There’s no doubt about it – 2020 and 2021 have not been the best years for many businesses. Ratio CPA is razor-focused on helping small and medium-sized businesses grow profitably, but not all business owners know exactly what the right CPA firm can do for them. (Hint: it’s way more than preparing and filing income tax returns come tax season!!).
Below is a list of 12 ways that Ratio CPA helps its clients grow their businesses.
1. Lowering taxes with tax planning
Most business owners consider working with a CPA an expense. When working with the right firm, it’s actually more of an investment with a high rate of return.
It’s because a CPA with in-depth knowledge of tax law can help businesses and individuals lower their tax liability (both business taxes and individual taxes). This service is called tax planning or tax reduction planning.
Tax savings depend on many factors, including gross revenue, profits, company size and industry. An average business client at Ratio CPA saves $37,000 annually on taxes (yes, every year!) but we’ve helped companies claim tax savings in the hundreds of thousands.
There are a LOT of deductions, tax credits and tax reduction strategies businesses (and business owners) can take advantage of – but you need a great CPA to help claim them!
2. Knowing tax law
We already know that a CPA with in-depth tax expertise can help a business owner save on taxes, but knowledge of tax laws is crucial for many other reasons.
Business owners sometimes underestimate the time, money and stress involved in dealing with the IRS or state Departments of Revenue. This time and money are better spent on product development or client acquisition! If you’re working with a great CPA, it dramatically lowers your chances of things going wrong.
Your business return won’t get rejected.
You’ll get fewer tax notices.
You’ll receive correct information to your tax questions, which will in turn prevent you from having to fix mistakes or make costly and stressful changes.
You’ll be eligible for more government goodies (like free PPP loans that so many business owners missed out on thanks to incorrect advice from their CPAs).
You’ll be compliant with IRS regulations thanks to good guidance.
You’ll be able to focus on business growth.
3. Offering tax advice
Every day we receive questions from clients: How much money can I gift my parents tax-free? What vehicle should I buy for the biggest tax write off? How much can I contribute to my SEP IRA this year? What documentation do I need for my business trip to be tax deductible? Why am I receiving a tax notice from the IRS?
It’s really amazing how many life decisions have tax consequences – business issues are really the tip of the iceberg!
And you know what? It’s best not to rely on google for these things.
Having a knowledgeable and qualified CPA advise you will once more save you from unpleasant surprises down the road so you can dedicate your energy to growing your business.
Your important financial questions should be answered by someone who knows what they’re talking about!
4. Making sure clients are in good standing with the IRS
There’s nothing that can bring a business down faster than problems with the IRS. A good certified public accountant will ensure that you are in compliance with the tax code.
Is the salary you’re paying yourself a reasonable salary?
Are you reporting all income correctly?
Are you filing all the correct forms?
Are you paying all the taxes you should be paying, on time?
Are you keeping track of expenses in a way that will withstand an IRS audit?
Have there been any regulatory changes you are unaware of?
Are you using your business account solely for business expenses?
Are you expensing anything that will raise red flags?
The right CPA will help ensure that clients remain in good standing with the IRS, and are not subject to any penalties that will weigh a growing company down.
5. Helping with important business decisions
You may want to open a new branch, change your business structure, hire more employees, provide a profit sharing plan, buy expensive new equipment or real estate. All of these important decisions will have a huge impact on the future of your business.
A CPA can give you an unbiased opinion concerning your plans, and help steer you in the right direction, and also offer advice concerning operations and strategic business moves to create competitive advantage.
Don’t wait until the last second to speak with your CPA about big plans!
6. Outsourced Chief Financial Officer (CFO) services
Some businesses need more than consulting on a single issue.
When a business is big enough (say, over one million dollars in annual revenue), it may be time to hire a CFO.
A full-time CFO can cost a business well over $100,000 – which is why it’s become popular to hire an outsourced CFO (sometimes also called a “part-time” or “virtual” CFO).
How does a CFO help your business grow? Their sole job is to oversee all financial and tax aspects of your business and help make your company more profitable.
A CFO will focus on increasing your revenues, increasing your profit margins and net profit, reducing your business taxes, getting business finances in order, increasing the net worth of business owners, help with financial planning, in addition to ongoing support and oversight.
A CFO will also help you make important business decisions backed by data, forecasts, financial statements and projections, which will increase your chances of success.
7. Helping negotiate debt with the IRS
The IRS can do a lot of nasty things to taxpayers who owe money. They can put a lien on your home, ask the U.S. Department of State to revoke your passport or not allow you to be issued a new one, they can garnish your wages.
Not to mention all the tax notices you will be receiving.
This is devastating to business owners, especially small businesses focused on growth.
The right CPA can help you (if you are eligible) settle your debt, renegotiate monthly payment installments, have the IRS abate penalties, file delinquent tax returns, and even ask for debt forgiveness.
8. Representation in front of the IRS
Certified public accountants can represent clients in front of the IRS. This means they can communicate with the IRS on your behalf, including if you receive a tax notice or are involved in an audit.
Only CPAs, tax attorneys and enrolled agents (EAs) may represent their clients in front of the IRS – and your current accountant or tax preparer may not have these credentials.
9. Preparing, analyzing and amending business (and personal) income tax returns
No one likes tax season, but it’s something most of us have to go through on an annual basis.
Ratio CPA helps clients prepare both business and personal returns – and focuses on maximizing tax savings.
At times our job also includes amending previous years’ tax returns, either for the benefit of a taxpayer or to fix incorrect information.
Is it important who prepares and files your income taxes? Absolutely, not all CPAs are equal!
Here’s a short story: because we don’t simply “crank out” tax returns and maintain a very high standard of services, last year we saved a client over one hundred thousand dollars by paying close attention to their accounting and noticing net operating losses that (thanks to new regulations) could be carried back to profitable years (NOL carrybacks). The client was unaware of this possibility.
A good certified public accountant will take the time to analyze an income tax return, and have a firm grasp of current tax law.
How much could you grow your business with an extra $100,000?
An accountant analyzes data, verifies data, gives forecasts, makes adjustments, and prepares financial reports such as balance sheets and profit and loss statements. They can advise a business owner on a higher level: How has your business evolved? What is its financial health? Where is it going? How is your cash flow? Are your business plans viable? Business owners can make informed, smart decisions based on this financial analysis.
Accounting is done with the help of accounting software. We recommend online versions of accounting software, as both the accountant and small business owner have immediate access to data.
By the way – not all accountants are CPAs, but all CPAs are accountants. This is because to become a CPA you need to take a very difficult licensing exam, and must maintain a CPA license in good standing on an annual basis. A CPA also has continuing education requirements, and must have a degree in finance or accounting.
11. Helping interpret and prepare financial statements
Financial statements are formal records of the financial activities and position of a business.
A CPA can assist you in preparing financial statements (such as a profit and loss statement or P&L), and then help interpret the data.
Have your expenses been going up or down? Have your sales or profit margins decreased? What was your gross revenue and net profit?
This data is crucial in determining the health of your business, and should play a large role in business decisions.
12. Taking taxes and accounting off your plate – perhaps the most important thing a certified public accountant can do for a small business!
Whether it’s medium-sized or a small business, your efforts should be focused on serving your customers – and not worrying about your bookkeeping, payroll, accounting, taxes or financial statements.
This is ultimately the best advantage of working with a good CPA. Peace of mind is invaluable, and we want to take all the accounting and tax stressors off your plate.