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“My CPA should have told me that!” I have heard this phrase over and over again from business owners. You believe and trust that your CPA understands everything related to the management of money. If you are doing something wrong, they would tell you about it, right? The problem with this strategy? It might be news to your CPA.
CPAs are a very literal bunch
You hire them to do your tax return, so that is what they will do. They aren’t going to go wandering through you books spending time looking for suggestions for you. They are simply trying to get your compliance work done for you as efficiently as possible. So unless you have talked about something further, this is what you can reasonably expect.
Compliance and Advice are two different things
To most people accounting is accounting. It is just one big lump of numbers that any accountant sifts through and performs some mysterious functions and sends you a bill and tells you that you are good to go. But there are different types of accountants and they perform different functions. Asking someone who primarily does compliance work to help you with budgeting and cash flow and ratio analysis is a bit like asking a plumber to look at your electrical panel. Yeah, they might have some basic knowledge in that area, but you may not get the best result.
What is the skill set of your CPA?
Tax? Audit? Consulting? Cash flow and Budgeting? Some work in all areas, some specialize. But none are going to do work that you don’t ask them to do. The struggle here is that a lot of people don’t really know what to ask. Figuring out what to ask is your job. Do you need a list of deadlines for compliance items? Or do you have other “money” issues? If you can at least describe the problem you are trying to solve, that is the first step. Then listen to what they say next. Do you get an answer like “Yeah, that’s a problem.” Or do they ask you a probing question. If it is the former, you might want to find someone else to help with the consulting aspects.
Are you on the same page?
Most CPA firms are good at preparing tax filings. They will also be good at tax planning. But here is where I have seen a lot of small businesses stumble, tax planning to both you and your CPA typically means minimizing your tax burden. That is a great goal. The problem comes in how it is applied. Your CPA may say something like, you need more deductions. You think that means go spend some money. You don’t really evaluate whether this really is the best strategy given all your other competing needs that you have for your cash. I have seen many business owners jump to the conclusion that spending it on one thing is just as good as spending it on another. As long as it generates a deduction, its all good. Nothing could be further from the truth.
So as the business owner, what do you do now? Well, if you have enough revenue to justify hiring someone (full or part-time) that can really sink their teeth into your fiscal management, then go for it. The problem is when your size really doesn’t justify the expense of hiring this type of employee. That person needs to be able to bring more value to your organization than they will cost you. So what is plan B?
Becoming an educated business owner. This really is the place to start. That doesn’t mean going to accounting school. That isn’t the point. You should be spending your time doing the things that you really are skilled at. Then delegate the rest. However, if you don’t have a good understanding of how your business makes money, what metrics you need to review and have someone who can put those together for you, you will continue to struggle.
So how can I help you with this goal? What issues do you struggle with? Add your questions or comments below or send me an email at me@maryellenmiller.com
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