There comes a point in every small business owner’s journey when you look at your money and think, “What is even happening?” That’s also the point when you realize it’s time to hire different types of financial advisors who know more than you based on their areas of specialty in money management.
While hiring an individual or a team for financial planning can feel intimidating, it’s also one of the smartest things you can do as a business owner for your company and for yourself. Knowing your finances are being handled properly removes a tremendous burden and prepares you to focus on more strategic decision-making for your company.
When hiring the right financial advisor or a firm (such as Fidelity or Vanguard), it’s important to first understand what you need help with and then who can help you. It’s helpful to focus on the roles and functions that need to be addressed. Not all bookkeepers, accountants, tax preparers, and financial planners are alike. In fact, you may find people who know how to do it all. Or you may need to hire several professionals to fulfill multiple roles.
4 types of financial pros you can hire for your business
1. A CPA
A CPA (certified public accountant), often called just an accountant, is one of the most versatile professionals in the financial world. All CPAs have to pass an accountancy exam and complete a number of requirements to become licensed. I repeat—a legit CPA is licensed. Often people use the word “accountant” as a misnomer for all financial professionals or all CPAs.
If you’re considering hiring a CPA, be sure they are indeed a CPA and have a current license. Start with an online lookup tool like CPAverify. Most CPAs will give you their license number, which you can check with your state’s Board of Accountancy to verify if their license is active and in good standing.
CPAs specialize in a wide range of things, from taxes to estate planning to forensic accounting to venture capital. Before hiring one, check to see if they have experience with small businesses, especially businesses in your industry.
What small business CPAs can help you with:
Advise you on the legal structure of your business
Advise you on the financial structure of your business
Financial statement audits
Develop a tax strategy for your business
Prepare and file your business taxes and in many cases, your personal taxes
Financial recordkeeping (in some cases, not all accountants will do this)
Review and monitor your financial data and make suggestions based on your data
Prepare financial reports, metrics, and projections
Advise you on a business growth strategy, cash flow management, debt management, and budgets
When to call a CPA:
When starting out and choosing a legal structure for the business
At tax time or anytime during the year when in need of strategic tax advice
When in a financial situation that needs resolving
Anytime you’re about to make a big financial move in your business (e.g., getting a business loan, bringing on a partner, working with investors, or changing your business model)
2. A tax preparer
A tax preparer is an enrolled agent or a financial professional licensed by the Internal Revenue Service (IRS) to file taxes on behalf of others. They represent their clients in an audit and in tax court, in some cases.
To be clear—an enrolled agent isn’t a CPA. They don’t take an accountancy exam and fulfill the licensing requirements of a CPA. Rather, enrolled agents pass a federal licensing exam certifying them to file taxes on others’ behalf.
While CPAs have a wide breadth of knowledge when it comes to finances (including taxes), a tax preparer’s skill set is zeroed in on taxes.
What tax preparers can help you with:
Prepare your business and personal taxes
Develop a tax strategy for your business tax planning
Answer your tax questions
Represent you in an audit
Represent you before the IRS
When to call a tax preparer:
At tax time, if you need tax advice or if your tax situation is changing
If you receive a notice from the IRS about your taxes
If you’re audited by the IRS
Do I need a CPA and a tax preparer?
Nope. You either hire a CPA or a tax preparer.
CPAs can be expensive and many small business owners might not be able to afford to keep one on retainer. Even having a CPA file your taxes once a year will usually cost more than hiring an enrolled agent.
Tax preparers are perfect for those who have a fairly simple business model and don’t need ongoing financial advice. If you’re on a tight budget, hiring a tax preparer ensures that you get yearly oversight of your finances and that your taxes are filed correctly.
3. A bookkeeper
Bookkeepers are the people who process your financial data. While you may interact with your accountant or tax preparer a handful of times a year, your bookkeeper is the pillar of your financial team. You will interact with them on a daily, weekly, or monthly basis, depending on the size of your business.
Bookkeepers analyze the information from your receipts, bank statements, credit card statements, and any other financial institutions you use and enter that data into your accounting program. They ensure that your books are up-to-date and accurate.
What bookkeepers can help you with:
Set up your accounting software (cloud-based and desktop)
Enter your financial data into a software program
Reconcile your accounts every month
Design your invoicing, accounts receivable, and accounts payable systems
Manage accounts payables and communicate with vendors
Manage accounts receivables and communicate with customers
Prepare financial reports, metrics, projections, and analysis
When to call a bookkeeper:
To set up your financial record-keeping software and processes and streamline systems
For daily, weekly, and monthly support with your financial operations
To clean up messy bookkeeping files that have long been neglected
To catch up your financial recordkeeping, if you’ve fallen behind
Can one bookkeeper really do it all?
That depends on your business and how much of your day-to-day financial operations you plan to outsource. Some small businesses only work with their bookkeeper on a monthly basis, while others hire a full-time bookkeeper or even a bookkeeping team.
4. A financial planner
Financial planners focus on helping you manage your personal finances so your current financial life, your life changes, and your financial future. Many business owners get confused about the roles of a financial planner vs. an accountant and are surprised when their accountants don’t offer personal financial advice.
What a financial planner can help you with:
Investment management in a range of financial products (e.g., real estate, savings account, the stock market, etc.)
Provide strategic investment advice, overall wealth management, and a comprehensive financial plan on the allocation of assets in an investment portfolio, based on risk tolerance, short-term financial goals and your long-term goals, as well as other life events and factors
Manage debt
Personal finance strategy and budgeting
Retirement planning for business owners and their employees
Insurance planning (health, long-term care, life insurance, disability, liability insurance, etc.)
Estate planning
Mergers and acquisitions
When to call a financial planner:
For support with getting personal finances in order and managing your money
When you have long-term financial goals and need to develop a strategic plan for financial decisions (e.g., buying a home, retirement, saving for your children’s college, etc.)
To help you select the best insurance options for you and your family
For investment advice and planning
Do you need a financial planner and a CPA?
It depends on the size of your business and your needs. When you’re first starting out, it’s wise to work with a CPA to ensure that your financial and tax strategy are on point. As you build more personal wealth, you may need to hire a financial planner to help you manage that wealth.
It’s not uncommon to find a CPA who is also a CFP (certified financial planner) and vice versa. If you can find one of these magical creatures in the wild, snag them, and you’ll be getting the best of both worlds.
Where to start
Do your own books
Before you start your search for a financial team, try doing your own books for a few months. You’ll learn how accounting works in your business, which will enable you to have more informed discussions with the people you hire.
Create a wish list
Then, outline all the roles and duties you are looking to fill. Start with the financial tasks you’re currently performing and then move on to your wish list. If you’ve ever thought, “Wouldn’t it be so great if someone could tell me X, Y, and Z,” put that on your wish list.
As you interview financial professionals, ask them key questions about the roles on your list. The amount of money advisors charge (whether they’re fee-only, charge commissions, or are fee-based, earning through a mix of fees and commissions) can be worth it when they provide the value you need. It’s okay if they can’t do it all, but check in before you assume it’s outside of their expertise. You may be pleasantly surprised by what folks can do.
Seriously vet the financial pros you hire
Never hire anyone who makes you feel bad or shameful about your money, and keep in mind that only registered investment advisors (RIAs) have a fiduciary duty to their clients to disclose conflicts of interest. Also, remember that whomever you hire will not only have access to your private information, from your Social Security number to your Employer Identification Number (EIN), but they’ll know all the details of your money business, from your net worth to the financial health of your business. The bottom line is that whomever you hire will see the good, the bad, and the ugly—and the awesome—when it comes to your hard-earned money, so make sure whomever you choose is the right fit for you and your business.
