As your business enters different stages of growth, you may be wondering whether you should hire a CPA or a CFO, and what the difference is. While the two can play similar roles and complement each other well, they actually do different things for your business.
What’s the difference between a CPA and a CFO?
If your business works with both, the two should collaborate and work hand-in-hand. The CPA will provide tax planning insight and financial advice that will guide decisions that relate to the goals and objectives of the company. A CPA can provide valuable insight with a strategic, yet outside point-of-view when it comes to taxes and long-term financial goals of the business. when it comes down to it, the two roles are different, yet they complement each other.
What is a CFO?
A CFO is responsible for managing all financial aspects of the business. They should have a solid understanding of corporate finance and how to assess financial risk, manage budgets, and develop fiscal performance standards. In addition, the CFO will advise the executive board on how to best align their financial strategies to meet corporate goals.
CFO responsibilities may include:
- Guiding the company through mergers, acquisitions, and general business operation changes
- Overseeing expansion opportunities to new markets
- Ensuring sound financial practices in the decision-making processes
- Managing assets and financial relationships with stakeholders
- Streamlining daily operations
- Assessing and managing financial risks and threats
- Planning for short and long term financial goals
- Offering sound advice for investing corporate assets
- Forecasting trends in the market and knowing how the company can best capitalize on them
Do CPAs do more than taxes?
Tax planning may be the first thing that comes to mind when you think about hiring a CPA, but a solid accountant can certainly play a much bigger role in your business.
CPA responsibilities may include:
- Setting up your business – A CPA can help select the correct legal structure (sole proprietorship, C-corp, LLC, partnership, or S-corp)
- Offer sound advice through business growth and downturns – A CPA can review your finances from the outside, evaluate risk, and help you make the right long term decisions
- Financial checkups – By meeting with your CPA on a quarterly basis, you can review sales data, profit margins, cash flow, inventory, and payroll to determine if you need to make any budgetary adjustments
- Advice on loan applications – Your CPA will take into account cash flow, potential risks, fines, and the overall effect the loan will have on business taxes
- Payroll services – A CPA with experience in payroll services can handle direct deposits, as well as monthly and quarterly payroll taxes through W-2’s
- QuickBooks Experts – A QuickBooks expert can take care of the initial setup of the QuickBooks company file, training, payroll setup, inventory management, job costing and training on how to interpret reports
- IRS experience – CPAs have experience dealing with the IRS and can help you respond appropriately, supply the information the IRS is requesting, and resolve the issue as quickly as possible
- Understand which tax deductions you qualify for – You want to take as many deductions as you qualify for, but you don’t want to make questionable deductions that may trigger an IRS audit
- Understand tax changes – When the tax laws change, like they did in 2018, a CPA can help you understand how and if the changes will affect your business.
Is one better suited to your business than the other?
Although a CFO and CPA play different roles, they certainly complement one another. A CFO is going to be on-site full time, while a CPA is more flexible because you only pay for what you need without having to factor in salary, benefits, etc.
While a CFO can advise on major changes to your business, including physical or operational changes, buying or merging a business, selling or closing your business, or bringing on or dissolving business partners, you should always consult a CPA first, as they can inform you about the tax implications.
When it comes to buying and selling, a CPA can help you analyze the financial records, verify the assets and assist with certain forms and paperwork. A CPA can also help determine fair market value for a business and prepare financial reports and statements. When buying and selling, the other party will expect accurate accounting records and valuation.
While it can be easy to determine when you need to bring in someone to take on more of a financial role within your organization, it can be hard to determine what kind of help you need. If you’re still not sure, give us a call and we can talk about your business goals and help you determine which role is better suited for your organization.