Your CPA can (and should) make you money by giving you more than just tax compliance services.
You should work with a CPA who is also your business adviser and can help you evaluate the financial and tax implications of your business decisions. If you have an ongoing, proactive and strategic relationship with this type of CPA, the relationship will be extremely profitable for you.
So what does a relationship like that look like? This CPA and business adviser will help you to:
Charge Higher Fees & Collect Them Faster
Recently, one of our clients – a criminal defense attorney – had a dilemma about the flat fee he was asked to quote to a prospective client. He was hesitant to charge the fee even though he felt it was appropriate for the proposed services because he felt the client wouldn’t value those services as much. After discussing the issue, we analyzed the requirements for the time and expertise of the project and identified that he would actually be doing his client a disservice to by not charging what he is worth.
Ultimately, the client would suffer by not gaining the sufficient time, attention and care required. After our session, the attorney felt confident to charge $10,000 more than he originally intended to, and both parties were satisfied with the results. By regularly meeting with your CPA during the year, it creates opportunities to evaluate the effects of your everyday business decisions before you make them.
Your CPA should also be involved in your budgeting process and cash flow projection. This type of forecasting will warn you about cash shortcomings in the near future and give you an opportunity to prepare for it before it occurs. Our clients that regularly update and examine their cash flow projection reports feel motivated to bill more and accelerate collections of outstanding invoices.
Spend Wisely Not long ago, a family law attorney presented us with a question of why her profits were lower than expected. She wasn’t sure where her money was going, so we looked at the financial statements. We then realized that although the chart of accounts were sufficient for tax preparation purposes, they were not detailed enough to provide useful information for management and analysis purposes.
In the process of fixing this issue, we segregated wage expenses between associates, paralegals and support staff and realized that she wasn’t earning enough profit from her staff. Due to the new clarity about the cause of her problem, she was able to correct it by both increasing billing rates and improving employee utilization.
Your CPA and business adviser helps you manage your finances proactively by examining the numbers regularly and analyzing and interpreting what those numbers mean. This gives you new clarity and insight that not only saves you money, but also helps you spend it productively.
Don’t Overpay the IRS
Last week, a new client presented us with his horror story about dropping off his documents at his previous CPA’s office then later picking them up without having the opportunity to talk with his CPA. He also complained about receiving a large, unexpected tax bill, in spite of paying quarterly estimates.
To help this client, we amended this client’s tax returns and found mistakes and missed opportunities that amounted to more than $20,000! This unexpected extra refund definitely came in handy, as he had a wedding to pay for this summer.
So does your CPA serve as your proactive and strategic tax planner or only your tax preparer? Did they offer to prepare a personalized tax plan for you and help implement it? When was the last time they called you and said, “Here is a new idea that will save you money!”?
Do you meet with them at least quarterly to have your current tax liabilities projected, or are you always surprised at tax time? Are you confident that your business’ tax treatment is still the most beneficial, or do you have a suspicion that you pay more tax than is legally required? Do you know your audit odds?
Meeting with your CPA monthly or quarterly gives you an opportunity to discuss the business side of your law firm with an ally who understands it and gives you clarity about what makes it tick so you don’t have to run it blindly. When you have a strategic relationship with your CPA, together you can discuss your unique situation and challenges. This will give you new insights into the causes of the problems and ultimately result in finding custom solutions.
If you want your CPA to make you money, find one who understands your business and wants to see it succeed!