Starting (and growing) a company involves a multitude of financial decisions. The business owner must choose the business type that best enables the company to achieve its financial goals. During the firm’s operation, the business owner pursues strategies that ideally lead to company growth.
Smart entrepreneurs recognize that they don’t possess all the business or technological expertise needed for business success. Therefore, they rely on their executive team along with highly skilled external partners.
A Certified Public Accountant (CPA) plays a key advisory role in many companies’ business and financial operations. Private equity expert Mark Hauser details the ways in which a CPA can support business growth.
Offers Expert Business Formation Advice
A CPA can provide invaluable guidance during a company’s formation. Private equity expert Mark Hauser explains that the CPA will compare the pros and cons of different legal business structures. The CPA will consider the tax implications of a Limited Liability Company (or LLC), S Corporation, and C Corporation.
During the company’s formation, the CPA can provide guidance on the business plan’s financial analysis section. This recognized accounting expert can also offer advice on accounting software, expense tracking, and business bank account logistics.
Small Business Loan Preparation
Many start-ups and early-stage companies apply for small business financing. Later-stage businesses may apply for an expansion loan. In both cases, the lender will require current financial statements along with certain financial projections.
A business-friendly CPA can recommend the best business loan given the industry and the company’s financial and competitive position. The CPA will also help compile the required reports and offer additional guidance.
Provides Strategic Advisory Guidance
Besides offering accounting-focused leadership, a CPA often participates in a client’s strategic planning and longer-term growth initiatives. With the CPA’s accounting and business world expertise, a company’s leadership often regards them as a trusted advisor. These well-rounded experts offer valuable perspectives on business challenges and opportunities.
Strategic Roadmap Development
A company’s strategic roadmap provides a defined path toward a predetermined goal. To develop this template, the firm’s CPA advisor studies industry trends and pinpoints important business objectives. The CPA also analyzes the company’s competitive environment, identifying challenges along with emerging opportunities.
Equipped with this knowledge, the CPA assists their client in developing viable strategies that strongly reflect the firm’s financial goals. As economic, market, and competitive conditions change, the CPA helps their client refine their strategic approach accordingly.
Enables Adoption of Digital Accounting Systems
In today’s highly digital world, companies in all industries are automating multiple aspects of their operations. A technologically savvy CPA explains how to automate low-value, repetitive activities, including accounting tasks. This enables employees to focus their energies on higher-level work.
The CPA also offers advice on the migration of accounting functions and other financial operations to the cloud. This data storage option means information is always available, eliminating concerns about onsite server failures.
Finally, increasingly available data analytics tools enable businesses to gain key insights on specific issues. This information enables company leaders to make better-informed decisions aligned with business objectives.
Drives Tax Law and Regulatory Compliance
Businesses in every United States jurisdiction must comply with applicable tax laws and government regulatory requirements. Hauser Private Equity’s Mark Hauser explains how a knowledgeable CPA can enable company compliance.
Tax Law Support Services
Companies of all types are required to comply with relevant tax laws. A proactive CPA can help businesses implement accounting systems and practices that make it easier to stay in compliance.
To illustrate, the CPA can ensure that business clients meet tax filing deadlines and W2 submission requirements. The CPA also helps minimize each client’s tax liability by identifying applicable tax deductions, incentives, and exemptions. Finally, the CPA verifies the accuracy of clients’ tax returns.
Audit Preparation and Support
Each year, the Internal Revenue Service (or IRS) audits a certain number of businesses nationwide. If a company receives an audit notice, the CPA will help the client prepare for the audit process. The CPA will also represent the client throughout the audit, playing an integral role in resolving emerging issues.
Regulatory Compliance Support Services
Many United States companies are subject to increasing government regulatory requirements. A highly skilled CPA can proactively assist with risk assessments, internal evaluations, and compliance audit preparation. When a company meets its compliance requirements, the firm can avoid penalties, maintain a favorable industry reputation, and remain well-positioned for growth.
Implements Financial Performance Metrics
Even a well-managed company needs targeted metrics that can together gauge the business’ financial performance. Private equity expert Mark Hauser highlights common business financial metrics and their significance to the company’s health.
Financial Statement Generation and Analysis
A company’s financial statements collectively provide a well-rounded overview of the business’s overall financial performance. These targeted reports often reflect current (and predicted) economic and market conditions. The financial statements also factor in previous financial trends along with current and upcoming company expectations.
Together, the CPA and the business owner will closely review these statements. After identifying areas of concern, the CPA will recommend strategies to address each issue. Many companies’ future financial plans are based (in part) on a CPA’s analysis of key financial statements.
Balance Sheet
The phrase “balance sheet” denotes a financial statement listing a business’s assets, liabilities, and shareholders’ equity (or owners’ equity) at a single point in time. In essence, the business must pay for its assets by borrowing funds or obtaining investor capital (or issuing shareholders’ equity). By analyzing the balance sheet, the CPA gains an overall picture of the company’s financial health.
Mark Hauser displays the time-tested Balance Sheet equation:
Assets = Liabilities + Shareholders’ Equity
Income Statement
The CPA reviews the company’s income statement to gauge the firm’s overall current and potential profitability. By looking at several fiscal years’ income statements, the CPA can identify revenue and expense trends. As would be expected, these trends can potentially increase (or decrease) the firm’s future profitability.
Annual Report
The company’s annual report includes the key financial statements along with relevant insights and explanations on significant company issues. These additional narratives profile the firm’s business segments, overall growth, and relevant benchmarks. Here, the CPA can “read between the lines” to gauge the company’s big-picture performance.
Cash Flow Projections and KPIs
In any industry, financial reports with changing variables can result in corresponding impacts to a firm’s cash flow. To illustrate, higher direct expenses or an expanding product line will affect cash flow metrics. If a growing firm adds another location or hires 100 more employees, these factors will also impact the company’s cash flow.
A knowledgeable CPA can generate accounting software reports to determine the appropriate Key Performance Indicators (or KPIs) applicable to the company. With the KPI reporting structure in place and the CPA’s guidance, the business owner can consistently track each KPI result. Equipped with this information, the entrepreneur and their team can ideally avoid unwelcome financial surprises.
Industry-Specific Benchmark Comparisons
Regardless of the industry, every business owner wants to know how their company stacks up against its competitors. Here, the CPA can employ financial benchmarking analysis software to achieve this goal. An easily understood report, along with clear, concise graphics, will offer the most value.
To begin, the CPA should identify each KPI’s industry-specific standard. Next, the business owner should determine whether the company has a better (or worse) performance than the baseline KPI. Cost ratios are an especially significant metric.
Taking it a step further, the CPA and the business owner can determine whether one revised variable could significantly improve the company’s bottom line. These “what if” scenarios can really help the company seize a key market advantage.
Prepares for Short- and Longer-Term Growth
A CPA is well-positioned to help business owners streamline company operations and maximize their profits. Concurrently, private equity principal Mark Hauser emphasizes that CPAs can also help lay the groundwork for the company’s growth. Near-future and longer-term growth strategies will often differ.
To begin, the CPA can analyze the company’s cash flow cycles, pricing strategies, and inventory management dynamics. Monitoring the business’ budgets and generating financial forecasts are also important. The CPA can determine whether these collective results support the company’s near-term growth plans. If so, the CPA can offer guidance on property leasing logistics and/or equipment acquisition or leasing specifics.
Longer-term growth plans may include facilities acquisition or construction and/or expansion to other geographic areas. Again, the CPA reviews the appropriate metrics before providing the business owner with recommendations.
Company Merger/Acquisition or Sale
Economic, market, and/or competitive conditions may spur a business owner to merge with another company. Alternatively, another firm may initiate an acquisition (or takeover) of the subject company. In any event, a CPA can assist with business valuation, due diligence, and transaction logistics.
Choosing the Right CPA is Key
Regardless of a company’s business objectives, a versatile CPA can play a key role in helping the firm accomplish its goals. Private equity expert Mark Hauser recommends that businesses partner with a CPA who has demonstrated industry expertise and excellent client references.
Members of the editorial and news staff of the Daily Caller were not involved in the creation of this content.