Managing a company’s financial aspects is an integral part of business operations. Estimating and paying the quarterly taxes, checking the accounts receivable and making sure that all the bills are getting paid are just a drop in the bucket of the accounting processes that are involved. Some business owners will take on these responsibilities themselves, while many have someone they employ handle the books.
When your needs grow, however, it can be harder to tackle certain activities with your current resources. For example, insurance, sales tax and payroll can involve complicated issues. Certified Public Accountants (CPAs) have specialized expertise in these financial areas, and can provide you with the right information and tools to take your business to the next level.
What Is A CPA?
A Certified Public Accountant (CPA) is someone who has met the educational and experience requirements to earn a certification as an accountant in their state. Typically, one becomes a CPA after he or she has passed the Uniform CPA Exam in their state. It is important to understand that a person can be an accountant and not have their CPA. A CPA is a specialized type of accountant. While all CPAs are accountants, not all accountants are CPAs.
The American Institute of CPAs (AICPA) develops and grades the CPA exam. Each state, district and County Board of Accountancy will license separately. The CPA is known to be challenging. The pass rate for the CPA exam has historically been roughly 50 percent.
An accountant can conduct activities such as bookkeeping and tax return preparation as well; however, a CPA is highly knowledgeable in their field and operates according to a high ethical standard.
CPA Services & Responsibilities
The responsibilities of a CPA can vary quite a bit. They can offer a range of services that include tax advice, auditing, accounting and consulting for corporations, not-for-profits, small businesses and more. Here are a few of the responsibilities that may be handled by a CPA:
- Organizing and updating both digital and physical financial records as necessary
- Participating in budget processes
- Establishing the accounting policies and procedures
- Regularly monitoring bookkeeping activities
- Forecasting revenue and analyzing profit margins
- Reviewing transactions and preparing reports
This range of services can actually be done by a qualified public accountant in most cases. There are two things, however, that only a CPA can do as opposed to an accountant who does not have a CPA license:
The preparation of audited or reviewed financial statements that are used to file a report with the Securities and Exchange Commission (SEC). The SEC is the entity with which all public companies must file their audited financial statements.
Representing clients in front of the Internal Revenue Service. The exception is that non-CPAs in the following roles can also represent their clients: attorneys, enrolled agents, enrolled actuaries and enrolled retirement plan agents.
Essentially, this means that CPAs are certified especially for auditing practices. Their level of training, expertise, the requirement of continuing professional education and periodically being required to pass an ethics examination implies that CPAs are highly capable in their roles. With that being said, let’s look at some special areas CPAs often handle.
One of the common responsibilities that are handled by a CPA is auditing a client’s accounts and providing their third-party opinion on the accuracy, arrangement and other factors. A CPA prepares all types of tax statements on their clients’ behalf, from property taxes to income taxes. They represent their client’s in the event of an audit.
Tax Consulting & Planning
Tax laws change quite frequently, and it’s difficult for many businesses to keep track of these changes. In addition, these tax rules can be pretty complicated and difficult to navigate without an expert reviewing how they affect your business. Any CPAs involved in this area will review these tax rules to recommend the best course of action.
Another area that a CPA can assist a business with is the day-to-day financial operations. This may include activities such as providing investment advice, budgeting, cash management, financial planning and estate planning.
Exit & Stock Strategy
If your business is planning a sale strategy in the future, or is involved with one now, a CPA can help assist with the financial aspects that are involved. A business that is planning to go public can also benefit from working with a CPA to prepare for that process.
Mergers & Acquisitions
There are many benefits to merging with or acquiring other companies, including future growth and competitive advantage. There are also accounting and other financial reporting requirements that need to be satisfied by both parties to a merger or acquisition, which is why a CPA is necessary.