In the small business phase of a company’s growth, the typical structure for accounting is to have an in-house accountant or bookkeeper and then rely upon your local or outside CPA firm for year-end financial statements and, most importantly, preparing and filing your business’s taxes. But as a company grows, your financial and accounting needs will outpace the ability of your outside tax CPA. To truly scale and grow, you’ll need a financial and accounting pro who is not an outsider. Most importantly, you need that professional to think strategically, align accounting and finance with your overall business direction and help drive profitability.
The truth is simple:
Your Outside CPA is an outsider, primarily focused on your taxes.
Their “value” to you is saving money on taxes. Period.
What an outside tax CPA typically lacks is industry experience, having probably not worked for companies in your industry but instead has worked in public accounting and tax preparation. They lack asking KEY QUESTIONS and thinking both strategically and analytically.
And, the longer you WAIT to have a CFO or professional finance and accounting expert on your team, the longer your business will be held back from truly transformational growth.
Lastly, as much as you hire your Outside CPA to prepare your taxes and save you money, hiring a Strategic CFO to be part of your financial team is just as crucial. Probably even more so as tax rules are consistent while strategy and analytically looking at your specific business needs are not.
While a CPA is an expert in taxes and tax strategy, a CFO focuses more on the long-term strategy of your business. When you choose an Outsourced CFO versus an Outside CPA, your CFO’s first step is to obtain a deep view of your business goals and existing strategies. Then, the Outsourced CFO will look for the value-add places to improve your existing workflows, systems, and operations to accelerate your achievement of those objectives and to maximize your probability for sustainable success.
If you want to know you’re at the point in your business for a CFO vs. just relying upon your Tax CPA or Bookkeeper, ask yourself these questions:
- Did you hire your Bookkeeper or Outside Tax CPA) to think strategically about your business, analyze data and capture key business metrics?
- Did you hire your Bookkeeper or Outside Tax CPA to advise you, to help you improve your business, or did you hire him just to do your taxes (and perhaps an audit)?
- Does your Outside CPA help you with a Comprehensive Forecast for your business?
If you answered “NO” to any of the above, then your Bookkeeper or Outside Tax CPA is NOT a CFO for your business.
The Core Differences Between an Outside Tax CPA and a Strategic CFO:
Outside Tax CPAs and Bookkeepers focus on:
- Insure the books are are accurate.
- Prepares company taxes, reduces tax burden and understands tax law.
- Works mostly in the past — from historical data.
CFOs focus on:
- Financial strategy and growth, uses the past to focus on the future.
- Systematized, efficient, scalable operations
- Budgeting & Forecasting.
- A financial forecast goes down to the detail to determine where money should be spent, where money should be coming from, and when. This forecast will guide budgeting, fundraising, sales, marketing, purchasing, and operations.
- Measuring and improving profitability
- Overhead and Expense control
- Projecting & Managing Cash flow
- Financial Lending relationships
- Risk assessment
- Establishing policies and procedures
- Project management
- IT Enterprise Systems aligned with finance and accounting.
- Experts in long-range operational planning and making sure every arm of the company is performing sustainably at peak performance.
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