Small businesses in Canada often need help with accounting functions that are time-consuming and confusing. As a small business owner, it’s essential to ask yourself, “Does my small business need a CPA, or are there other options available?” While it isn’t necessary to hire a full-time CPA to conduct accounting tasks, it is worthwhile exploring all your accounting options. Here we look at four accounting solutions to help you decide which one is best for you and your business.
A CPA, or Chartered Professional Accountant, is a licensed professional who is invaluable when your business is starting up. However, instead of hiring a CPA full-time, you can consult with a CPA for tax advice and planning, guidance on the best business structure to save you money, and to help you develop a bookkeeping and accounting method to keep on top of your finances.
If you have been in business for a while, you can also consider hiring a CPA if:
- Your business is growing exponentially, and you can’t keep up
- You need someone full-time to manage your finances and provide advice that will maximize your profits
- You need help planning out your business structure
- You feel you are making mistakes or overpaying on taxes and need a tax planning strategy
- You don’t understand the implications of basic tax laws and are worried about compliance
- Your payroll has become too complicated to manage
- You keep encountering issues with tax filings and payroll, such as audits, penalties, fines, etc.
Bookkeepers keep on top of your financial transactions, ensuring your books accurately reflect how money flows in and out of your company. Their primary duties include maintaining your ledgers, entering data, keeping records of transactions, creating and paying invoices, paying your GST/HST, collecting and recording customer payments, and other duties you might assign to them.
While bookkeepers help get your finances in order and put a process in place that enables you to keep on top of your cash flow, they lack the insight you need to make smarter financial and business decisions.
You can consider hiring a bookkeeper if:
- Your accounts receivables and payables are a disaster
- You can’t keep your books up to date
- You need to get organized with a basic accounting system
- Your financial records are unclear or non-existent
- You are experiencing increased sales, yet profits remain the same, or worse, are decreasing
- You have an unpredictable cash flow
- You are wasting time on the books, so you can’t grow your business or manage your team
- Money seems to be missing or is unaccounted for
A fractional CFO provides strategic financial oversight to avoid financial barriers and implement effective systems that help you raise capital, optimize performance, and create economic efficiencies. They work on a part-time or project basis and can assess your existing financial systems and processes to recommend improvements. They also provide clarity, helping create business goals and ensuring you have a realistic plan to achieve them.
They provide leadership to accounting teams and other managers, implementing processes to improve management effectiveness. This is a high-level, situational role suited to the following scenarios:
- You need to overcome a specific financial challenge, such as cutting costs, navigating an audit, or implementing new financial systems
- You lack forward-looking financial visibility to maintain a sustainable, efficient business and envision growth-building change
- You need new financial systems to support longer-term plans
- You require forensic accounting to track the causes of issues related to cash flow, cost overruns, revenue leaks, etc.
- You want to assess your accounting needs and have expert input to define the right financial roles for your business
- You are at a point where you need a partner to help provide clarity on business decisions
You might also have specific scenarios for your business, from assessing contracts to advising on possible expansion to new locations. Seeking a consultation with a fractional CFO is usually free, allowing you to discuss your needs and learn how they can help.
A CPA-led bookkeeping service provides the best of both worlds. You have your books managed by a bookkeeper while also gaining expert financial insights from a CPA. As a result, the bookkeeping is far more detailed and effective, with meaningful financial reports essential for making informed business decisions. You avoid paying a high salary for a full-time CPA, and instead, the CPA function is offered on an as-needed basis, providing oversight and guidance to improve the effectiveness of your bookkeeping.
Your financials become accurate while reporting helps you become more forward-thinking to experience growth. You maintain financial health, leverage tax savings, and spot opportunities to facilitate growth.
You should hire a CPA-led bookkeeper if:
- The volume of your CPA function is limited to monthly or even weekly input
- You are perfectly fine using a cash basis accounting method
- Your financial reporting is only required to help keep on top of cash flow
- You could use a little help now and then to make wiser business decisions, such as knowing when to expand your team, creating a logical business structure, or having a tax planning strategy to reduce your tax burden
- You’d like a more comprehensive view of your financial state
- You worry about complicated tax law, audits, legal issues, etc., related to your bookkeeping, payroll, and tax filing processes
Does My Small Business Need A CPA?
Knowing you have options for your accounting needs helps you make the right decisions for your small business. The main consideration is that the accounting functions that are standard and necessary in a larger corporation differ from what a small business typically is concerned with. Therefore, there isn’t a one-size-fits-all accounting solution for every business, including the need to hire a full-time CPA.
In conclusion, the best-case scenario for many small businesses is to work with a CPA-led bookkeeper for your day-to-day accounting needs. As your business grows, you can consider hiring a CPA or working with a fractional CFO to guide you through specific financially-driven decisions and challenges.