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Analysis| The Profession

What small businesses miss when they do their own accounting

Entrepreneurs, especially in start-up mode, try to do many things themselves. But turning to a CPA early on can save you headache, heartache—and money

If you’re a small business owner or an entrepreneur trying to get a new idea off the ground, professional accounting services may seem like a luxury—a nice-to-have that can be added once your business has reached a certain size or cash flow has improved. In reality, a CPA can add strategic and tactical value throughout the life of your business, from set-up to wind-down and everything in between.

“For many of my clients, I’m the first CPA that they’ve ever contacted,” says Jessica Somers, owner of Cordova Street Consulting, a Vancouver-based consultancy that specializes in tax and business advisory services for local businesses and entrepreneurs. Since opening its doors in early 2016, Cordova Street Consulting has quickly built up a diverse client base that runs the gamut from solopreneurs and freelancers in creative fields to an architecture firm with 50 employees.

“One of the things that my clients have in common is a desire to understand their business from a financial and tax perspective and feel some level of ownership,” explains Somers. “They don’t want to hand things over to their accountant. They want to work with their accountant.”

Here are three critical reasons why partnering with a CPA early on makes good (small) business sense:

1. THEY CAN GUIDE YOU IN ESTABLISHING EFFECTIVE ACCOUNTING SYSTEMS

A CPA can recommend and work with you or your bookkeeper to set up effective systems for tracking day-to-day transactions that will pay dividends when tax time rolls around. The key is finding a solution that makes sense for your business and is one that you’ll stick to—whether that’s a sophisticated solution like QuickBooks or a low-tech, pen-and-paper approach.

2. THEY CAN ADVISE YOU ON TAX PLANNING AND COMPLIANCE ISSUES

When it comes to taxes, knowing when and how to apply Good and Services Tax (GST) and Provincial Sales Tax (PST), identifying tax-deductible expenses and understanding payroll taxes are some of the most common challenges facing small business owners.

"It’s a good idea to have a CPA work with you on your taxes, at minimum, especially if there are complexities,” says Somers, noting that you or your bookkeeper may not be in a position to recognize all of the tax implications you should be considering.

A CPA can not only explain your tax obligations at the outset and file your taxes correctly and on time, but also help you recover if you find yourself in a situation of non-compliance. For incorporated business owners, a CPA like Somers can also offer tax-planning advice related to compensation, mortgage applications, retirement savings and more.

3. THEY CAN ASSIST YOU IN MAKING GOOD BUSINESS DECISIONS

Somers finds that many business owners she encounters don’t feel confident in their ability to analyze the financial side of their business. But, as she notes, “Nobody knows that business better than they do.” A CPA can help small business owners improve their financial literacy, explaining which metrics are most relevant for their industry and how they can use those figures to make smarter business decisions. It’s a powerful skill, whether you’re starting a new business, considering buying an existing business or applying for a loan.

“My clients really value having someone they can just pick up the phone and run something by,” says Somers. “If you’re thinking about picking up a lease for your store or offices, or hiring employees versus contractors, it can be nice to have somebody to talk to about those decisions. A CPA can be that person.”