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13 Ways a CPA Can Help Your Business

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A CPA is an accountant who has passed the Certified Public Accountant exam and meets the qualifications to be a licensed CPA in their state. CPAs can help businesses in a variety of ways.

This post comes to you in conjunction with a Personal Profitability partner.

Bookkeeping Records

Many businesses employ bookkeepers or use bookkeeping software to track their own finances. A CPA can review these records for accuracy and compliance with the law, and use this information to prepare tax documents and provide financial advice. They can also help you set up your record-keeping procedures if you're just getting started or give you suggestions for improving your current system. 

Financial Statements Audits

An audit is an independent examination of a company's financial statements. After auditing the statements, the CPA issues a report with their opinion of the statements. These reports are required by some government agencies, such as the SEC. Additionally, publically traded companies are required to be audited once a year and must furnish the audit reports to any shareholders they have. Creditors may also sometimes request these reports. 

Break-Even Analysis

A break-even analysis is an important tool for businesses that are considering expanding their operations, offering a new product or service or making a major purchase. A CPA can perform this analysis, which includes a comparison of current costs and revenues versus projected costs and revenues after making the proposed change, to determine how much revenue would need to be generated to reach the break-even point if the change was made.

Financing

Whether you need a loan to get your business started or to make a major purchase or fund an expansion, you will need to make the case to your potential lender that your business is a good financial risk. A CPA can help you make your case by gathering the necessary information, investigating different funding sources, and completing a compelling loan application. They can also help answer any questions the lender may have about your business's ability to repay the loan.

Tax Advice

CPAs are required to have a thorough knowledge of state, local and federal tax laws in order to pass the CPA exam and maintain their license.  CPAs can provide advice to help you stay compliant with tax laws, keep efficient and accurate records, and maximize tax deductions. They can also prepare and file your tax returns and represent you in the event that your business is audited by the IRS. Additionally, they can assist with calculating estimated taxes that may need to be paid throughout the year, payroll taxes and other tax obligations. 

New Businesses

If you are planning on starting a new business, a CPA can help you with the process by drafting your business plan, choosing and setting up your accounting software, making sure your accounting procedures comply with the law and helping you determine the best legal structure. Getting financial advice from the start of your business can help you avoid any costly mistakes that could derail your start-up or get you in trouble with the law. 

Financial Health

A CPA can help you evaluate the financial position of your business and give you advice on how you can improve it. Many businesses choose to have their financial health evaluated once per quarter so that they can stay on top of financial trends and fix issues or take advantage of opportunities promptly. CPAs can also help prepare quarterly reports for stockholders, creditors, and others. 

Risk Management

Businesses face many different kinds of risks. CPAs have been trained to spot potential risks and recommend solutions. Risks that a CPA might evaluate include uninsured or underinsured property, liability risks, legal compliance and security threats. 

Key Performance Indicators

Key performance indicators are performance measures, such as job cost, inventory turnover or daily sales that can be used to judge the success or failure of a particular aspect of your business. CPAs can help you identify what your key performance indicators are and how to use them when evaluating your business operations. 

Chief Financial Officer

Small businesses may find it more economical to outsource the duties performed by a Chief Financial Officer to a CPA. CFOs typically oversee activities such as bookkeeping, financial statements, cash flow management, and forecasting, payroll, tax obligations, and reporting. 

Business Value

There are many reasons you may need to know the value of your business, such as seeking financing or investors, deciding whether to sell your business or planning for retirement. A CPA can both help you calculate the current market value of your business and help you maximize that value. 

Contracts

It is common practice to have an attorney review contracts and other important documentation to ensure compliance with the law. It can also be a good idea to have a CPA review any contract that could have financial consequences. A CPA can make you aware of any tax or cash flow implications and suggest any changes to the language that might be necessary. 

Business Operations

CPAs can help with day-to-day business operations in a number of ways. A CPA can explain your financial statements to you, ensure that employees and contractors are classified correctly, provide tax advice, and handle payroll. If you're not sure where to find a CPA to assist with your business operations, you can use the CPA Directory website to locate accounting professionals in your area.

Whether you need a professional to oversee the finances of your company or you just need to get your taxes done, a CPA can be an asset to your company. CPAs provide expertise and advice that can help almost any business improve its operations. 

This post comes to you in conjunction with a Personal Profitability partner.

4 Signs You Are Ready to Start Your Own Business

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Editor's note: This is a guest post from our friends over at Money Crashers, and written by Tyrone DeMarco. I love side hustles and starting your own business, so this is a great read for anyone looking to take their side hustle idea to the next level.

Small business ownership has its perks: You get to be your own boss, work when you want, and control your own destiny. But business ownership isn't for everybody, nor is it always the best option. It can be a huge financial risk—one that requires a lot of time and mental commitment. In fact, timing and readiness are going to be the determining factors of whether your business succeeds or crashes. After all, the latter is a reality for millions.

Consider this: According to the Small Business Administration (SBA), around two-thirds of businesses that employ workers survive past the two-year mark, while only half make it to at least five years. The reasons for the flameouts vary but failing to understand the risk is a big part of it. From measuring the financial challenges, hiring the right personnel, finding the right balance between growth and stability, or even just finding the right location, small and young businesses owners often don't realize how huge of an undertaking making their business run smoothly actually is. 

Owning a business can be downright scary, but also extremely rewarding. While you'll never know completely when you are ready, there are telltale signs it just may be your time to make the leap.

How to Know You Are Ready to Start Your Own Business

  1. There's Great Passion Inside You

Anyone can start a business granted they have the capital to get it off the ground. But the ones that are truly successful are those that have a passion for the product or service they are hawking, not just trying to get their business off the ground because they can make money that way.

Take organic food for example. The entrepreneur who has a love of natural foods is going to enjoy learning and sharing that knowledge with customers. The one who is just jumping on a trend won't be as convincing when a potential customer walks through the door. If you don't care about the underlying products or services your business offers, other than their money-generating ability, you are less likely to invest the time to make your business grow and get established.

Truly loving what you do will ensure that business owners won't turn into the equivalent of taking any old job with a day-to-day toil. Starting your business with passion and no plan can sometimes be more valuable than having capital and a plan, but no passion. 

  1. You Have the Time for the Commitment

Getting a business up and running is tough enough. But then there's the work of growing your baby, which requires blood, sweat, and tears. If the thought of pouring countless hours into your endeavor leaves you wishing you were getting a tooth pulled, then business ownership probably isn't for you. But if knowing you will be breathing, eating, and sleeping your small business gets you pumped up, that's a surefire sign it's time to execute.

Successful entrepreneurs bring all sorts of things to the table, but a shared characteristic is commitment. Without it, you won't be giving your business its best chance of success. As a result, your personal circumstances can be a good predictor of your readiness to go it alone. If things change in your life—such as a new addition to the family or an impending divorce—it's probably not the best time to test your business acumen and idea. A baby requires a lot of attention, not to mention creates sleep deprivation. Although different, a divorce is also a big distraction.

If there is upheaval in your life, you may want to hold off launching your new business. But if everything is smooth sailing and you are ready to give it your all, then it could be the best time to pull the trigger.   

  1. You've Been Thinking About It for a While

Giving up your career to start your own business isn't something that you decide overnight because you're angry with your boss or unfulfilled at your job. Many entrepreneurs worked for someone else, in lots of instances for years, all the while plotting and planning before they made the leap—and sometimes kept working for someone else even after launching their business. It's not like age is a barrier or a stigma anymore.

The Great Recession of 2008-2009 changed the makeup of small business owners and entrepreneurs, with scores of older individuals using downsizing as the impetus to branch out on their own. Consider this: according to the Kauffman Foundation, a non-profit focused on entrepreneurship, the percentage of entrepreneurs aged 55 to 64 jumped to 25.8 percent in 2015 from 14.8 percent since 1997.  

Although age doesn't determine success, time considering an endeavor can. The last thing you want to do is launch a business because you feel forced to for whatever reason. Lots of people will take the leap solely because they hate their job, wrongly assuming that leaving will fix everything. If you fall into that category, there's a high likelihood you'll still be unsatisfied and quickly resent it, which is a recipe for disaster for any business owner. Leaving your problems behind doesn't resolve them. 

  1. You Can Do It Better

For some individuals, the light bulb to branch out on their own comes from watching the mistakes of their boss or upper executives in an organization. Maybe it's how they interact with customers that they are doing all wrong, or perhaps it's the lack of openness they have to what could be game-changing ideas that have you frustrated. It could be a cultural thing or watching corporate waste in action that's led you to dream about how you would do it better.

Heck, it's not unheard of for an employee to quit a job only to resurface a few months later as a competitor, so why can't you? Questioning the abilities of your boss in and of itself isn't enough of a reason to start your own endeavor, but if you find yourself repeatedly about how you can do it better than your boss or management, then it's a big sign it's time to show them.

Final Thoughts

Small businesses are the backbone of this economy, employing millions of people—or close to half of the private workforce—according to the SBA. But just because owning your own business puts you in control doesn't mean it's right for you. There has to be a passion, a willingness to commit, a business sense, and confidence in your ability to make what will undoubtedly make a success out of a struggle.

Without it all, pursuing a career within an organization may be the better action.

If anyone has first-hand experience with making the wrong decision when quitting his job and launching his business, Tyrone DeMarco is it. He worked for Corporate America for a decade before finding himself so resentful of his workplace that he ventured out on his own, only to fail miserably when launching his first business. Since then, he’s readjusted his priorities and is a very successful real estate investor, finding the best fixer-uppers around the United States.

This post was originally published on March 13, 2018, and updated on March 31, 2022.

Protect Your Credit After Losing Your Job

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Suddenly losing your job may make your life and daily routine change drastically. If you're unemployed, you may also wonder how this new status may impact your credit. Not having a job or income doesn't mean your credit will plummet. There are multiple strategies to use to help protect your credit and keep your financial future bright. Here is what you can do right now to protect your credit after losing your job.

Have an Emergency Fund

First, before facing unemployment, it's smart to have an emergency fund in your bank account. If possible, everyone should secure an emergency fund of at least six months of expenses to help them survive in case of a job loss. If you have prepared for this and have an emergency fund ready to go, it will make unemployment less painful. If you weren't able to stock an emergency fund like millions of Americans who live paycheck to paycheck, don't panic. There are other ways to help yourself financially after a job loss.

File for Unemployment

After losing your job, one of the most important first steps is filing for unemployment. You'll need to go to your state's unemployment office or website and fill out forms indicating a job loss. Once your paperwork gets processed, you'll receive regular payments of a portion of your salary for a period of time. While it won't be as much as you would normally get from working, at least you'll get some income to keep yourself afloat.

Cut Back on Expenses

Getting through a period of time when you're unemployed is easier if you work diligently to lower your monthly expenses. That means no eating out at restaurants or getting carry out, no going to the movies, and no purchasing anything that's not necessary. Cutting back on wasteful spending will help you get more wiggle room in your budget and be able to pay for the necessities.

Ask for Discounts

You can also get more out of your new, lower monthly budget by seeking out discounts. When you desperately do need to purchase something, such as medicine, food, or other essentials, ask about discounts. You can also call companies like your car insurance company, internet provider, or gas and electric company to see if there are temporary discounts available to those suffering from financial hardship. Keep junk food off of grocery shopping lists and buy only wholesome ingredients. Many companies may surprisingly provide a discount to people who are recently unemployed.

Talk to Creditors

If you have credit card debt, be sure to also reach out to your creditors and negotiate lower payments while you're not working. You may also be able to ask about getting rid of late payment charges and interest during your time without a job. Loan providers, such as mortgage holders and car loan operators, may also help you get some payment relief if you call and speak to a customer representative.

Monitor Your Score

Even when you don't have any income and you're overwhelmed with monthly bills, it's also incredibly important to monitor your credit score. Watch out for any big changes that impact or lower your score during this difficult time period. If you see any significant changes because of late payments, talk to your creditors and ask them to remove any negatives related to your job loss. This can help keep your score from dipping and preserve your financial health.

Consolidate Debt

It may also make sense to apply for a debt consolidation loan if you lose your job and are struggling to pay bills. If you have loans with a high-interest rate, you can take advantage of the most recent changes to the country's interest rates and get a loan to consolidate your high-interest debt. Paying everything off as one big loan with a low-interest rate may save lots of money each month and give you some financial relief.

Look into Government Programs

Another option is to turn to the government for help during a tough economic time. This year, millions of Americans are due to receive a stimulus check of approximately $1200 from the government. Additionally, families can get up to $500 per child under 16. If you aren't sure if you qualify to get these payments, make sure you check your income tax forms from 2019 and 2018. There are strict income requirements to get the $1200, but most people should be able to get the payments of $500 for each child.

Search for a Job

Once you lose your job, you also want to get right back into the workforce as quickly as possible. Start searching for your next opportunity right away. Update your skills and resume to make yourself more marketable for a variety of jobs. Take the initiative and reach out to potential employers to find a viable job opportunity quickly in your field.

Make Some Side Income

A job search in today's economy may be long and frustrating. While you search for the right position in your industry, be sure to take on some side projects or work to help bring in extra income while you're out of work. Consider selling things you have in your house and don't use anymore on secondhand yard sale website groups. Offer your professional services to friends and family if possible. You may also want to consider being a part-time driver or delivery shopper for people ordering groceries and supplies.

Borrow Money

Finally, don’t be afraid or too proud to ask for help if you need it. For most people, there is at least one person in their circle of friends and family members they can turn to in a time of financial need. If you're struggling to pay your rent or buy food for your family, ask for help. It can be in the form of a loan that you slowly pay back when you get back on your feet, or someone may be willing to simply help you without expecting anything in return. Don't let things get too bad before asking for help.

While losing your job can be terrifying, there are some actions you can take to help keep your finances healthy and steady. Follow these tips to give yourself a way to survive during a tough economic time.

This article comes to you from a Personal Profitability partner.

This post was originally published on April 24, 2020, and updated on February 17, 2022.

Should You Get Your MBA?

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I earned my MBA in 2010, and I attribute quite a bit of my financial success to this degree. However, for many people an MBA may be unpractical or simply a waste of money. George Diaz recently finished his MBA at New York University, one of the top business schools in the country and, on a personal note, my grandpa's PhD alma mater. If you are debating getting an MBA, George's insights are particularly valuable. Read further to help you decide if you should get your MBA.

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Why You Need to Make Passive Income Stat

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This post comes from guest contributor Deacon Hayes. Deacon is a frequent media contributor and blogs at Well Kept Wallet. He was also featured on a past podcast episode right here at Personal Profitability, where he discussed paying off $52,000 in debt. Be sure to check out his awesome site! Now, I'll hand it over to Deacon.

I have always been fascinated with the idea of making passive income. My first job was working in the concession stand at AMC Theaters where I was paid $5.15 per hour. At the time, that seemed like a reasonable amount of money, but I was only 15 years old and my monthly expenses were extremely low at that time. What I did realize is that I got paid only once for the work that I did.

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Your Cover to Cover Guide on Benefiting from Credit Cards

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This post comes from a Personal Profitability partner.

Money matters for many reasons. For one thing, money is closely associated with security, stability, and independence. Without it, it’s near impossible to plan with any degree of certainty. Credit cards feature prominently on the financial spectrum of tools, resources and options. An article published in the New York Times indicated that the credit card industry is booming. While this bodes well for banks, it’s an ominous sign for consumers. Many retirees are now placing an increasing burden of their monthly expenses on credit cards. With nothing but Social Security payments coming in, this is a risky proposition.

In Q3 2017, the biggest 4 banks in the United States – Wells Fargo & Company, JPMorgan Chase, Bank of America Corporation, and Citigroup generated $4 billion in pre-tax income through their credit card operations. Another startling statistic headlined earlier in 2017, when US household credit card debt topped the April 2008 figure at $1 trillion +. All in all, the number of credit card customers in the US exceeds 171 million people, as reported by TransUnion. These statistics are particularly troubling to people who don’t have an innate understanding of how to deal with credit card repayments, credit facilities, or even how to choose one credit card over another.

What do the Pros Say?

A credit card comparison page confirms that clients need to shop around for the best deals. Financial advisors across the board agree that meticulous selection of credit cards is imperative for keeping costs as low as possible to guard against unreasonable debt to income (DTI) ratios.  

Overall credit utilization levels are rising, but banks have been careful to limit their credit allocations to customers. Although 171 million people are using credit cards, that number doesn’t do justice to the checks and balances that banks are putting into play to protect themselves against default. Additionally, customers are a lot savvier about the types of credit cards they are applying for. Cashback, rewards, low-interest APRs, and other options are now being used to reduce the burden of credit card debt as a percentage of overall debt.

The US economy has been subject to an extended period of ultra-low interest rates. This clearly disadvantages banks in a big way, since they derive most of their profits from loans. With the federal funds rate currently at 1.25% – 1.50%, banks are rather limited in terms of how much they can realistically charge customers in interest. The spread for banks is found in the rate they levy on loans, versus the lower rate they pay on savings deposits.

Banking on Credit

In an era of low interest rates, banks rely heavily on their high yield cash cows like credit cards. The $4 billion generated by the 4 biggest banks is a case in point. By May 2017, the total US household debt amounted to $12.7 trillion – a staggering amount. It is largely made up of mortgage-related debt, automobile debt, student loan debt, credit card debt, and other debt. On a plus note, banks have reported lower overall levels of credit card delinquencies – an indication that the debt to income ratio is still at a manageable level.

Customers are not interested in slipping into another recession, losing their life savings in their 401(k)s, and being saddled with untenable credit card repayments. To this end, they are selecting credit cards with cashback offers (between 1% and 3%), low APRs (0% for 12 months or 18 months), and bigger rewards. Even so, it’s imperative to repay credit card balances in full before the end of the month. This is perhaps the most challenging aspect of sensible credit card practices. The only way to dramatically reduce the burden of credit card debt is to use the savings and rewards offered by these lines of credit to your advantage. For example, big-ticket purchases on credit cards are typically associated with cashback. By paying it off in full, the discount is the cashback.