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Maximizing Your Investment

By Gail Kinsella

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We hear so much about maximizing our resources. And, for good reason. Perhaps you have a list of relationships you are reviewing to ensure satisfaction. Great idea, and don’t forget to put your CPA on the list. CPAs are much more than number crunchers or tax-return machines. They can help you when business growth is the objective and when you are ready to sell. 

Since every business deals with income-tax returns, let’s start with tax consequences. For example, your CPA can help you understand the tax implications of purchasing equipment. A CPA can also assist in identifying cash-flow impacts of a purchase or sale. After the deal is done, it is too late for these conversations. Be sure to work with your CPA in the planning stages.

No doubt your CPA is preparing income-tax filings for you. Perhaps, you have also engaged her to prepare or review payroll or sales tax returns. And maybe she handles your financial statements for those of you whose financing arrangements carry a reporting requirement. 

While timely filing of tax reports and completion of financial statements are the backbone of the client-CPA relationship, there should be so much more. After all, your CPA is a trusted adviser to you and your business and has a wealth of knowledge to share. I would challenge you to look at the role of your CPA much like that of your family doctor. We all know it is unwise to limit contact with your doctor to those moments when you already have sinusitis, poison ivy, or pneumonia. Annual check-ups and preventive medicine are key whether you are talking about your physician or CPA.

So what might you consider discussing with your CPA?

 

Financial and operational reporting systems 

Financial statements are important tools and it is wise to take steps to ensure your statements are useful from both internal and external reporting perspectives. Beyond the traditional balance sheet and income statement, your CPA can assist in determining the key business indicators that drive your business and define metrics to help you stay on the pulse of operations. A highly functioning computer system is just the tip of the iceberg. A system will only give you what you ask for, so spend some time with your CPA to determine what information will be useful in a snapshot format. Many organizations refer to this as a “dashboard,” which is just a concise framework to provide reporting of key performance indicators.

 

Cost of doing business 

Interestingly enough, many business owners do not have a clear understanding of the cost of doing business. CPAs are experts in financial analysis and can help you make sense of direct costs, indirect costs, overhead, break points, and profitability trends. Your CPA can evaluate existing cost structures and identify products that carry higher margins and potentially greater profitability or products from which there is no positive contribution to the bottom line.

 

Compensation structures 

Sale of products or services inevitably includes the use of salespeople. Compensation structures may involve a combination of base pay, commission, and bonus. In addition, a clear understanding of employee/subcontractor relationships is critical. Your CPA can help you and your team understand the ramifications of various compensation models so that everyone benefits.

 

Succession planning 

All, and I do mean all, businesses should have a succession plan in place. One can never predict when opportunity or tragedy will present itself. The best way to prepare for either eventuality and ensure smooth operations in the present is to document systems and procedures, and to establish formal buyout/continuation plans. This combination ensures that both the buyer and seller understand what the transaction includes and how the company will continue to operate (which often affects cash flow to the exiting party).

Your CPA should be your sounding board, your business partner, and your trusted adviser. Not just at tax time. Of course, there are costs associated with consultation, but far less than the cost of cleaning up the mess that can result from misinformed decisions. Contact your CPA today to ensure you are taking advantage of all your CPA can offer.       

 

Gail Kinsella is a partner in the accounting firm of Testone, Marshall & Discenza, LLP. Contact Kinsella at gkinsella@tmdcpas.com

 

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