If you’ve ever heard the term CPA, you may have asked yourself what a CPA is. We all know that an accountant keeps and interprets financial records. However, there are some specialized tasks that a regular accountant is not qualified or licensed to perform.
A certified public accountant (CPA) is a professional accountant who, through continuing professional education, has passed the CPA examination and meets all state licensing requirements. Typically, a CPA is only licensed in one state but can become certified in additional states based on reciprocity laws.
Additionally, CPAs are not limited to any single industry or job function. The American Institute of Certified Public Accountants (AICPA) highlights five popular sectors that CPAs work in.
- Business and industry
- Public accounting
- Government
- Education
- Non-profit
However, CPA designation can grant opportunities in almost every industry. In fact, the certified account designation is considered one of the most prestigious qualifications an accountant can earn due to the difficulty of passing the CPA exam, given that CPAs are often required to complete 40 hours of continuing professional education each year.
Only about 50% of US accountants are licensed accountants.
Types of accountants
Accounting is a highly diverse industry, and there is so much more to it than just filing tax returns. There are so many areas of accounting that, by necessity, there are many different types of accountants, each of these dealing with their specialized area.
Here are just a few of the different types of accountants:
- Staff accountant
- Investment accountant
- Project accountant
- Certified public accountant
- Cost accountant
- Forensic accountant
- Management accountant
- Auditor
Some business owners employ a bookkeeper for their in-office financial needs and outsource to more specialized professionals where necessary.
What does a CPA do? The value of hiring an accountant
To ascertain the value of employing a certified public accountant, one needs to know what they do. Cerified accountants have many areas of expertise.
Some of the most popular are:
- Auditing and review
- Consulting services
- Financial planning
- Tax preparation and consulting
- Litigation consulting
- Financial planning
- Investment advice
- Business valuation
- IT consulting
If we go further and look at just a few of the career choices available to certified accountants, you will begin to understand the priceless value of having one on board your staff payroll.
A certified accountant is qualified for any of the following positions, among others:
- Credit analyst
- Tax accountant
- Auditor
- Financial advisor
- Budget analyst
- Forensic accountant
- Internal auditor
- Anti-money laundering manager
- Treasury manager
- Chief financial officer
As you can see, the list is almost endless. Undoubtedly, a CPA is a precious asset to any business.
When to hire a certified accountant
Most small businesses won’t need a full-time accountant, so when should you hire a CPA? The idea of paying hundreds of dollars for a few hours with a certified accountant may seem excessive, but it is deductible, and an accountant can help you avoid costly mistakes.
There are times when a certified accountant will be necessary. Examples include:
- Before you start your business
- During tax season
- When you have complex financial decisions to make
- When you plan to make significant changes in the ownership of the company
Before your business is even up and running, an accountant can assist you in your company’s formation and legal structure and in formulating a business plan that promotes tax efficiency and sound financial practices.
Other instances where the services of an accountant are beneficial are:
- When your business scales
- Before buying a business
- Before taking on a franchise
- Before selling your business
- Before taking a business loan or overdraft
- In the event of an IRS audit (although the timely services of an accountant can help to avoid an IRS audit.)
The next question is whether to hire a full-time, part-time, or freelance certified accountant. Bear in mind that it’s unlikely that a small firm will generate enough workload to warrant a full-time accountant.
Hiring a part-time accountant is a solution if you have enough of a workload to keep them busy for a certain number of hours each day or week. The advantage of hiring part-time over freelance is that you can calculate the salary into your budget every month. However, it may be that you have intermittent work for a CPA. In that case, your best option would be to hire on a freelance basis.
Qualifications to look for in an accountant
A CPA must pass rigorous training and exams before being suitably qualified. When hiring a CPA, you will need to make sure that they have the following qualifications:
- A bachelor’s degree in accounting is essential.
- A master’s degree is not necessary but is preferable.
- They need to have passed the CPA Examination.
- They must hold a CPA license.
- They should have at least one year of professional experience.
Also, be sure that the CPA you are considering hiring has renewed and maintained their licensure, as states generally require CPAs to renew their licenses every one to two years.
The costs involved in hiring a CPA
The costs involved in hiring a CPA vary based on the CPA’s level of experience, the particular services offered, and the location of the CPA. For instance, a New York CPA will charge more than a Kansas CPA.
CPAs, being more specialized, charge more than regular accountants. For a basic tax return, you can pay between $375 and $500; more complex ones can run up into the thousands.
Retaining the services of a CPA to assist with managing taxable income in retirement might cost you $150 to $250 per hour.
How to find the right CPA in your area for you
Hiring a CPA is a costly undertaking. You’ll want to be sure that you have hired the right one. Here are a few tips on how to do that:
- Get a clear picture of your current financial status and understand your specific tax and accounting needs so that you know what kind of specialized CPA to look for.
- Ask about their industry experience. You want a CPA with expertise in your particular niche.
- Shop locally so that you can meet with them in person if you have to.
- Ask your community who they can recommend and who to avoid.
- Make sure that the CPA in question is a team player.
- Verify their identification number.
- Look up their license to verify their credentials.
- Confirm their willingness to sign and to meet before year-end.
- Consider their fees and if their prices are within your budget.
- Make sure they e-file.
After checking and verifying all the above, have a casual chat with the prospective CPA to ensure they will be a suitable partner in your business.
Questions to ask before hiring a CPA
You should always ask a few basic questions before hiring a CPA.
- What licenses do you have?
- Can you name some of your clients?
- How big is your company?
- Who will actually do the work?
- How accessible are you?
- How will you add value to my business?
A good CPA should be able to answer all these questions confidently and without hesitation, setting your mind at rest.
Conclusion
Hiring a CPA is something to be taken seriously, and you must be sure that you are hiring the right CPA for the job. Don’t penny-pinch because, in the long run, a good CPA can save you a lot of money and even prevent an IRS audit. Ultimately, a good CPA will be an invaluable asset to your company.