Do I Need A CPA For My Small Business?

Posted on Jan 23rd, 2023

Every small business owner gets to the point where they worry about the tax implications of their business, as well as having to handle accounting and other obligations. Trying to single-handedly juggle these tasks can lead to a lot of inefficiency and chaos. For this reason, many opt to hire a certified public accountant (CPA) who can handle these tasks on the behalf of your business.

What Is a CPA?

A CPA, or certified public accountant, is a highly skilled financial specialist who has been licensed to provide accounting services to the public. Licensure requirements include passing the rigorous Uniform CPA Exam, complying with additional state requirements and possessing a bachelor’s degree with a minimum of 150 credits alongside one to two-plus years of public accounting work experience. CPAs help business owners keep track of their finances including taxes and government filings, and also provide sound financial advice.

Bookkeepers keep track of all financial transactions within an organization so that everything can be accounted for accurately at all times.

An accountant oversees the books and records of a business, keeping it organized and up to date to help clients make informed decisions about their taxes. They are not licensed by the state; they’re regulated by their professional associations. CPAs, on the other hand, provide accounting services for businesses and are licensed by the state in which they work.

Reasons To Use a CPA

CPAs are experienced professionals capable of helping you with many aspects of your business, including analyzing financial statements and providing unbiased advice. You should hire a CPA to:

• Manage your finances: A CPA will be able to help you with your finances by providing advice on how to set up and structure your business, and plan for its future. They know how best to plan for growth to minimize risk and maximize profits.
• Plan your taxes: Taxes are complicated, especially when you’re just starting out. It’s not unusual for small businesses to get tripped up by their own mistakes or lack of knowledge about tax laws, which means they often end up paying more than necessary. Hiring a CPA means you don’t have to worry about tax planning as they can help you navigate the complicated tax filing process.
• Prepare comprehensive financial statements: CPAs will be able to assess the impact of certain expenses and deductions, including things such as depreciation or amortization on your business’s income statement. They’ll also be able to calculate how much money you can save from reducing taxes owed, or even help to file a tax extension. They make sure that any legal requirements are met, such as filing tax returns on time or ensuring that you’re paying all outstanding payroll taxes when they become due.
• Represent you before the IRS: In the event of an IRS audit, you should hire a CPA to help you defend it as they are the only qualified personnel for that.

When Do You Need To Hire a CPA?

As a small business owner, you might require the services of a CPA if you’re new to business and need help choosing and planning your business structure, or if you do not have the time or resources to deal with taxes on your own. If you’ve been running your business for a while, the experience and skills of a CPA will keep complicated tax situations in check, and help you stay informed and compliant with laws.

Ways Small Businesses Can Handle Accounting

If you’re a small business owner, it’s essential that you follow proper accounting practices to ensure maximum returns for your investments.

Here are four ways small businesses can handle accounting:

Use Accounting Software

In the past, keeping track of books and records was often done manually with pen and paper. Today, a lot of businesses rely on accounting software to help them manage their finances. There are many types of accounting software available for you to choose from—it depends on your industry, budget and choice. We reviewed this in our best accounting software for small businesses article.

Who it’s best for: Small businesses (including freelancers and startups) with limited budgets are ideal candidates for accounting software.

Hire an In-House Accountant

If you’re just starting out in business and don’t want to take on the full burden of bookkeeping yourself, hiring someone else for that purpose may be ideal for your business needs. Hiring an accountant will allow them access to all of their systems so they can handle everything from payroll processing to tax filings without you having to worry about key issues.

According to the U.S. Bureau of Labor Statistics (BLS), the median annual wage for accountants and auditors was $77,250 as of 2021, which is more than $30,000 higher than the annual mean wage for all occupations in the country. The pay of accountants might vary depending on location, industry and seniority.

Outsource to an Experienced Tax Pro or CPA

Outsourcing your projects to experienced tax pros or CPAs is one of the best ways to ensure that your business’s accounting needs are being met. They can help you with all aspects of accounting including cash flow management, business planning and budgeting, and tax returns for small businesses.

CPA wages are not separately reported by the BLS but its report for Accountants and Auditors indicates that the lowest 10% made less than $47,970, and the highest 10% earned more than $128,970. Indeed shares an average base salary of $78,947 and some others estimate a CPA salary to go up to $147,000 for manager positions.

Who it’s best for: If you’re unsure about how best to handle accounting tasks such as payroll taxes or bookkeeping duties, working with a professional is recommended so that they can provide guidance based on their expertise in these areas as well as yours.

Original Post: Do I Need A CPA For My Small Business?