When should I hire an Accountant (CPA)?

There is so much to cover here, it is tough to pick a place to start writing.  So, we are just going to roll with the flow, and see how we go. 

For starters, it is great that you are asking this question, it really is.  And to the point of my semi-sarcastic excerpt above, if you are asking this question, then you are probably close to the time to hire a Professional Accountant.  

I will start with a little anecdote; prior to starting Boost CPA, I held two leadership positions where I was the first in-house CPA at a couple of private companies.  And let me tell you, in both cases, external stakeholders (banks, investors, major vendors & customers, external auditors, etc.) made it clear that they thought the business needed an in-house CPA years ago…and that’s only from their external viewpoint!  And my experience in both companies mirrored this – my initial time at both was a mad rush of catch-up work lasting 8-12 months, navigating various urgent issues while trying to make general system and process improvements, and sometimes having to concede that it was “too late” to avoid certain pitfalls.  This is not at all to say that these companies were in awful shape or were bad companies in any way.  But all this time spent, and the issues uncovered or resolved, could have been prevented by having a CPA involved sooner.  Think preventative maintenance on your car/machinery/etc. Same concept.

Business Planning & Conceptualization:

CPAs can help turn your idea into a workable business plan ready for presentation to banks and investors, and to be ready to showcase it to the world.  And where we don’t have the expertise in-house for certain elements of your business plan, we can help you find those that do…think Logo/web design.  You don’t want your CPA building your website 😉

We have the resources to help you craft a solid business plan, and make sure that you have thought of everything.  This includes all the fun topics, such as business operations, resources needed, etc., as well as the “boring” topics, such as navigating regulatory obligations, government programs, etc.   We can also consider whether you could meet eligibility for various small business incentives, tax credits, etc. 

We can help make sure the financial model of your business works and has some variance analysis built in so that you are as prepared as possible for whatever comes your way.  Sometimes, it’s not a lack of business that hurts a business, but not being ready for success either!  (See our discussion on Managing Growth below.)

Finally, and this one is personal, but I love this stuff, I really do.  I love helping people take a business idea and help them make it a reality.  I have started a “crazy idea” business of my own before Boost CPA, and I navigated the entire process solo, and while it was tough, it was also extremely rewarding.  I still run it to this day as a passion project, and I wouldn’t have it any other way.

Business & Personal Tax Planning:

Here is the part everyone thinks of when they think “CPA”, and for good reason.  Have you considered your business structure, incorporated, sole proprietorship, or even a partnership?  Do you want to be able to raise money by selling a share of your business to others now or in the future?  Have you considered how to pay yourself from these structures? What personal tax considerations of yours would impact on the other questions above?  If you are incorporated, what should your year-end date be, and how would that impact your business’s seasonality?  How can you tax plan for yourself, from that year end date? 

Having a CPA involved from the start means considering these things right from the get-go.  There are pros and cons to all structures, and there is no one size fits all.  The most common answers I give in my profession are: “It depends”, and “what’s the question behind the question?”.  And not because I don’t want to give a direct answer, but because the right answer truly does depend on each unique situation. 

We will be doing a future blog post about classic question CPAs get of “Should I incorporate?”, as well as posts about how to pay yourself from your business, whether it is a Sole Proprietorship or a Corporation (CCPC, as they are called. A “Canadian Controlled Private Corporation”).  So sign up for our Newsletter to make sure you don’t miss when we post those.

Business operations, compliance, & analysis

So, now your business is up and running, or it already was before you first pondered whether you should hire a CPA or not.  Here are the ways that a CPA can help at this stage:

A CPA on your team will help make sure your financial records are ready for any audit from the CRA or provincial government and can navigate any compliance issues with them, leaving you to do what you do best.  There are many ways to get audited for compliance from government bodies. For example, they may review your payroll, GST/PST, or corporate taxes, or any SR&ED claims, government benefits, or government grants your company receives.  Our taxation system aims for taxpayer compliance via both targeted and random audits, so you don’t have to be doing something “wrong” to get an audit.  Sometimes, its just your turn. It’s no fun, but it’s the reality.  Having a CPA on your team will ensure you can sail through this process as painlessly as possible.  

Further, a CPA will conduct in-depth analysis of your business to help you make better decisions.  And this analysis can be used to create future orientated forecasting and growth planning (discussed in the section below).  Some things we consider as we look to dig into your business’s finances are: 

• • Which costs represent your company’s overhead, and which are directly related to revenue generation? We should track these separately, and should track by projects too.

• • What products/services contribute most to the company’s bottom line, and which ones the least? And how would changes here, impact the company?  (Sometimes the most volume or the highest ticket price items aren’t the money makers.) 

• • Which projects are contributing the most to your company overhead, and which are the least? And why? Is it pricing (revenue) related, or cost related? 

• • Which customers are good ones, which should you let go?  I.e., which customers have high margins for you, which one’s nickel and dime you over every invoice and suck up a lot of you/your team’s time, who pays on time and who is constantly late, etc.

• • Are you overpaying for various input costs? Or maybe eligible to not have to pay PST on some of your input costs? 

• • How is your approach to staffing affecting the business?  (Rapid turnover hurts companies, and low wages can sometimes only attract lower quality candidates, etc. Saving $ on lower wages, may hurt the company overall in terms of lower performance, dissatisfied customers, etc.) 

• • How are your competitors doing, and can we learn from them or other industry benchmarks? 

These are just some of the ways a CPA will dig into your accounting system and will use this information to help you make the best decisions possible.  Making good decisions in business is not a one-time thing – it is a series of smaller, ongoing decisions that make the best businesses for their owners.

Business Growth & Forecasting

CPAs can help navigate the challenges of growth.  “Challenges of growth?”, you are definitely asking?  Yes, very much so.  If poorly managed, some businesses can grow themselves to death, or at the very least, grow themselves until the burnout point of the owners and/or staff. Often, this burnout and “growth at all costs” mentality garners marginal or no additional net income overall, despite all the extra effort.  Many business owners can fall into this trap, where they work twice as hard, and effectively make the same net income at year end.  Why?  Because their margins decreased with all the extra work, and because they didn’t manage their growth well. Its the classic “juggling too many balls” scenario where things get missed, and those mistakes cost real money now, and your company’s reputation with clients (i.e. future business). 

Managing growth is also INCREDIBLY IMPORTANT if you plan to sell your business at some stage.  The value of a business that is either maintaining or improving their margins over time, is far greater than that of a company seeing decreasing or stagnating returns.  And if your company is growing revenue year over year, while also maintaining or improving margins…you are in fantastic shape.  

So let’s think about this:  say your business is making money, but you want to grow. Saying you want to double your sales is all well and good but take a look around you.  If you have the equivalent of 5 full-time staff working for you, you should be prepared to potentially hire 5 more.  

• • Do you have a hiring plan and work ready to go for new staff, and can you afford them until the extra sales (and the cash from them) start rolling in? 
  • Will you start to need a dedicated HR person, part time or not, to manage the hiring and training process? Because hiring, training, then managing staff takes someone’s time, and in the current employment market that time requirement is only going up.
  • Will growing like this, take you out of the niche that you fill in the overall market (going into unknown territory)?   Not to say moving and positioning your company as you grow is a bad thing, but it needs to be planned for.
  • Will you be able to maintain the quality of service/product as you grow, so that you don’t lose customers or start to earn a poor reputation?
  • Will your current location be good enough for them, your production/order fulfillment, or your head office? Or will you need to find more space to house them all?  
  • What about other equipment your company needs, such as delivery vehicles or fixed machinery?  
  • Do you have the capital to buy any equipment as per above, to facilitate your growth? And if not, do you have access to affordable loans, that make sense for the company (i.e. the cost of the debt doesn’t kill your margin)? 

As you can see, there is an awful lot to think about, and failure to think of these things is how companies can grow their way to a painful place.   This is not to say you shouldn’t want to grow your company, but in our experience, sometimes the growth seems to be just for the sake of growth itself, vs achieving some overall business goal.

Sale of your business, or acquisition of another

Somewhat related to the growth note, but also it’s own separate item.  Growing your overall business by acquiring others, involves complex business structure planning and solid due diligence processes to be successful.  CPAs can help with this. 

While we do not specifically hold Certified Business Valuator designations, valuing a business is part of our overall training, and our vast knowledge of business financial statements and general business acumen can be of incredible value when first considering a target to purchase or be involved with.  There is a ton of information that can be gleaned from their financial statements, how they are prepared and by whom, that can readily point to red flags early on in a deal. 

Likewise, when it comes time to sell your business, we can help make sure the company is in the best shape possible for satisfying any incoming due diligence requests, simply by way of being involved with you monthly so that we know the records are rock solid. We can help provide estimates for your business’ value, and link you in with specialists that focus just on business sales, to make sure that you get the best value for your company in price & terms.

Conclusion

Whew, you made it!  Thank you for reading, there was a lot to say here as the topic is such a large one, but also such an important one for business owners, and potential business owners to consider.  I wanted to try and touch on as much as possible, because there are truly so many ways that a CPA can bring value to a business at any stage of its conceptualization or its existence.  

So in short…if any of the above applies to you, and you don’t have a CPA working on your team yet, book a consultation with us to discuss your needs. We are now accepting client applications for our monthly service packages so reach out if any of this has resonated with you, and lets see if we are a fit for working together.