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3 ways your small business can work with a CPA

March 12, 2014

Guest blogger James E. Heyward of Heyward CPA shares tips on how to make your accountant a strategic partner within your business.

In my role as founder of HeywardCPA, I’ve met a number of people interested in starting a small business. As luck would have it, most of these potential business owners have understood the need for a good accountant or CPA. These are the people that help you keep your books in order, calculate payroll, prepare vendor payments and file tax returns. When financial statements are needed by banks, investors or vendors, your accountant is the go-to person. Your accountant may also be the first person you call when you’re having trouble meeting expenses or when you receive a letter from the IRS.

If this sounds like the relationship you have with your accountant, you are not alone. Accounting services have traditionally focused on compliance work, or reporting historical transactions for a business. Focusing on compliance work has positioned the accountant as an outside advisor who has very little influence on the operations of the business. As a result, many business owners feel that accountants can only be used to keep the books and file tax returns. They may feel that meeting with an accountant is a painful experience because their meetings usually involve a discussion about paying taxes. While accountants will continue to provide these services, they can also offer their clients a more substantive relationship geared toward long-term success.

How might this new relationship be achieved? There is a movement in the accounting profession to shift away from being transaction-based reporters of historical data in order to function as real-time analysts, or trusted advisors. When this type of relationship is fostered, the accountant can become a tool of growth and part of the process rather than an outsider brought in at specific intervals or in times of crisis.

A trusted advisor can provide feedback on business ideas based on past and current data about your company and industry. They will learn your business and help you set and develop goals as your company grows. Most importantly, a trusted advisor is there in real-time so that issues can be dealt with in a prospective, not reactive manner. In short, a trusted advisor focuses on preventing problems rather than putting out fires.

Below are three examples of how an accountant, acting as a trusted advisor, can have a positive impact on small business performance:

Budgets and projections

Every business, regardless of size, should project revenue and budget expenses on either an annual, quarterly or monthly basis. A trusted advisor is perfectly positioned to assist business owners in preparing budgets and forecasts because of their knowledge of historical financial data. Combining historical data with the owner’s understanding of and plans for their company can create a valuable tool for guiding business decisions.

Cash flow analysis

Cash flow is a key indicator of a business’s health. It is also one of the most misunderstood, because businesses usually focus on profits and losses. Cash flow measurements are different, and particularly useful, in that all expenditures are accounted for, even those that are not reported on profit and loss statements, like loan payments. A trusted advisor has the ability to assist in measuring, planning and explaining a business’s cash flow in a way that will allow the owner to keep more of what they make.

Tax Planning

One of the most valuable services a trusted advisor can provide is tax planning, which is the practice of minimizing tax liability through the use of strategies throughout the year. Most small business deal with taxes once a year, when they have the returns prepared. There are very few things that can be done to reduce tax liabilities once the year is over. Working with a trusted advisor throughout the year can also give a business a good estimate of their tax liability before tax season starts, allowing them time to plan ahead to pay what they owe.

Most business owners do not think of hiring an accountant to provide these and other related services, but they are critical to the growth of any enterprise. By rethinking your relationship with your accountant and changing the way you interact, you can create a trusted advisor relationship which can help you succeed in ways that you may have never imagined.

Visit the U.S. Small Business Administration to find an accountant for your small business.

James E. Heyward is a Certified Public Accountant, Enrolled Agent and founder of HeywardCPA.com. He is based in Durham, North Carolina and is in the process of opening an office in Queens, New York. Heyward CPA strives to be a “next-generation” accounting firm that combines technology with a trusted advisor approach to provide more value to clients, ultimately becoming a partner in their success. He also writes about entrepreneurship, personal finance, and other money matters at Financial Flipside, his recently launched blog.