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Why Isn't My CPA Asking These Questions?
A surprising number of business owners think
their CPA is watching their books for things to be concerned about. In my
experience, that's rarely the case. Here's what some Chief
Executive Boards International members discovered about that
assumption: http://www.chiefexecutiveblog.com/2009/02/how-much-is-not-having-cfo-costing-you.html
In my business coaching practice, I generally find myself drilling into a
client's financials, asking questions like "What's this?",
"Why did you book it that way?", "Why is gross margin %
bouncing around month-to-month like a random number generator?" etc.
And as I explain why those things are important, it's almost predictable
that the client will ask, "Why hasn't my CPA ever asked me any of
this stuff?"
And my now-practiced response is, "Did you hire him to do that?"
They look at me quizzically, and then I ask, "Did you hire him to
coach you, to help you improve your business, or did you hire him just to
do your taxes (and perhaps an audit)?" At that point they realize
that, as conventionally defined, a
CPA is not a CFO. There is a huge difference between the two. Let's
take a look at a quick comparison between them:
CPA |
CFO |
Compiles
financial statements from client-provided data |
Plans,
considers and decides how financial transactions will be booked,
consistent with the objectives and strategies of the business |
Works
mostly in the past -- from historical data |
Plans,
forecasts, budgets and projects the future financial performance
of the company, in light of the company's objectives, strategies
and capacity to perform |
Delivers
financials weeks or months after the close of the accounting
period (month, quarter, or year) |
Focuses
on a clean, quick, and solid closing of the books within days
of the end of the period. Generally has daily or weekly real-time
key indicators of performance or trouble, shared with key players
in the company. |
Compiles
financial statements in accordance with statutes and practices
consistent with the type of business |
Analyzes
results in the context of the company's objectives, strategies,
and owners' intent for the business. Establishes key indicators
that provide early warning for management |
Compiles financial statements that
can be relied upon by 3rd parties, such as banks, creditors and
investors
|
Works
to maximize the value of the business to the owners, including
investors, while remaining within loan covenants, creditor
requirements, etc. |
Assumes
you (the owner or CEO) are going to read and understand the
financial statements as delivered |
Makes
certain you (the owner or CEO) understand the financials, the
trends and the issues they identify. Reads them to you, if
necessary. |
Does what he's hired to do --
generally Taxes and Audits -- including mid-year tax planning,
quarterly estimates, and appropriate posting of expenses
|
Does
what he's hired to do -- help you strategize, plan and operate
your business to your maximum financial advantage, within the law. |
In reviewing the above, it's probably obvious why your CPA
probably can't be your CFO. He's not in the game. You haven't been
paying him to come over, sit in your planning and management staff
meetings, and get fully engaged in the business. He has, in most cases, no
perspective by which to help you plan, forecast or monitor
financial performance. Because you haven't invited him in (and paid him to
come).
Now, please don't misunderstand -- I'm not saying the services of your CPA
aren't valuable -- they are. And I'm not saying you can't engage your CPA
or someone else from his firm as a part-time CFO. Most CPAs would be
thrilled to have a client actually engage them to help improve the
performance of the business.
You'll have to pay him to do that -- probably a monthly retainer. You'll
have to spend time with him, and you'll have to think to schedule and
invite him to meetings where strategic or major tactical initiatives are
going to be debated and decided. In the case of most of my coaching
clients, I find myself filling that role, at least partially. I have one
client who has a former corporate CFO, who now works for the client's CPA
firm, on a monthly retainer to perform the duties and services in the
"CFO" column above.
In this case, he's hired the same guy to wear both hats, and the two
engagements are explicitly different -- a part-time CFO on retainer, and a
CPA working on a conventional fee schedule, doing conventional reporting,
tax and audit work.
Think about it -- is your company without a CFO? Can you really afford
that (or do you know how
much it's costing you):?
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Thanks,
Terry Weaver
CEO
Chief Executive Boards International
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