Small businesses often face the challenge of juggling between core business activities with non-core activities, such as bookkeeping and cash flow management. These have the ability to impact the financial health of a business. This is where CPA services for small businesses play a critical role helping owners maintain accurate records, manage cash flow, and stay compliant. According to U.S. Bureau of Labor Statistics report, shows approximately 65-75% of businesses shut down due to poor cash flow management.
To counter these issues arising, the most straightforward solution is to seek professional expertise from a CPA firm. This saves businesses from investing valuable time and resources in maintaining their books, while ensuring accurate financial records and regulatory compliance.
In this blog, we will list some key services you can expect from a CPA firm, along with guidance on when to hire CPAs for small businesses.
What to expect from a CPA firm for small businesses?
As a business conducts internal analysis, it can find various gaps in the business. A CPA firm can help bridge them. While visiting a CPA firm, a business owner can have a lot of questions. A common inquiry is regarding the typical services provided by a CPA firm. The following is a list of services you can expect:
Accurately Maintained Financial Records
Businesses doing their own bookkeeping divert resources from their primary duties. This happens due to the high volume of daily transactions, some of which may go unnoticed.
CPAs for small businesses help them maintain accurate books. These firms ensure that all financial transactions like revenue, expenses, payroll, and much more are recorded correctly. This creates an organized financial record for the business. Accurate books help the business in decision-making, increase credibility, improve funding potential, and more.
Preparing Organized Financial Reports
Preparing financial reports is a time-consuming task. It requires going through a lot of financial data from different sources. Apart from it, meeting the ever-changing regulatory standards while maintaining accuracy can be a complex process.
CPA services are tailored for small enterprises to assist in generating financial statements such as profit and loss reports, balance sheets, and additional documents. They offer immediate insights into the company’s financial health and status. These reports help the owner to increase profits, track expenses, manage debt, and ensure tax compliance.
Cash Flow Projection
Cash flow projection is generally considered a complex, and time-consuming task. It is due to factors like dependency on manual data collection, market uncertainty, and much more.
CPAs for small businesses take cash flow projections as an easy task. CPA firms provide expert strategic guidance, real-time visibility, scenario modelling, and automation which makes cash flow projection easy. This enables businesses to effectively manage the cash, take informed decisions, prevent shortages, scenario planning, and much more.
Ensuring Tax Preparation
Identifying tax deductions and credits is a difficult task. It is due to the complexity of tax laws, ever-changing regulations, documentation, and more. Moreover, tax deductions and credits vary depending on the nature of business.
CPA firms identify tax deductions and credits that are specific to the business’s nature. These companies possess extensive expertise in taxation regulations and are familiar with industry-specific incentives such as deductions for qualified business income, credits for research and development, and incentives for energy efficiency. They make sure that these opportunities are maximized and thus reduce the tax liability for businesses.
It helps the business in reducing business failures, increased professionalism, improving cash flow, and more.
Avoiding IRS Penalties
This is a challenging task due to complex regulations, payroll tax errors, record-keeping issues, and more. Based on the data of the IRS and tax industry, small business owners, especially self-employed individuals, face fines for underpaying quarterly estimated taxes.
CPAs for small businesses help them avoid IRS penalties by making sure that all the tax filings are accurate and submitted on time. They monitor the tax filing deadlines and help businesses in knowing the changing tax regulations. In this way, CPA firms make sure that compliance is always maintained.
Expense Management and Cost Control Strategies
Expense management and cost control strategies are challenging for a small business. It can be due to various factors including limited resources, unpredictable costs, resistance to change, and more.
CPA firms can provide strategies for business owners to cut and manage unnecessary expenses. This includes identifying areas where costs can be cut, such as going paperless, optimizing vendor negotiations, and more. This helps businesses focus on long-term growth and stability.
Advising on Optimum Capital Structure
Choosing an optimum capital structure involves a complex, trial-and-error process. It is a challenging task as small businesses have inconsistent cash flow, lack of tangible assets, and more. Moreover, there is no single formula to choose capital structure. Along with it, the market conditions are dynamic, which makes it even more challenging.
A CPA firm can help business owners in this case. CPAs give advice to the business on the most optimum capital structure, balancing debt and equity. This helps in minimizing the overall cost of capital and maximizing the company value. It ensures sustainability of business, improves the chance of loan approval, enhances financial flexibility, and more.
Assisting With Loan Application
Getting a loan approved can be challenging due to strict standards, heavy documentation, the need for consistent cash flow, and high-credit scores.
Ways in which a CPA firm assists small business with loan application:
- Check the eligibility and compliance of business
- Prepares essential documents and check the financial accuracy
- Submission and tracking of application
- Advice a business on different types of loans
- Guide business through the 45-60+ day underwriting process
These are some of the services a small business can expect from a CPA firm. The CPA services for small businesses can make the working of businesses more efficient and effective. By using CPAs for small businesses, a business can focus on expansion, generation of more profits, and more.
We have understood what a small business can expect from CPA firms. Now, it is important to know when we need CPA firms.
When Do You Need a CPA Firm?
Almost every business owner comes to a point where they need to worry about tax, auditing and handling books becomes difficult. Some try to handle it all alone, but this only complicates the situation.
Here are some of the questions you can ask yourself:
- Are the financial records of business confusing?
- Is my business struggling with recording cash flow?
- Is filing tax becoming difficult for the business?
- Is my business finding it hard to get loans approved?
- Is my AR/AP not organized?
If the answer to any of the following questions is “yes”, you need CPA services for your business.
Conclusion
There is a point in every business where the owner has to focus on core growth. For management of financial and accounting processes, it is always better to delegate it to specialized experts so that you can focus on increasing revenue, and more. While visiting a CPA firm, a small business owner can have a lot of questions.
For a small business, hiring a CPA firm is not just regarding finance. It can be a gamechanger for a small business in terms of financial management and strategy. The business owner can focus on the expansion of business by having a strategic approach to decision-making.
We’ve outlined key services to expect from a CPA firm. Use this as a checklist to assess if your business needs one now.
