The April tax deadline is not the only important fiscal date for small businesses.
Many people who own businesses must also make estimated tax payments throughout the year, but your accountant can help with much more than tax preparation. An experienced accountant can also assist with planning, bookkeeping, payroll, and other services that can free business owners up to focus on executive functions.
What Does an Accountant Do?
Accountants, according to the American Institute of Certified Public Accountants, speak the “language of business.”
Good accountants have specialized tax knowledge and are able to identify tax-saving strategies. But an accountant’s skill set can extend to many other business tasks, including the following:
- Tracking sales and expenses
- Keeping an eye on cash flow
- Billing clients
- Paying invoices
- Running payroll
- Producing financial statements
- Assessing financial data
- Conducting internal audits and audit defense
Not all accountants provide all of these services, and a small business may not need assistance in all of these areas. The business may already have a bookkeeper who handles day-to-day financial transactions, but it may be beneficial to have an accountant analyze the data to provide information that can help the owner make business decisions.
CPAs versus Accountants
All certified public accountants (CPAs) are accountants, but not all accountants are CPAs.
Accountants typically hold a bachelor’s degree in accounting, finance, or a related field. CPAs also have an undergraduate degree but must meet more rigorous criteria to earn their professional title.
Becoming a CPA entails meeting education and experience requirements and passing the Uniform CPA Exam. Eligibility to sit for the exam is based on state requirements. In addition, CPAs must comply with rules of professional conduct and undergo continuing professional education (CPE).
CPAs are trained in standardized accounting principles and best practices. As government-recognized specialists in their field, they are uniquely qualified to perform certain tasks—such as preparing audited or reviewed financial statements, representing taxpayers before the Internal Revenue Service (IRS), and filing reports with the Securities and Exchange Commission.
Businesses that need help with these specific services should hire a CPA instead of an accountant. But for basic tax filings and other standard accounting services, an accountant may be sufficient.
CPA and Accountant Costs
CPAs generally charge more for their services than non-CPAs because of their more robust credentials. The fees for both groups vary depending on the professional’s experience level, geographic area, and the tasks they perform. The Bureau of Labor Statistics (BLS) is a good resource for researching the average wages for CPA’s and accountants in your area.
Hiring a CPA for an Audit
Only a CPA, enrolled agent, or an attorney can represent a business before the IRS if it is audited.
About 1 to 2.5 percent of small businesses face an audit each year. The odds of getting audited are low, but some experts say that small businesses are more likely to be targeted because they tend to receive more income in cash, making it harder to identify and easier to misreport.
With the IRS is set to receive a substantial budget increase over the next decade, there is speculation that the number of small business tax audits, especially among high earners and cash businesses, could increase in the coming years.
How to Find an Accountant
Whether a small business needs à la carte accounting services, is looking to hire an accountant full-time, or requires regular communication with an accountant, finding the right professional is crucial. To put together a short list of candidates, look to the following sources:
- Professional network referrals. Coworkers, business associates, attorneys, financial advisors, bankers, fellow business owners, and other members of a professional network are a good starting point for finding an accountant. Accountants and CPAs may have broad business knowledge and an array of skills, but it makes sense to choose a professional with a track record of working with small businesses and, even better, in the same industry as your business.
- State and national associations. State accounting boards, including the National Association of State Boards of Accountancy, and CPA societies such as those listed by AICPA offer local member directories.
- IRS directory. The IRS maintains a database of federal tax return preparers sortable by skills, education, and areas of expertise, as well as by city, state, and zip code. Basic tax preparation requires only a Preparer Tax Identification Number (PTIN), but IRS audits, payment and collection issues, and appeals must be handled by CPAs and other professionals with government-recognized representation rights.
- Recruiters and job boards. Businesses in search of a full-time, in-house accountant can use a recruiter or job listing site to connect with candidates. LinkedIn is a valuable source for finding accounting talent and also offers a guide for hiring accounting professionals.
After you have put together a short list of accountants, you can compare prices, qualifications, and personalities to find the right fit. As with other business decisions, focusing solely on price can be misguided. An experienced accountant might charge more than a recent college graduate, but their knowledge is likely to save you money by helping you take advantage of tax deductions, tax breaks, and good financial strategies.
It goes without saying that the person you hire should be knowledgeable and capable, but do not underestimate the importance of an interpersonal connection. Your accountant or CPA should be someone you are comfortable reaching out to at any time and entrusting with company information to which few people are privy.
Ideally, you will build a long-term relationship with your accountant that enables them to gain a deep understanding of your business. As a member of your team of advisors, they will be able to spot trends and offer personalized advice. And if an audit or another trouble spot emerges, it is important to be able to count on a professional who will provide you with sound advice.
Make Davis Law Group a Part of Your Team
Like a good CPA, an experienced business attorney is another good person to have on your team and at your disposal. Your CPA and business attorney will likely work together in cases of an audit or other financial legal issues to provide the best counsel and outcome. We have worked in tandem with many high quality CPAs in the Hampton Roads region and can help you find one to suite your business needs and preferences. Contact us today.