Source: Baltimore SmartCEO's Big Idea Book
By: Angeline M. Huffman, MBA

Have you ever thought of your CPA as a Chief Financial Advisor? Traditionally, business owners view their CPA as someone who prepares tax returns or, in the beginning, as help in determining the form of business organization, such as LLC, partnership, corporation, etc. What's wrong with this view? Throughout the year you are making many financial decisions in your business without getting advice from an accounting professional. A CPA can be much more than just a tax preparer.

Many people go into business as technical experts in the field they love. They are not necessarily financial and accounting management experts. Smart business owners recognize their limitations and then hire experts to fill the gaps. However, many smaller companies cannot afford a full-time CFO, a full partner in the business' strategic planning process who also oversees the financial, accounting, and bookkeeping duties of the organization.

CPAS FILL GAPS
Your CPA can fill the gap in the financial management and accounting oversight arena. Since your CPA is not working in your business on a full time basis and is not responsible for carrying out business decisions, the CPA is not an officer in the business. Your CPA can function as your CFA, Chief Financial Advisor, whose duties include managing the financial risks of the business, financial planning and record-keeping, and communicating financial results. Your CPA can be your CFA, until your business grows to necessitate a full time CFO.

Here are some typical business challenges or questions the CPA as CFA can help address:
• Is it more cost-effective to outsource a function or to hire an employee?
• How much will it cost to expand the business?
• Should you rent or buy the equipment needed to operate the business?
• How much can you afford to pay yourself as a business owner?
• Do you know if you're pricing your products and services for a profit? Is that profit enough to cover all business expenses and to pay you a salary?
• Do you have enough in cash reserves to carry you through the natural downturn in revenue cycles?
• What are some strategies for keeping your accounts receivable balance low?
• What are the best strategies for managing your accounts payable?
• Are there any other ways to grow your business?

Here's an example from cash flow projections and management, an area in which your CPA as CFA can advise you and just one area in which Huffman Financial $olutions (HF$) specializes. I've been working with a retailer whose big season is Christmas. Year after year, a cash flow problem formed because the owner needed to purchase significant quantities of inventory months before the sales rung on the register. Since she usually waited until she was out of cash before requesting credit lines from banks, she was turned down and ended up putting the inventory on her high interest rate credit cards. I helped her project a year forward to determine when cash flowed into her business and when more cash flowed out of the business. Now after a Christmas season she knows she needs to hold on to some of the cash generated by that season's sales to build up her inventory for the following year's Christmas season. I also advised her that if she could increase her inventory by at least 50 percent for the next Christmas season, she could double her sales for the same Christmas season. Previously, increasing her inventory to gain additional sales during the Christmas season was difficult because she never had sufficient cash or credit lines available. We determined how much cash she needed to increase her inventory in July and August for the following Christmas. Since we knew that information in February, we obtained the credit line from the bank because she still had cash reserves on-hand and a cash flow plan showing how the additional inventory could increase sales. Therefore the bank found her to be a worthwhile risk. Also, she could save more than 40 percent on her financing charges because she tapped into the more cost effective credit line from the bank instead of the higher rate credit card.

YOUR CURRENT CPA AS CFA?
How do business owners determine if their current CPA has the ability to act as their CFA? Call them at some other point in the year to ask a question regarding your financial management to see if they ask you for your current profit and loss statement before answering your question, or do they refer to last year's outdated tax return? When you ask questions, do you feel your CPA listening to you, and offering answers you can understand? Finally, give the CPA a challenge question to determine his/her strategic thinking ability, such as how to project your cash flow needs or how to determine if it is cost effective to hire additional staff (or any of the other questions listed previously in this article).

Should you, the business owner, fear the cost of asking your CPA these questions? Perhaps, because you might be billed for the answers. However, consider the cost of not asking your CPA to assist you through a challenging business decision. In our example, the business owner gained increased revenues and saved on high interest costs. By all means, ask the questions.

CONTROLLING CPA COSTS
Here's a tip on how to control the cost, and at the same time, give you the freedom to pick up the phone to ask those questions. Ask your CPA if he/she is willing to establish a fixed year-long program fee for the services you will need during that year. The program could include tax preparation, bookkeeping services or review of bookkeeping files, and regular discussions around the financial and accounting management strategies of the business. Ask if you can pay that at a fixed monthly rate. If your CPA appears only willing to assess fees on the billable hour, then search for another CPA, such as HF$, who offers an annual service program where the consultation fees are based on one to three hours monthly or quarterly (based on your needs). It might be the best investment you'll make in the future success of your business. All the more reason to carefully select your CPA and tap into his/her financial management expertise as your Chief Financial Advisor.

Reference Document: click here.

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