With great growth comes great responsibility, and as your business becomes more successful, more lucrative, and more complex, you’ll have more work to do come tax time. If you’re one of the lucky entrepreneurs who saw their business grow in 2010, it may be time to enlist the services of a Certified Public Accountant (CPA).
Cost vs. Benefits
Many small business owners, especially those just starting out, might be put off by the seemingly high cost of a CPA—$100 to $400 per hour, on average (costhelper.com has an overview of how much you can expect to pay for professional tax prep). But that price won’t seem so steep when you consider all the money a CPA can save you. “The amount that CPAs usually save you [on your taxes] pays for their fees,” says Anne Maxfield, founder of organic cooking site The Accidental Locavore.
The exact price of having a CPA do your taxes will naturally depend on how complicated your return is. If you fall on the more complex side of things, with a number of full time employees, contractors, and investors, the cost of using a CPA will typically be no more—and may even be less—than the cost of filing your return through a retail service. That’s because storefront tax preparers often charge by the form and not the hour. Plus, you’ll get the added peace of mind of knowing that a licensed CPA completed your taxes.
If you still aren’t convinced the benefits of using a CPA justify the costs, bear in mind that there are CPAs who will work with you to make sure you get the best deal. Maxfield’s CPA, Gary Topche, will often give a discount to young companies that don’t have a lot of capital. He also makes a point of training entrepreneurs in things like basic bookkeeping so that they won’t have to pay him—or anyone else—to handle it. “I don’t charge entrepreneurs for things they could do themselves,” he says. “It’s a way to keep the fees down.”
|Note: This article is Part Three of a three-part series on tax filing options for small businesses. Part One, which focused on tax prep software, can be found here. Part Two focuses on retail (storefront) tax preparation sites and is posted here.|
A Special Relationship
Of course, a CPA does much more than just file your taxes. The advice of a good accountant is invaluable year-round. “Taxes are just part of the service [a CPA provides],” Maxfield says. “The things they do to keep you functioning are more important. It’s like having a good doctor.”
Topche illustrates the relationship between a CPA and an entrepreneur—and all its potential benefits—with a story about one of his former clients, a family-owned travel agency he began working with in 1985. “The father, who ran the business, was a good salesman, but not a businessman. He had a comptroller stealing from him.”
After the comptroller was fired, Topche began mentoring the founder of the company and his daughter, answering all their financial questions. Sixteen years into the relationship, when the family sold the travel agency for $56 million, they likely had very few complaints about Topche’s fee.
Maxfield has been working with Topche for 15 years. “He’s been a great sounding board,” she says, “full of levelheaded advice.” He echoes her sentiment: “The real value in our relationship is that I can be that objective, independent sounding board. Whenever a client has something important going on in their business, I’m the person they talk to.”
But Maxfield also knows the dangers of working without a CPA. She speaks fleetingly about a time early in her entrepreneurial career when she ran afoul of her state’s labor board—an incident she might have avoided had she consulted with a professional when setting up her company. Says Topche: “Businesses often bring in a CPA after they’ve gotten into trouble when, if they’d brought one in earlier, they might never have gotten into trouble.”
Finding a CPA isn’t difficult; finding the best CPA for your business can be. “Not all CPAs are the same,” says Topche. “People who have a CPA license don’t necessarily have the real life experience. There are Fords and Mercedes out there.”
So how do you get yourself behind the wheel of the model that best fits your business? Web sites like CPAdirectory and the home page of The American Institute of CPAs are excellent places to start, but you don’t have to go too far afield to begin your search. Both Maxfield and Topche recommend relying on referrals. “Referrals are critical,” says Maxfield. “Talk to people in similar businesses and similar states in their entrepreneurship. Interview people and see who you’re comfortable with.”
Maxfield’s point about finding a CPA with whom you’re comfortable is an important one. As your business grows, the art of maintaining it for the long haul will become imperative. A CPA, one who knows your business well, can assist you in everything from dealing with the IRS to strategies to help you prepare for retirement or for the sale of your business. Still, this person will have an intimate knowledge of your company’s financials, so you’ll want to be selective and find someone with whom you feel an innate trust.
Which CPA is best equipped to help you out is something only you can know. The important thing is to recognize the point at which your business becomes too complex for you to manage without the help of a professional—both for filing your taxes and for all the day-to-day advice you’ll need if your business hopes to achieve great growth.