Acronyms are common in all areas of our life and especially in education and business. However, it can be difficult to remember what different professional designations stand for. And it's not uncommon to know the acronym, yet still not know what the letters stand for. If you've heard of CPAs or a CPA firm, but you don't know what it means, you're not alone.
When people are taking a closer look at their finances or thinking about hiring a tax professional they'll have a few questions, like "What's a CPA?" or "What is a CPA Firm?" Accounting can be a complicated arena for the uninitiated.
What's a CPA?
To find out what a CPA is, you need to take a look at careers in finance. A CPA is an accounting professional, and for anyone interested in becoming a CPA, the first step is to earn an accounting degree. Those wanting to pursue a business career and become a CPA or Certified Public Accountant will need to take further courses after earning their bachelor's degree.
All CPAs are accountants, but not all accountants are CPAs. It's a specialized career earned through additional training, professional practice and further education.
CPAs need to take an exam, and the additional designation attracts benefits such as higher pay and more job opportunities. The exam consists of a 16-hour, computer-based test which assesses prospective CPAs on four professional aspects of competency including Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting and Regulation. Some states also require accountants to take additional courses in ethics. Considering much of the information that passes through a CPA's hands is highly sensitive and proprietary, it makes sense that they should be schooled in ethical dilemmas and taught to have the highest standards of professional integrity. Ethics training ensures that a CPA's clients can trust him with their major business decisions and classified information.
Once the exam is passed, students still cannot practice as a CPA, but must then be certified to earn that "C" in CPA. Each state has their own requirements, which are available to view on the thiswaytocpa.com website. Most states require an individual to have at least two years of practical experience as an accountant, although this can sometimes be obtained during their training. An accountant can train at a CPA firm alongside CPA professionals while undertaking their final courses towards certification.
Where Do CPA's Work?
Once a CPA qualifies, they can work in a variety of businesses or offer their services as a self-employed accountant. They may find themselves managing financial portfolios for the board of multimillion-dollar, Fortune 500 companies or advising individuals or small business operations. They may also work for charities, the government or a variety of businesses.
CPAs' services are much in need, and job prospects are good since companies recognize the benefits of having a professional financial accountant in their corner to guide their business.
The CPA designation is considered to be a mark of professionalism and integrity in the business sector and highly sought after in prospective employees. CPAs can expect to have excellent career prospects, and according to the Bureau of Labor Statistics, CPAs make an average median salary of $69,350.
What Is a CPA Firm?
A CPA firm must include at least one Certifed Public Accountant, although it may contain many, who must be licensed in the state where the company operates. The benefits of hiring a CPA firm are that you will have a team of highly qualified, educated and experienced accounting professionals at your service. They can help you scale your business and create projections and detailed budgets to take your business to the next level.
The Benefits of Using a CPA Firm
Business owners have myriad responsibilities such as the day-to-day operations of the company, staffing issues, customer complaints, inventory, advertising and other concerns. Hiring a CPA firm allows them to take at least one part of their company responsibilities off their shoulders and outsource it to professionals. Many companies also find that hiring a CPA firm rather than having an in-house team of accountants costs less while adding value with more competent accounting professionals on their side. Freeing-up managers' and business owners' time to attend to other important matters saves the company money and utilizes time more effectively overall.
CPAs are also experts in federal tax laws and keep abreast of regulations which can change over time. If your company doesn't keep up with recommendations and new protocols set in place by the IRS, you could be in danger of facing fines, and even prosecution. Tax professionals such as CPAs can also save you money by alerting you to tax benefits and credits that you might otherwise not know how to take advantage of or apply for.
A CPA can also help you manage your business by investing money in smart ways. They are adept at managing debt responsibly and can liaise with your creditors to find payment plans that work for both you and your lenders.
If your firm conducts business internationally, a CPA firm will be able to keep you abreast of all the rules and tax regulations that may affect imports and exports across the state and country lines. They will inform you of your obligations and keep you up-to-date on rules and regulations regarding international finance.
A CPA Can Help You Manage an Audit
A business of any size can benefit from a CPA, but business owners of successful companies that make more than $200,000 a year are more likely to be audited. Consequently, profitable companies may find the services of a CPA firm particularly helpful.
A CPA can help get your company through the auditing process and ensure your documents and files are in good order, which helps make financial decisions easier in the future. They can also help you lower the chances of being audited down the road by avoiding mistakes and having all your important documents filed safely.
CPAs can help steer business growth by helping you start new ventures, hire more staff or they can be helpful when you first leave full-time employment to become self-employed. CPAs are experts in all manner of accounting issues and are adept at understanding all the tax codes, credits and rules to make every business process as easy as possible.
If you have been audited in the past and owe money to the IRS, a CPA can help you make a payment arrangement, avoid extra fines and get back in good standing. It's challenging to do business if you have back taxes hanging over your head, which may well affect your current business decisions. A CPA firm will guide you through the process of getting all your business paperwork back in order to ensure that you stay afloat and do not defer on your taxes in the future.
CPAs can also facilitate a variety of other financial decisions including tax preparation, retirement planning, estate planning, bookkeeping and payroll procedures. Once you decide to retire, a CPA firm can guide you through the process of winding up your business, passing it on to a family member or selling it.
How to Find a CPA Firm
To find a Certified Public Accountant, you can speak to other successful business owners in the community and ask for their recommendations or ask your friends and family for their contacts. You can also check online and select a CPA by state or area of expertise. Make sure you speak with current clients or read testimonials to make sure the CPA firm you choose is well-respected and has established an impressive reputation for trust and integrity.
The American Institute of CPAs (AICPA) and the National Society of Accountants both produce searchable directories of licensed CPA firms.
CPA firms can be in high demand, especially close to tax season, so you may find that the CPA firm you selected cannot accommodate any additional clients. Keep notes as you telephone different firms, and refer to the online guide the IRS produces on how to choose a tax professional and how to confirm their credentials. This guide also has a directory of CPA firms and contains instructions for what to do if you have a bad experience with a company and want to make an official complaint.
The IRS advises the public, and especially business owners, to choose their tax professional carefully. Unfortunately, some unscrupulous people will pretend to be reputable tax professionals to defraud you or even to steal your identity.
The IRS produces short videos to remind the public that whoever you choose to organize your return will see all of your highly confidential and personal financial information. They are privy to sensitive information, which includes documents that can be used fraudulently, like your Social Security number, your employment details, your date of birth and your banking information. If you own a business, they are also able to see all of those important documents and details for all of your employees as well.
The IRS warns taxpayers not to trust financial advisors who promise too much. If they say they will guarantee you a large tax refund, you should be wary. A reputable accountant knows he can't speculate on your return until he's seen all your information and made some calculations.
There are other scams the public should be aware of, and it's prudent to steer clear of any accountant who asks you to sign blank tax returns or suggests she deposit your return into her bank account and she'll pay you at a later date. These are tactics used by crooks and fraudsters and would never be adopted by professional financial planners and accountants such as CPAs.
As well as protecting you from fraud and providing unbiased advice, a good CPA will ask you a variety of questions about your business goals and how you plan to grow your company. They can also help you balance cash flow and a whole host of other financial matters.
One of the most important areas in which a CPA can assist business owners is in managing employees' payroll and benefits such as wages, overtime, 401k plans, retirement benefits and medical benefits. Employee retention is greatly increased when well-organized financial and other incentives are offered, so the use of a CPA subsequently helps boost employee morale overall.
A CPA can do so much more than simply balance your books and file tax returns. Depending on the depth of the role they are hired for, a CPA can contribute to your business's growth by helping you spot opportunities, design and implement improvements in financial management and help you facilitate enhancements across the board that ultimately take your venture to the next level. With the guidance of a CPA, you can learn to effectively control your company's finances while offering an excellent compensation and benefits package to your workforce.
The CPA designation is the gold star in accounting, its stellar reputation upheld by the work and accomplishments of thousands of dedicated, professional financial advisors throughout the United States.
Fiona Tapp is a freelance writer and educator. Her work has been featured on The Washington Post, HuffPost, The Toronto Star, Brit+Co, and others. She writes about a variety of topics including Homes, Parenting, Education, and Travel. Fiona is a former teacher and masters degree holder.