Do I Need a CPA?
A standard question that I get from potential clients is if they need a CPA (Certified Public Accountant) to run the company's accounting. The answer is no, but there are specific areas where a CPA is absolutely needed.
Let's first look at the definition of a CPA. Certified PUBLIC Accountants work with GAAP (Generally Accepted Accounting Principles) and the Internal Revenue Service (IRS) Tax Code and are required yearly, to maintain their expertise about each of these subjects.
Companies that use GAAP as their accounting method, are generally Publicly Traded Companies that are traded on the exchanges. In these cases, CPA's need to be thoroughly involved in the accounting department. Certified Public Accountants guide the company on how to treat all accounting transactions, based on GAAP.
Why do laws require Publicly Traded Companies to use GAAP as their accounting method? Because Wall Street is one big money bowl and the investors need to have standard information that is consistent between the companies they are deciding to invest in. They need to be able to compare apples with apples.
The second area that a company needs to have a CPA involved in is with the company's taxes as they are also experts in the IRS Tax Code.
Two areas of tax are tax planning and tax filing.
Tax planning simply means that your CPA is helping determine how to pay the least amount in taxes and helping you plan business expenses and investments to achieve this.
Tax filing is the other area where a CPA is needed in order to create and sign the tax return. Essentially, this person or firm is "guaranteeing" the Government that someone is looking at these numbers before filing a tax return.
Outside of these two areas of accounting, GAAP and tax, there is no need to think that you have to have a CPA running or working in your accounting department. It's just not true.
Those that have received a degree in Accounting, and any advancement in education after that, should be able to adequately run a company's financial records.
Usually, when a business hires a CPA to be their accounting firm, and they aren't a business that needs to have a CPA on board, they get a lot less value, for a lot more money simply due to the designation that the person carries.
As a private business, find a solid Professional Accountant to build and manage your company's financial operations, analysis, and statements. This way, you get the value you need by partnering with the Accountant, for a price that is much more competitive.
Blue Collar CFO