Taxes tend to be the first thought when business leaders think of a CPA. But when business leaders share more information more often with their CPA, especially as they consider strategic decisions, a CPA can do much more than prepare and file a company’s taxes.
“A good CPA has a broad depth of knowledge in a number of different areas,” says Jim Suttie, Director, Corrigan Krause. “We see a lot of different things that can help us help business leaders make the best decisions for their companies. And every decision has tax implications.”
Smart Business spoke with Suttie about how sharing more financial reporting with a CPA can help a business leader make better strategic decisions.
Why should business leaders involve their CPA in strategic decision making?
It can be a challenge when a business leader has already made a move then wonders how it will impact their tax situation. It’s much more beneficial to get information on the front end before those decisions are made. Involving a CPA early, as opposed to after the fact, can mitigate tough tax situations well before they’re imminent.
A CPA can, based on seeing as much financial information as possible, understand the financial impact and tax implications of company decisions. Aside from the basic financial reports such as the balance sheet, income statement and cash flows, business leaders should also share industry-specific financial data with their CPAs. For example, with contractors, it can be impactful to share contract schedules, bid documents, contract agreements, surety policies, bonding requirements, labor and payroll data, and backlog information. Manufacturing businesses could share inventory runs, data on production volume, and machine uptime and downtime. And more than strictly financial information can be helpful. Information such as reports that cover materials, usage, property and equipment schedules, etc. can give these financial professionals a wider scope of a company’s position.
CPAs would prefer to get out in front of issues. To do that, they need to dig in and understand all aspects of the business so they can best advise the business leaders on the financial impacts of potential moves.
How often should business leaders share information with their CPA?
Once a decision is made, it can be much more difficult to uncouple it from the tax consequences. Instead, if a business leader can talk with their CPA about what they’re thinking about doing, their CPA can offer the best way to approach the decision from a tax perspective.
To that end, it’s a good idea to share financial reports and information on a quarterly basis, especially if that aligns with an organization’s quarterly strategy meetings. This also helps break the assumed cadence of having once-a-year conversations with their CPA. Annual meetings relegate your CPA as a financial historian. Meeting at least quarterly transforms the relationship into that of a proactive business adviser.
There are also events that could trigger a conversation with a CPA, such as a business acquisition. Before a company sets out to buy a business, a business leader should talk with their CPA, bring them in on the due diligence process, consult with them on which reports to get and have them perform the financial analysis.
Who else should be included in this process?
It’s critical for business leaders to keep their CPA informed and involved when making key strategic business and financial decisions. But it’s just as important that the CPA understands all aspects of the business so that everyone can be better informed regarding key decisions to maximize success and growth. It’s also a good idea to have all the company’s professional advisers — bankers, attorneys, bonding agents — looped in and moving in the same direction. Each has a unique area of expertise and all can offer important input on potential strategic decisions. If a company’s CPA only knows part of the story, it’s significantly more difficult to provide the best proactive advice to help uncover risks and opportunities. ●
INSIGHTS Accounting is brought to you by Corrigan Krause.
