How to create a successful business—with the help of a CPA
Apart from offering financial advice, CPAs can help business owners identify technology trends and analyze operational decisions to create a solid foundation for success (Getty Images/mapodile)
Starting your own small business can be an exciting career move. But while passion and drive can go a long way, smart planning can be essential to survival. According to the Canadian government, 23 per cent of small businesses fail within their first three years and that figure climbs to 57 per cent after 10 years.
So, how do you avoid becoming a statistic? CPA Kim Moody, personal and small-business tax expert in Calgary, advises entrepreneurs to “delegate everything but genius.” In other words, accept the fact that you can’t do it all yourself and consider hiring a CPA.
As he puts it, often entrepreneurs will think covering all bases themselves will save money and get them further along, “but think about it differently,” he says. “Who are the teammates you can bring to the table that can save you all that time and aggravation? Instead of it being a cost, it becomes an investment.”
Here are four good reasons for hiring a CPA when launching your own business.
1. PLANNING YOUR BUSINESS PROPERLY
Having a solid business idea on its own isn’t enough to be successful, experts say. You need proper strategy and planning. “A lot of fresh entrepreneurs sometimes are really excited about being in business, but don’t really have a lot of experience,” says Moody.
CPA Josh Zweig, co-founder of LiveCA, one of the first cloud accounting firms in Canada, sees the advisory role as a core reason for hiring an accountant. “It’s really about understanding someone’s goals and helping them get there,” says Zweig.
By using an analytical approach, he points out, CPAs can reframe a client’s needs. For example, this could mean helping them to determine whether the business should register for sales tax in the U.S. “It’s really about, how can I help this particular company achieve their goal?” says Zweig.
That’s why Moody says it’s a good idea to consult an experienced CPA who has private enterprise knowledge and can advise on various areas. These types of general practitioners are often in tune with what he calls “the pulse of their clients.”
CPA Sandy Lyons, senior manager, Grant Thornton Limited agrees, adding that CPAs understand what it takes for a business to make money. “They [also] spend a great deal of time assessing risk and that that quite often is invaluable to the business owner,” he says.
2. SETTING UP TAX AND ACCOUNTING SYSTEMS
Often, new entrepreneurs try to save costs by doing their own tax filing and bookkeeping, Moody says. But without knowing the proper tax requirements, they can miss deductions and filing deadlines, which can be pricey in the long-run, especially if they then have to hire a CPA to redo the bookkeeping for accuracy.
To avoid this, Moody recommends hiring a professional accountant from the get-go to set up the correct accounting systems to track revenue profits and losses, as well as ensure there’s a properly constructed balance sheet in place.
“Today, there’s no shortage of fairly simple software,” he says. “Associates can help with software selection on the design and training of the chosen accounting system, making sure that it fits seamlessly with their tax compliance obligations...and obligations for filing and reporting.”
Zweig agrees, adding that the profession has seen drastic technological advancements in the past 20 years, changing the role of the accountant.
“One of the drivers of cloud accounting is the idea of automation and getting rid of manual data entry,” he says. “CPAs can set up clients on these programs, reduce the manual labour and billable hours and free up both client and CPA time for other tasks.”
3. KNOWING WHAT TO REPORT, AND HOW
Every incorporated business needs to file corporate returns. But requirements and reporting obligations often go beyond that, says Moody.
“Sometimes the requirements are industry-specific and sometimes they are municipality-specific,” he says. “So CPAs, locally, can certainly help with that.”
As Lyons points out, no one can be expected to know the ins and outs of an area that is not within their field of expertise, and that’s why you should call on an expert for help, just as you would call on a tradesperson to fix an electrical problem. It’s that kind of expertise that will end up saving you in the long run, he says.
Business owners can work with CPAs on subsidy and wage programs too, adds Lyons.
“Being able to comply with those requirements can be very confusing for someone who doesn’t have [that background],” he says. “Business owners turn to professionals because they’re dealing with calculations that are foreign to them.”
4. STAYING ON TOP OF NEW INDUSTRY INFO
CPAs are lifelong learners and are mandated to meet professional development requirements to maintain their designation.
“They’re always looking at how they can help their client, from tax planning and compliance, to understanding what government incentives are out there,” says Lyons.
Business owners can also ask CPAs to recommend entrepreneurial coaching programs, says Moody, who has used such services himself for more than 20 years. “It’s one of the best things I’ve done,” he says of the personal development and professional experience he has gained from the training.
“I think that’s the benefit that CPAs can provide,” he says. “It’s the wisdom, the experience, the education to help their clients and to make sure they apply the advice sooner rather than later.”
MORE VALUE FROM CPAs
CPAs have the right kind of skills and training to help businesses navigate through tricky times. Also, if you’re a small business facing challenges during the pandemic, CPA Canada has a wealth of resources to help manage your finances. These include podcasts, webinars and how-to guides on financing, strategy and planning, cash management and managing risk to facilitate recovery from the effects of COVID-19.