How to Know When Your Growing Business Needs a CPA Firm

Your small business is taking off and life is good! With growth comes the need to effectively manage and analyze your business’ (and your own) finances, and a lower-end or online tax service can only take you so far. Furthermore, a poorly prepared tax return and a well-prepared tax return can look identical to most business owners. But they’re not, and the stakes can be high when it’s not done well.

A professional CPA firm is a crucial piece of a successful business owner’s team, offering insight and services that can take crucial work off your plate and take you to the next level of success and beyond.

A CPA is your Business Advisor, not just a Tax Preparer.

How will you know when it’s time to make that leap?

When you DON’T need a CPA firm

There are certain instances when you do not need a CPA. If you are a freelancer with no deductions and only receiving 1099s you probably do not need a CPA’s help. Or, if your business is a sole proprietorship without plans for growth and your personal tax situation is simple, you might be able to handle your own tax preparation and financial management with one of those online tax prep services. Finally, if you fit into one of the following categories there is probably no need for you to engage with a CPA firm:

  • Not interested in retirement planning
  • Not interested in college planning for children
  • Not interested in pursuing tax deductions (office and/or mileage for example)

When you DO need a CPA firm

There are no magic numbers or milestones that can determine when the time is right for you to partner with a CPA firm, however there are some important considerations and questions to ask yourself:

  • How quickly is your business growing? Businesses do not always grow at a steady rate. An Accountant can help you manage necessary growth adjustments including the need to hire staff or increase the size of your office space. They can also handle the payroll, tax management, and other accounting processes to free up your valuable time. Professional Accountants can analyze your cash flow, inventory management and pricing as well as provide insight into how to properly grow your business through careful financial analysis.
  • Are you ready to delegate? Or perhaps the better question is – SHOULD you delegate? There is more of a demand for your time and as a result you might be overwhelmed by handling the accounting or you’re not able to keep up with it at all. At this point it is time to bring in an expert. By doing so you can lighten your workload and get the professional expertise needed to ensure accurate, reliable financial records that can result in sound business decisions and continued growth. Besides, isn’t your time better spent on your business rather than focused on the accounting tasks?
  • As your business grows, so does the complexity of the financial recording, analysis, compliance, and reporting that is required. Accountants who are also CPAs are the most qualified type of Business Advisor to handle those complexities.
  • Is it possible that your business qualified for government assistance and/or tax benefits this year? It is critical that you do not leave any money on the table and take advantage of every possible tax savings opportunity. Ask yourself – are there opportunities that you could be taking advantage of with proper tax planning strategies? You don’t know what you don’t know and a professional CPA can ensure you have sound strategies and proper planning in place.
  • Are you having to deal with the government? The government paperwork and compliance requirements involved with owning a business can be daunting. A professional accounting firm they can handle all of this while ensuring that you are up to speed on all the current tax laws and requirements.
  • Is your small business being audited by the IRS? Even businesses with the most perfect of tax returns will be selected for auditing by the IRS. Experienced Accountants have been there and done that and they can expertly manage and take this unpleasant task off your plate.

Are you ready for an Advisor that can meet all your financial needs under one roof?

Overall, hiring an Accountant/CPA can ensure:

  • You experience smart growth. An Accountant can help you avoid growing too fast or in the wrong way.
  • You receive a wealth of expertise from an Advisor who is also a CPA and can guide you through every stage of your business. A CPA firm will add depth to your bench. You will have access to a multitude of services including tax, bookkeeping, exit and succession planning, and business valuations just to name a few. As your business grows and reaches new *milestones and as your life circumstances evolve you have access to expert staff who are there when you need them without having to have them on your payroll.
  • You have an established relationship with an Advisor that allows for effective and proactive tax planning. As your business grows and reaches new goals the established relationship with a CPA means that they have a deep-rooted familiarity with your business. This level of familiarity is required for strategic and proactive tax planning.
  • You avoid costly accounting errors. Accounting errors, especially those that are tax-related, can be costly. In fact, hiring an Accountant may end up being much less expensive that the costs associated with doing it yourself. Think about it – you are essentially paying yourself to do the same work calculating and researching current tax laws that an accountant can do in less than half the time and simultaneously ensure more reliable records.
  • Your quarterly estimated tax payments are accurate. As your income increases, so does your tax liability. Insufficient estimated payments can result in significant consequences, so regular analysis of those payments can help you avoid underpaying and unwelcome surprises at tax time.
  • You can see the 360-degree view of your business. It’s easy to get “stuck in the weeds”. Seeing the big picture of your business is vital for continued growth, and an accountant will perform a periodic breakdown and analysis of your business’ financial conditions so that you can see the entire forest – not just a tree.

Is it time to outsource your accounting?

*Business milestones that require the expertise of a CPA firm include:

  • Starting your business. CPAs can recommend the best business structure for your specific business. The legal structure you use to set up your business – sole proprietorship, partnership, LLC, corporation or co-op – affects your taxes, liability and reporting requirements. They can also connect you with the necessary resources for all other aspects of the new business – from licenses to small business loans.
  • It is time to consider buying or selling property and other assets. CPAs are expert with business finances, and they can tell you if a purchase of property or assets is a good investment.
  • It is time to consider transitioning and exiting your business. A good exit plan addresses all of the business, personal, financial, legal, and tax questions involved in transitioning a business. It also considers and plan for emergencies and unforeseen events such as illness, burnout, divorce, and death.

The best exit/succession plan achieves three goals”:

  1. Maximizes the value of the business,
  2. Ensures that you are personally and financially prepared with a customized personal financial plan, and
  3. Ensures that you have planned for the third act of your life. This would be a “life after business” plan.

An experienced firm with personal financial planning services can also provide you with customized 401(k) retirement plan options. Retirement plans that can help you meet your business goals AND help ensure that you and your employees are on track to retirement readiness.

Find out if your business’ 401(k) retirement plan is working for you

The bottom line is that engaging a professional Accountant can result in a more profitable business and secure financial future for you and your family. Your specialty is running your business. Leave the financial detail to an accountant.

Less time spent on these tasks = More time to focus on doing what you love.

With offices in Rutland and Williston, Vermont Davis & Hodgdon Advisory Group has served small- to medium- sized business owners for more than 30 years through expert staff, high-end technology, and unparalleled efficiency. Our mission as your accountant is to provide the financial peace of mind for yourself, your business, your children, and future generations.

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