There’s a scene in the movie Dave where Dave, an imposter president, is tasked with finding available funding in the massive government budget. Recognizing that he is out of his element, he turns not to the IRS or other government agencies at his disposal but to a trusted source: his own personal accountant for his small business.
For many small business owners or solo hustlers, a CPA may sound extravagant. Many small business owners assume that it’s an expense they can’t afford, or an unnecessary one as they can handle the bookkeeping themselves. But as was made clear in our tax preparation blog [LINK], sometimes SBOs don’t know what they don’t know and the expense of a CPA may pay off in other ways.
In this blog we’ll discuss:
- Why you may need a CPA
- How to find a CPA
- How existing management tools can assist (and don’t replace) a CPA
Why You Should Consider a CPA
CPAs can be a tremendous sounding board for new or inexperienced small business owners and provide a variety of services, including:
Tax advice and planning
Our tax blog [LINK] makes it clear that taxes can be complex and time consuming for even the smallest businesses or side hustles. A good CPA can help your business ensure that all correct paperwork is tracked and filed, make tax payments accurately and on time, and find ways to save your business money with their knowledge of deductions, available tax breaks, and more.
Along with tax advice and preparation, CPAs can also ensure that your business is correctly managing all aspects of your finances. Auditing helps avoid issues with the IRS before the IRS can call them out. If your business holds deposits or retainers, CPAs can confirm that all applicable laws and best practices are in place. In short, CPAs are terrific liability protection from financial infractions.
Management and consulting
Most small businesses don’t rush out to hire a CFO. In fact, most involve one person wearing all hats, from CEO to fulfillment. A freelance CPA can provide guidance with budgeting, risk management, and even preparing financial statements for investors. They can also be a sounding board for future growth plans and help plan for upcoming expenses and profit forecasting. In some cases, they can even help strategize pricing for goods and services.
If an issue arises where you fear that employees or subcontractors might be mismanaging funds—or if you are accused of doing so by vendors or other debtors—a CPA can conduct forensic accounting to provide clear evidence of malfeasance or exonerate you from liability.
If you have employees or subcontractors, CPAs can not only handle paycheck distribution but also other financial human resources issues like tax withholdings, benefits payments, and more.
Of course, the classic role of a CPA is basic business bookkeeping. A CPA can handle invoices and accounts receivable, make sure necessities like rent and utilities get paid on time, and pay your vendors on time.
How To Find a CPA
CPA vs. Accountant
First, let’s explain the difference between a CPA and an accountant. Both have an educational background in accounting, finance, or similar. However, a CPA:
- Has documented work experience.
- Must pass the Uniform CPA Exam and meet state licensing requirements.
- Is required to take continuing education classes to stay up to date on applicable state and federal laws and regulations.
Most importantly, because CPAs are state certified, they have a fiduciary responsibility to their clients. In other words, they are legally required to act in the best interest of their clients or risk losing their CPA license. For this reason, we recommend looking for a CPA and not just an accountant.
What To Look For in a CPA
Try to find a CPA who is familiar with your industry and/or your stage of business. Do you do most of your business online? Across states? Are you selling goods vs. services? Are you just starting out or ready for your next phase of growth?
Action Item: Interview potential CPAs about their existing or past clients and what they consider their specialties.
Additional things to consider:
- Make sure potential CPAs are registered in your state.
- After compiling your list of candidates, check the Better Business Bureau for ratings and red flags.
- Meet prospective CPAs in person to be sure their communication style and personality mesh with your business. If you can’t stand your CPA you are unlikely to properly utilize them for advice or follow their recommendations.
How To Find a CPA
- Check with your network of business owners and colleagues. Many are probably also using a freelance CPA and may even receive a discount for making a profitable reference.
- Search online directories such as the American Institute of CPAs or National Association of State Boards of Accountancy.
- Check with your local Chamber of Commerce for local referrals.
Once you’ve identified a list of candidates and done your due diligence on reviews and state certification, set up meetings to review your needs and their skills. Ask questions that will help you understand:
- Their background, experience, and education/training.
- Their availability, including their backup resources if they are unavailable during a sudden crisis or issue.
- Whether they are Enrolled Agents—i.e. whether they can represent you in front of the IRS if an issue arises.
- Their prices.
- Their process for handling your business, including tools they prefer and their method for tracking your expenses and filing your paperwork.
Merging Your Financial Tools and a CPA
Tools such as Solo Hustle are a great way for solo entrepreneurs and small business owners to manage a lot of paperwork and necessary documentation easier and more efficiently. They cannot, however, offer advice or manage a fluctuating budget.
At the same time, acquiring the services of a CPA does not mean that you must immediately ditch your existing systems or convert to a system recommended by your CPA. (In fact if a CPA is adamant about using a system with which you are unfamiliar and/or not comfortable, this can be a red flag.)
A reliable CPA will be proficient in common tools such as Quickbooks or tax preparation software, and is happy to work within any system that you have in place that will reliably track receipts, expenses, expected revenue, and more. Solo Hustle is a great example of a system that fosters and encourages solo entrepreneurs to stay organized with bills and expected payments, track hours and costs, and have customer contact information at their fingertips. For your CPA, access to Solo Hustle makes it possible for them to grab paperwork on a quarterly basis and quickly see the scope of work and expenses you’ve incurred since their last update.
In conclusion, investing in a CPA can be a great expense that frees up your time to focus your strengths and expertise on growing your business rather than fumbling through government regulations. Solo Hustle is the perfect complement to make working with your CPA even easier and more efficiently.