Is It Time to Hire a CPA?

When to hire a CPA

If you can afford it, hiring a CPA is likely your best option under any circumstances. Trying to educate yourself on changing tax laws, understanding the various deductions you qualify for and staying current with filings can distract you from what’s most important: running your business.

“As soon as you start your business, you should hire a CPA,” Spencer Carroll, a CPA and adjunct professor of accounting at Palm Beach Atlantic University, told us. “Business owners all know that time is money. Hiring a CPA to manage a company’s taxes allows employees to focus on other key areas of the business and its goals.”

While hiring a CPA right off the bat might not always be feasible for every business, it’s extremely advisable if your circumstances include: 

• You don’t have a dedicated in-house accounting and finance team.
• You’re behind on your taxes.
• You think you’re at risk of being audited and want to avoid a tax audit.
• You’re seeking outside funding or contemplating a merger and need audited financial statements.
• You suspect an employee or partner of committing accounting fraud.

What to consider when deciding whether to hire a CPA

Consider the following factors before hiring a CPA or deciding to go it alone: 

• Your business’s current financial picture: Can you generate accurate and complete financial statements and records, including balance sheets and profit and loss statements, on your own? Even if you can, consider the time it takes to run all your required financial reports and how you could better spend that time if a CPA was doing it for you.
• Your understanding of personal vs. company income: Do you know your personal income as well as your business’s income? Taxes can be complex for small business owners and accurately delineating your personal income is crucial for legal compliance.
• Your business’s accounting cycle and what it entails: Do you thoroughly understand the accounting cycle and the steps involved in ensuring proper financial oversight of your business’s financial well-being? Are you confident in your ability to manage your company’s accounting periods?
• Your business’s legal structure and unique tax considerations: What is your business’s legal structure? Sole proprietorships, C corporations, S corporations and partnerships are taxed differently and a misunderstanding could lead to legal consequences.
• The complexity of your business’s revenue sources: The more complex your revenue sources, venues (interstate or international vs. local) and industry, the more you’ll need a CPA to untangle it all.
• Your knowledge of tax laws and regulations: Tax laws and regulations change constantly. Even if you have the time to stay on top of changing requirements, their inherent complexities may make them difficult to understand correctly. A CPA can help you determine the tax deductions you do (or don’t) qualify for and the specific tax rules your business must meet as requirements evolve.
• Your business’s unique financial complexities: Does your business have complex inventory or accounts receivable processes? A CPA can align your company’s specific situation with optimal tax filings for legal compliance and strong financial health.

“CPAs can enhance a company’s financial strategy and optimize their tax strategy to reduce their tax bill, all while increasing the accuracy of their tax returns,” Carroll said. “Companies that try to organize their taxes on their own are more likely to run into errors.”

John Kinskey, CEO and president of AccessDirect, is a business owner who found significant benefits from retaining a CPA.

“I use a CPA to do my taxes and wouldn’t consider doing it on my own. [Eliminating the headaches] of trying to keep up with all the shifting changes in tax laws — and just the sheer amount of detail required to file state and federal tax returns — is well worth paying a professional,” he said.

Pros and cons of hiring a CPA

CPAs can be a game changer for businesses that want to manage their company finances and tax responsibilities more effectively. However, while CPAs offer expertise and valuable insights, they also come with costs and other potential drawbacks. 

Weigh the following advantages and disadvantages before deciding whether to hire a CPA.

Pros of hiring a CPA

• CPAs make fewer errors: CPAs are accounting professionals. It’s their job to know and stay current on all laws, rules and regulations relating to accounting and taxes. Their knowledge helps ensure your company won’t fall victim to critical accounting mistakes that could come back to haunt you.
• CPAs may be able to save you money: CPAs can help minimize your tax bill by taking advantage of all potential deductions and credits you can claim and advising you on tax planning and strategic financial decisions.
• CPAs can save you time: According to the IRS, it takes about eight to 13 hours to complete an individual tax return, while business returns can take as long as 24 hours on average. Freeing up this time (and removing the accompanying frustration) by relying on a CPA to complete your returns allows business owners to focus on their core business competencies instead.
• CPAs are adept at dealing with the IRS: If you’re audited or owe back taxes to the IRS, your CPA can help resolve the issue in your favor. Their knowledge and participation can minimize penalties, lower assessed taxes and give you more time to pay what you owe.

Cons of hiring a CPA

• CPAs can be expensive: CPAs have more education than regular accountants and undergo a rigorous certification process, so they cost more than a standard tax preparer or bookkeeper. On average, a small business may pay between $1,000 and $1,500 to use a CPA’s services. When margins are tight, this expense may be out of reach.
• CPAs have busy schedules: The months before tax day, April 15, are the busiest time of year for CPAs, followed by the months before the end of the year. Their attention will be split between your business and other clients, including some with more pressing needs. You may have to wait to get your questions answered and your tax return could take longer to complete.
• CPAs may be hard to find: There are a limited number of CPAs to go around, so you may have a hard time finding one — especially if you’ve waited until the last minute.
• You must still handle day-to-day accounting: CPAs are the “big guns” of the accounting industry and usually don’t handle daily accounting tasks. You’ll likely still need to hire a bookkeeper for standard accounting tasks (though some CPAs also offer bookkeeping as an add-on service).

Amanda Hoffman and Jennifer Dublino contributed to this article. Some source interviews were conducted for a previous version of this article.