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The Core Services of a Modern CPA Firm

Published by Tom Wadelton on 14 Mar 2024

Modern CPA firms have moved beyond the repetitive bookkeeping that characterized their work in the past. Programs like QuickBooks and Intuit have made it possible for non-accountants to do basic bookkeeping. However, as Roger Knecht of the Universal Accounting Center explains in an interview on the Modern CPA Success Show, “accounting is the analysis.” And analysis is what makes business owners need to make intelligent decisions.

Knecht breaks down the three core services offered by modern accounting firms:

1) Accounting and Bookkeeping

2) Tax Preparation and Tax Planning

3) CFO and Advisory Services

Knecht describes these core services as a “ladder.” Careful bookkeeping not only ensures compliance with GenerallyTHE CORE SERVICES OF A MODERN CPA FIRMAccepted Accounting Principles (GAAP) but forms the foundation for higher-level work. Tax Preparation relies upon the bookkeeper’s ability to assemble accurate information and present it clearly. The tax accountant then applies their expertise to this foundation, filing the tax returns in a timely manner and following up with tax planning services that show clients how to legally lower tax liability in future cycles.

While anyone who registers for a $15 PTIN can prepare taxes for clients, only Enrolled Agents and CPAs can represent clients before the IRS in the event of an audit or dispute.

A CFO or advisor incorporates the work of the bookkeeper and the tax accountant in order to formulate advice about such matters as cash flow, vendor and investor relations, and long-term strategy. Knecht notes, “I don't think you can do advisory unless you've actually become very familiar with the company's accounting process, from bookkeeping through the tax.”

If the client has the capacity, some of these steps may be completed by in-house accountants. In a small business, a single person may be responsible both bookkeeping and taxes. As businesses grow, their finances become more complicated. It quickly becomes impossible for one person to handle everything. On the upper end, a large corporation is likely to employ a whole team of in-house accountants, each specializing in a different aspect of the business.

Outsourced accountants can complement the work performed in-house. A small business or entrepreneur might call upon a CPA firm for accounting services or tax preparation, while a larger company might need a CPA firm to oversee their in-house team. CPA firms can be collaborative, offering advisory services that build on the work done by employees.

Knecht draws a sharp distinction between consultants and advisors. Consultants, he explains, bring a specific skill to a specific project. The consultant will “come in and take care of that project and leave.” An advisor, on the other hand, will teach.

A full-service CPA firm will offer high-level advisors who can function as a Virtual CFO, analyzing financial statements to identify which expenditures are bringing the best return on investment, or where hidden costs are impacting revenue. A good CFO can boost cash flow by honing in on the key performance indicators or metrics that drive revenue.

The range of services offered by CPA firms also includes valuation, the process of putting a dollar value on an asset. That asset might be an object, like real estate, or a business. Valuation is an important part of estate planning, preparing stock options, or any potential merger or acquisition.

In some cases, the services offered by an independent CPA firm can only be performed externally—most notably, audits. Publicly traded companies, government agencies, financial institutions, and many other organizations are required to obtain external audits on an annual or semi-annual basis.

John Scott of Anders CPA and Advisors describes three levels of attestations. The lowest level of attest work, the compilation, simply compiles financial data. The second level of attest work, the review, adds some analytics to the compilation. The highest level of attest work, the audit, “looks at the entire balance sheet and income statement.” The CPA issues an opinion and signs the attestation. Only a Certified Public Accountant in good standing with their State Board of Accountancy can sign an attestation, giving reasonable assurance that third party readers can rely on their statement.

Interested in learning more about how a CPA firm can help your business? Schedule a consultation with one of our Virtual CFOs.





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