The CPA as Advisor to Small Businesses

A Guide to Understanding and Using CPA Services

INTRODUCTION

More than 300 new small businesses open their doors every business day in the United States. Their ability to survive depends, in large part, on their ability to plan for the future, while meeting the present challenges of today's ever-changing business environment. Certified public accountants (CPAs) are the premier providers of business advice and technical assistance to small businesses.

CPAs are professionals, distinguished from other accountants by stringent licensing requirements. They must have a college degree or its equivalent, pass a rigorous national examination, and meet certain experience requirements to qualify for a state license. Once licensed, CPAs are governed by a strict code of professional ethics.

CPAs' technical knowledge, training, and business experience enable them to help small business owners find solutions to their day-to-day problems. For example, CPAs provide accounting and financial services on an ongoing basis, review and make recommendations to improve internal accounting and administrative controls, help businesses secure loans, and prepare cash flow projections that show how the loans will be repaid. CPAs also provide advice to business owners on problems unique to the industries in which their businesses operate and help them make informed decisions, such as creating succession plans to effect a smooth transition to a new owner.

By providing accounting and auditing services, tax services, management consulting services, and financial planning services, CPAs help small businesses prosper and face their competition with confidence.

ACCOUNTING AND AUDITING SERVICES

CPAs can assist small business owners by providing the following services in connection with financial statements:

CONSULTING SERVICES

Depending on the needs of the small business owner, CPAs can provide consulting services in:

In addition, CPAs help small business owners monitor and reduce production costs, control inventory, and develop marketing and pricing strategies. They also provide financial analyses, including evaluation of economic projections and long-range planning objectives.

TAX SERVICES

Ever since the first federal law on income taxes was passed in 1913, CPAs have been extensively involved in tax matters. CPAs keep abreast of changes in the increasingly complex tax system and can provide expert tax advice. CPAs help small business owners with tax compliance, keep them aware of tax law changes, and help them choose among the available options and provisions. They prepare business income tax returns, as well as sales, payroll, and franchise tax returns. CPAs also represent their small business clients before the IRS, if necessary.

Since most business decisions have tax ramifications, CPAs play an equally important role as tax planners. In this capacity, CPAs advise small business owners on the tax implications of proposed transactions and provide assistance in overall planning. CPAs help small business owners understand how transfers of ownership, changes in inventory procedures, acquisitions and mergers, and other transactions can affect their taxes. They also can answer day-to-day questions about depreciation, contributions, installment sales, and other specific tax problems.

CPAs provide advice on the tax effects of various types of business organizations, including sole proprietorships, partnerships, corporations, and limited-liability companies.

PERSONAL FINANCIAL PLANNING

As personal financial planning advisors, CPAs help small business owners make the right financial planning decisions by analyzing their overall financial and tax situations; helping them devise estate plans and plans for retirement; and assisting them in risk management, insurance planning, and developing an investment philosophy, among other things.

ADDING VALUE TO THE SMALL BUSINESS

CPAs make small businesses their business. They approach each set of business, tax, and financial problems with objectivity. They work with small business owners to find solutions to these problems and to ensure that companies are meeting their objectives. CPAs are prepared to help the client recognize and deal with a variety of business situations.

Whether small businesses are just getting off the ground or have been established for some time, CPAs can help put and keep them on the track to profitability.

Prepared by:
American Institute of Certified Public Accountants
Harborside Financial Center
201 Plaza Three, Jersey City, NJ 07311-3881

The information in this brochure is for general purposes and is not intended as specific advice for any individual business. In addition, late-breaking tax developments may alter certain tax-planning strategies. Before acting on any advice, consult a CPA.