Business Credit
3 business scenarios that need money to make money
You may think the most important thing a Certified Public Accountant (CPA) wants you to know relates to specific rules that apply to you. And of course, it's important for you to understand the rules and laws that govern your business. However, the most important piece of advice I can give is based on the concept of before. Talk with your CPA before you decide to open a business, before you set up your administrative process, and before you enter into a transaction.
When you ask for advice before you open your business, you give your CPA the opportunity to advise on the structure of your business, help develop a business plan, and help educate how being a business owner will impact your financial situation (including income tax liability).
Small businesses often fail because of cash flow issues and improper planning for items such as taxes. A CPA can help mitigate this risk by recommending setting aside money for taxes, helping you set pricing and payment terms for customers, picking the appropriate accounting system for your needs, such as QuickBooks, and teaching you how to keep separate books and records.
In other words, your CPA can help determine whether you're ready to launch your business, and help set you up for success from the very start.
When you come to your CPA before setting up your administrative process, it gives us the opportunity to advise you on your systems and processes. Whether it's setting up your accounting system to appropriately charge sales tax on the taxable items your business sells or creating the document storage method your business will use to keep track of invoices paid, a CPA will have experience with best practice processes to help guide you.
We can also address all of the necessary business registrations you'll need to file to get your business up and running. In addition to potential federal requirements, like applying for a Federal EIN, you'll also need to consider state requirements. A CPA can help you set up state tax accounts to file and pay sales tax, payroll withholding tax, and income tax. If your business has employees, your CPA can help you figure out whether you need to register for state unemployment accounts. They can also advise you on state-specific requirements - in my state, for example, there is a contractor database that requires those in that industry to register and select a sales tax method that they will follow.
When you enter into a business transaction, whether you're signing a new purchase order or buying out your partner, the best time to talk with your CPA is before that transaction takes place. There is only so much a CPA can do after the fact. Even if you are unsure whether there are accounting or tax implications on the transaction, ask first! It's never fun to find out later that you should have structured the transaction differently.
Having a trusted CPA who you feel comfortable reaching out to can make a difference in the success of your business. Allow your CPA the chance to provide their advice beforehand to save yourself some preventable mistakes and headaches down the road.
Asking other business owners or checking with other advisors such as your attorney, banker, or insurance agent can be a great way to find a CPA. Once you have a few names, do your homework and find out as much as you can prior to scheduling a meeting. Check out the firm's website and your state's Board of Accountancy, which has a searchable database where you can check the status of a firm's CPA license.
As with any business advisor, narrow it down and schedule a few get-to-know-you meetings before you make a final decision. Pay attention to how interested they are in getting to know you and your business, how responsive they are, whether your business falls within their expertise, and how well you are able to communication your concerns overall.
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