search:

Get Online:

Online is an excellent place to start the CPA search. The search may be as simple as “Small business CPA near me” or “Denver small business CPA.” Results will show CPAs who operate close to your company as results are generally sorted by zip code. During the search, ensure you are considering people licensed by your state as a CPA and if you are seeking them to prepare taxes, ensure they have a Preparer Tax Identification Number (PTIN).

Ask Questions:

Upon finding a candidate to fill the small business CPA position within your company, host a meeting to grasp their experience and specialty areas in which they are proficient.

Do you have a PTIN (Preparer Tax Identification Number)?
  • This is an excellent initial question to ask any CPA, as anyone who prepares tax returns must have a PITN to submit it through the IRS. 

How long have you been a CPA?
  • Business taxes and other financial processes can get complicated. Look for a candidate with at least two years of experience backing them up.

Can you represent businesses to the IRS?
  • Many CPAs are also Enrolled Agents, meaning if a company has a problem with the IRS, the CPA can represent them at hearings and guide them in unfamiliar territory.

Who will my company work with?
  • It is common for CPAs to have an employee base that helps them accomplish what their company needs. Ask about the size of their firm and their team's qualifications, and describe their lines of communication. 

What are your fees, and how do you bill?
  • It is appropriate and beneficial to understand a candidate’s fees and how they bill. These responses may vary between hourly bills, a fee-for-service dependent upon the job, or various other methods. Understanding this area will help provide a smooth transition for your company.

What types of clients have you worked with?
  • This is a great way to discover if the candidate has experience with clients in the service, product, manufacturing, or other industry. Knowing a CPA’s expertise can allow you to choose the candidate that best aligns with your company’s needs. 

What is your specialty?
  • Some CPAs only focus on W-2 taxation, others work on international tax situations, and others operate with corporate taxation. This question can be helpful as it will identify whether a candidate is knowledgeable about your company’s needs. 

What do you expect from my team each year? 
  • Utilizing a CPA requires that you provide them with the necessary information to provide accurate and complete services. While providing accurate and honest records is a given, each CPA will have expectations from their clients to obtain satisfactory results. This question is vital to bring up during the beginning of the relationship with a CPA. 

In-house vs. Outsourcing

The decision to outsource or employ accounting professionals in-house may seem daunting, and it is essential to ask, “Do I need a CPA for my business?”. This decision depends on several factors relating to your business. According to an embezzlement survey, 80% of cases concerning misappropriation or theft occur at small businesses. This is because small companies sometimes operate on trust and may have one person managing the entirety of the business’s financial flow, someone who may not be completely qualified.

Many startup companies outsource accounting services. The actions CPAs provide are complex and technical, even for a small business. Although only 33% of small businesses employ a bookkeeper, 20% of small businesses want to hire a financial advisor in 2022. 

In-house considerations:

What does your company need?
  • Bookkeeper - provides day-to-day transactional services
  • Accountant - creates insights and predictions based on financial data

Identify the financial impact of hiring a CPA
  • Calculate the potential financial and time gain of hiring a CPA
  • Calculate the overall cost of placing a candidate, the salary, and the benefits of a new employee.
  • Does the financial gain of hiring a CPA outweigh the burdens of hiring a new employee?

Outsourcing considerations: 

  • The complexity of your company’s accounting needs
  • Expenses associated with outsourcing
  • These expenses are generally more affordable for small businesses than hiring an in-house full-time accountant. 

Outsourcing a remote CPA:

Pros of outsourcing:

  • Business expansion is challenging, so it is essential to seek an experienced CPA when evaluating your company’s financials. Considering remote options expands the pool of applicants, helping your company find the best match.
  • This is especially true for specialized fields, such as nonprofits, that require a different skill set. 
  • Outsourced, remote CPAs can offer both bookkeeping and tax services, which simplifies the process come tax season, as your tax filer will need less from you. 
  • Because of the pandemic, the adoption of remote work represents a new version of normal. This method of employment has been profound among those who provide professional services such as advising and accounting. Performing aspects of accounting engagements have become increasingly popular.
  • Remote CPAs are readily available. In 2021, 37% of accounting personnel worked remotely in the United States.
  • Many accounting firms have mastered the technology used to facilitate remote work flawlessly. 
  • Remote work generally upholds flexible working hours, increasing the likelihood of job satisfaction among employees. Flexible options also demonstrate a company’s progressive practice that focuses on performance rather than the number of hours worked. Flexibility does not come at the company's expense and allows you to reap the rewards of lower turnover rates from a satisfied employee base. 
  • Remote workforces have significant saving opportunities involving operating costs. According to Global Workplace Analytics, companies that allow employees to work remotely 50% of the time reduce their cost per employee by $11,000 each year. This saving is especially beneficial for small businesses. 

Cons of outsourcing: 

  • You may need to work harder to ensure the CPA gets all the hard copies/receipts that the accountant needs. Fortunately, many remote CPAs have apps that help this process.
  • Occasionally urgent situations can create hardship in working with a remote CPA. Frequent touchpoints ensure you and your CPA remain focused and can help reduce the occurrence of critical problems.

The Verdict on CPAs

If you spend large amounts of time trying to manage your money, consider a CPA. As a small business owner, your expertise is better spent developing your company's direction, strategy, and growth. A CPA can relieve stress off your and your employee’s shoulders. Many small businesses don’t necessarily need an in-house CPA, but if they would save you money and time overall, it is a no-brainer. A CPA could become an indispensable asset to your team. If you need help finding a great in-house CPA, J2T can help. We place excellent CPAs, analysts, and other financial experts across Colorado and Montana. Please contact us today with your questions concerning placing a CPA for your small business. 

Written by Lauren Kemp

Lauren Kemp, Communications and Marketing Specialist at J2T, earned a Bachelor of Science in Business Management with a minor in Latin American studies and a Master of Science in Innovation and Management from Montana State University. Lauren hails from Montana and enjoys reading about the history of her home state. Her bucket-list items include touring the Biltmore Estate in Asheville, North Carolina, and taking an immersion trip to Chile to experience Latin American culture first-hand.