Running a small business is far from simple–between the volume of transactions that need sorting, the tax rules and regulations that seem never-ending, and then trying to grow your business profitably–the complexity adds up by the minute.
When it comes to your finances, it’s a good idea to hire professional help as soon as that “open” sign is hung on your business door (figuratively or literally).
However, you might not need someone with a CPA designation right away. The accounting industry has a few different types of professionals that can help you with your small business finances. Once you understand who does what, you can make the right choice for you—right now.
We’ll dive into all of those different options and more, so keep reading!
What Is a CPA?
A certified public accountant (CPA) is a licensed professional who took very specific accounting courses in college, passed a four-part exam and worked under the supervision of an active licensed CPA for 1-2 years. They can work in a variety of accounting fields, including:
- Tax preparation and planning
- Audit and assurance
- Forensic accounting
- Financial statement preparation
Is Every Accountant a CPA?
Short answer: no, a CPA is an accountant but not every accountant is a CPA (fun riddle, right?). CPAs have to take specific courses and pass an exam to get the professional designation, while accountants don’t.
Accountants, however, have to take accounting courses but don’t get any specific licenses or credentials. Non-credentialed accountants also do the above work (except for signing off on an audit).
Since there’s no designation or specific work requirement for accountants, entrepreneurs often hire a CPA out of familiarity with the letters.
Does My Small Business Need a CPA?
Yes, your small business should hire a CPA or other accounting professional who performs bookkeeping, tax preparation, and tax planning—or piece together a team that can do that. Either way, you need to have these areas covered by professionals. Here are the top three reasons why:
- Less stress: Small business accounting can get complicated–the number one benefit that most owners will scream from the rooftops? Less stress. Financial statements and tax preparation are some of the key pieces to running a successful business and those also tend to be the areas that most small business owners hate. So often tax returns are often filed late or last minute because the business owner didn’t take time to prepare their financials and then have to remember a year's worth of data quickly, while still running a business and living a busy life. A CPA or other accounting professional can step in and help with tax filing and financial planning.
- Stay compliant: Accounting professionals are there to help keep you compliant with the variety of taxes that exist (sales taxes, payroll taxes, estimated taxes, personal property taxes, and federal and state income taxes), which gives your business the best chance of avoiding penalties. The last thing you want is to be in violation of tax laws. CPAs can also help you save on your taxes and support you if the taxing authorities ever come knocking on your door. These professionals remind you to keep receipts, what is and isn’t a tax deduction, and keep your data organized.
- Faster growth and higher profit: A CPA or CFO can help you break through financial plateaus because of their vast experience and knowledge in growing businesses. These professionals can help you determine the best time to add employees, when to leverage debt for growth, and help prepare you for future investors. They can also help you minimize expenses and see where pricing may be too low and where efficiency could help raise profits.
- Access to expertise: You’ll have a financial expert there to answer all your questions and point you in the direction of accounting software that could be beneficial for running your startup (like Hourly.io to help with payroll and workers’ compensation).
Other Types of Accounting Professionals that Can Help Small Businesses
So, you know you need someone to help your small business with finances –but is a CPA the only type of professional you can hire? Or are there other people that offer accounting services too? In short, yes, there are other accounting professionals that can definitely support you. Here are the main ones:
An accountant is someone who has taken accounting courses, understands the language of accounting (or taxes) and has performed work in the accounting industry. They have no specific testing, licenses, credentials or requirements.
When you think of your big accounting departments, they are most often staffed by accountants who specialize in different subcategories of accounting (accounts payable, accounts receivable, bank reconciliations, tax, etc.).
Tax Professional with an Enrolled Agent Certification
There is one other designation that is important to be aware of (and that I think gets overlooked far too often) and that is a tax professional with the Enrolled Agent certification, otherwise known as an EA.
EAs specialize in tax preparation and tax planning and have passed a three-part examination administered by the IRS. They have the same rights to represent you in front of the IRS and tax courts as a CPA does.
Their fees are often similar to a CPA when comparing career experience, knowledge and tax services. You will want to make sure they have a good understanding of business accounting and how it plays into tax preparation.
Finally, bookkeepers are the lifeblood of any business, but are often hired when the business is experiencing more consistent revenue. There are certifications your bookkeeper may have (not required though!).
You’ll want to look for someone who understands accounting basics AND the software you are using. If they have a good working relationship with your tax professional, that’s even better.
These are the professionals who will help track receipts, send invoices, pay bills, and make sure your financial reporting is up-to-date and accurate for your tax accountant!
What Order do I Hire Finance People In?
So you know you’re ready to hire someone. Where do you start? Here are all the steps for who you should hire—and when:
- Step 1: Hire a CPA: First, hire a CPA or EA who can advise, tax plan, respond to IRS and state notices, prepare taxes and make sure you are compliant. This is the bare minimum for any business.
- Step 2: Hire a bookkeeper: Your current accounting professional may offer bookkeeping services, so ask them about this during the consultation. It will let you know if you can grow with this accounting firm or if you will need to piece together a team. Bookkeeping is often a recurring monthly fee, so you will want to budget accordingly. A bookkeeper will help you stay organized on a monthly or quarterly basis, provide financial statements, and close out your books for tax time. This hire is initially a contractor role.
- Step 3: Hire an accountant with a CFO mindset: These individuals are often called fractional CFOs and team up with you (the CEO) to cover all the financial aspects of your growing and scaling business. Their specialty is often in cash flow forecasts, budgets, strategic planning, pricing, obtaining financing, complex tax planning and investor presentations.
What Questions Should I Ask My CPA?
When looking to hire a tax professional, it is best to set up a meeting or free consultation to ask about their services. You also want to make sure that they are someone you trust, can work with, and they know small business taxes and your industry inside and out. This, ideally, is someone you will have a long working relationship with (since taxes are filed every year without fail).
Here are some of my favorite questions to ask (and be asked!):
- Do you offer check-ins throughout the year?
- Have you worked with businesses in my industry before?
- What way do you communicate with your clients? Phone, emails, online portals?
- Do you offer any type of audit protection or help?
- Do you offer bookkeeping services? If so–on which software?
- Do you offer tax planning services?
Frequently Asked Questions
Is an accountant worth it for a small business?
Without a doubt. Unless you have the specific training of an accountant, you need someone in your corner helping to manage all the moving financial pieces of your business.
Do I need a CPA if I use QuickBooks?
If you use QuickBooks, you don't need a CPA per se, but you do need a professional who is well-versed in the software. Quickbooks is not an intuitive software and even those who are professionals can make mistakes! You will want a separate set of eyes on your bookkeeping and business!
Can I be my own accountant for my small business?
If you have the training and know-how—yes! But keep in mind that unless this is something you do day in and day out—you are losing efficiency and time by doing it yourself. And you may be overwhelmed trying to keep up with the constantly changing rules if you are only doing it for your business. Best to hire someone!
Time to Go Hire
Once you identify the services you need (taxes, bookkeeping, forecasting), you can set up some appointments with financial professionals.
The end of the calendar year is a great time to get on someone’s client list. This will allow you to feel prepared for tax season and set you up for success in the ever-changing, complex world of business finances.
Remember–hiring a CPA for your small business will pay dividends in time saved and reduced stress!
1. Introducing Yourself
Your introductory email needs to pack a lot of information into a small package. Try something like this:
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My name is John Doe and I work for ABC Agency, where we provide business insurance policies to many of Dallas' rockstar small businesses.
Congratulations on your new business, Jane's Bakery. Are you wondering if you have all the insurance you need? Or if your policies will really cover you in a pinch?
At ABC Agency, we pride ourselves on providing robust, comprehensive coverage options to companies like yours with flexible, pay-as-you-go plans.
Are you available this week to talk more about how we can help? I can help you find the most affordable rates and the best policies out there.
I look forward to speaking with you soon.
2. Presenting a Quote
Once you've met with your potential client, a quick reply with their quote will get the ball rolling.
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Thanks so much for meeting with me this morning. I loved touring Jane's Bakery–I can still smell those delicious chocolate chip cookies baking! You have a great location, and I'm sure you're going to do great on Front St.
After reviewing my notes, I've pulled together an insurance quote for you (attached). I recommend a business owner's policy. A BOP includes several insurance products in one: liability, property insurance, and business interruption insurance. It offers robust coverage at a competitive price.
I'll call you in a few days to see what you think about this insurance plan. In the meantime, if you have any questions, don't hesitate to email me or call me at [phone number].
Again, thank you for your time today. I look forward to working with you in the future.
3. Thanks for Purchasing a Policy
Gratitude is important! It's never a bad idea to thank your clients for their business.
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Thank you for choosing a business owner's policy with ABC Agency. We know it's so important to get the right coverage for your business, and we are honoured you've placed your trust in us.
We're excited to work closely with you, and our no. 1 goal is to make sure you're business is always protected.
Do you have any questions? We are here to help. Reach out whenever something comes to mind.
Thank you again for choosing ABC Agency to insure Jane's Bakery.
4. Welcome Email
A welcome email helps clients feel like you're there to help–and can softly pitch other insurance products you offer.
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Welcome to the ABC family! We are thrilled to have you as a new customer and can't wait to meet all of your insurance needs.
As an independent insurance agency, we work with multiple insurance providers to find the best coverage options for all our customers. If you need any other type of insurance–like [include additional offerings unique to your agency, like life insurance, health insurance, home insurance or anything else]–we can help you too.
Do you want to discuss any of these policies?
5. Introducing a New Product
A happy client may want to expand their business with you.
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I hope all is well with you and Jane's Bakery. I stopped in yesterday for a blueberry muffin and coffee, and they were delicious. I loved the hint of cinnamon in the muffin! Was that your idea?
I wanted you to be the first to know we are now offering commercial vehicle insurance to our policyholders. Auto insurance for your catering vans is super important since your personal car insurance won't cover them.
We're offering this insurance coverage solely to our current business clients at the moment and have some very competitive rates.
Would you like me to work up a quote for you?
As always, thanks so much for being a part of the ABC family.
6. Asking For Referrals
Once your relationship is established and comfortable, let your clients help you grow.
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You've been a valuable member of the ABC family for two years now, and we so appreciate your business–not to mention the muffins you supply for our monthly meetings!
Because you are a valued policyholder, I wanted to ask a quick favour. I know you are active in the local Chamber of Commerce, and I'm hoping you might know some colleagues who would benefit from working with our insurance company.
Referrals are one of the most effective ways to connect with our community since people really trust their friends, family and colleagues. Is there anyone you'd recommend I speak with?
Remember that in addition to business insurance products, we offer everything from life insurance policies to pet insurance.
As a thank you for your help, we will send you an Amazon gift card of $100 when your referrals buy insurance from us.
Thanks so much for your help!
7. Policy Renewal
If your client needs to renew their policy with you, send an email like this:
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I hope you're doing well! What a year it's been—from being listed as one of the top 5 bakeries in Dallas to being an official vendor for the city—you have so much to be proud of.
Just a heads up that your business owner's policy is up for renewal soon and will expire on June 15, 2023.
If you're still happy with the coverage, we can easily renew it for you.
Do you have some time to chat this week?
Looking forward to serving you again!