Q: When should I hire a CPA to help me with my small business?
A: This is a great question and one that many new small business owners ask. While there is no definitive answer or revenue milestone to meet before working with a CPA, there are a few indicators to look for. Here are 5 signs that your business is ready to work with a CPA:
1. You need to make major financial decisions. This point is also related to risk. Throughout your entrepreneurship journey, you will need to make key decisions that can change the trajectory of your business, for better or worse. Working with a CPA when making these types of decisions can help improve your ‘better to worse’ ratio. Decisions such as hiring additional staff, choosing a suitable retirement plan, leasing a larger retail space, or taking on a business loan should be made under the guidance of a trusted advisor. A CPA will be able to shed key insights surrounding the decision by running projections and forecasting how the decision will impact your financials into the future, both long and short term.
2. The risk of making mistakes is too great. There isn’t one Fortune 500 company that doesn’t work with licensed professionals such as CPAs and attorneys. Why? The risk of not being in legal or tax compliance far outweighs any potential benefit of breaking the rules (and we’ve seen what happens when companies get caught breaking the rules. -coughs- Enron). Business, as with life, is all about taking and managing risk. When your business begins to employ others and their livelihood becomes dependent upon the decisions you make as the Owner, you become a little more strategic in your thinking and planning. When your business becomes a staple in your community, you act with that much more integrity because you want to make your city proud. When there’s too much at stake to lose, you want to make sure you have the right team members and trusted advisors on your side.
3. You’re clueless about your business finances. If your bookkeeping has been neglected (or if you’ve never set up the proper systems) and you can’t speak to the financial health of your business, you need to find someone who can help get you on track. Depending on the size and complexity of your business, it may make sense for you to work with a skilled bookkeeper who will have a more affordable price point than a CPA. Ultimately, the fee will be based on the number of months of neglect your books have suffered and how many transactions your business has.
4. You are being audited. This one is simple. If you’ve received any scary communication from a taxing authority, work with a professional to help get the matter resolved. CPAs are very familiar with dealing with the IRS and local authorities and likely have experience getting penalties and interest abated, if applicable. The disclaimer here is that if you’ve intentionally falsified information or evaded tax in any way, those penalties aren’t going away…but you might be (to prison). 🙂
5. You can afford to pay for their services. Working with a competent CPA will cost you a few thousand dollars per year and not all businesses are financially able to make that kind of investment. Taking a look at your Income Statement can help determine what level of service your business can afford. You may find that you need to cut expenses elsewhere in order to fit in your CPA’s fees. If there’s absolutely no room in your budget, you may want to contact a nonprofit that offers no-to-low cost services to small business owners such as Operation Hope or the SBA. Keep in mind that if your books aren’t in order, you will not be able to assess whether you can afford to work with a professional.
*Please note, all the information presented here is strictly for educational purposes and does not constitute tax or legal advice.
