Why Growing Businesses Should Talk to Their CPA More Than Once a Year
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Prefer to read? The key ideas from the video are expanded below.
A lot of business owners only talk to their CPA once a year during tax season.
And honestly, I think that’s one of the biggest financial mistakes growing businesses make.
So how often should a growing business actually be talking with its CPA? There isn’t one right cadence for every business, but for a growing company, the answer is usually more often than once a year.
If your CPA only shows up once a year to prepare a tax return, there’s a greater risk that you’re making decisions without financial information you can fully rely on.
Now, to be clear, I’m not saying every business needs a full-time CFO or a massive accounting department. That’s not realistic for a lot of smaller companies.
But as businesses grow, the financial complexity usually grows faster than the owner realizes.
Why a Once-a-Year CPA Relationship Can Become a Problem
We recently worked with a business doing around $8 million a year in revenue. They only talked with their CPA once a year during tax season. They handled their own books internally, the books were always behind, and honestly, they were kind of a mess.
The business owner was basically flying an $8 million company blind financially.
When we got involved, one of the things we found was that there was very little connection between the books and the tax return. Their previous CPA had been making large journal entries for tax purposes that the business owner didn’t really understand were happening. Those adjustments were changing the financial picture, but the owner did not really understand why.
And this had been going on for years.
The owner would hand over incomplete books, the CPA would make adjustments during tax season, and then a tax return would show up to sign.
That’s not uncommon, by the way. A lot of business owners don’t really understand their tax returns or financial statements. And when the books are late or unreliable, they eventually stop trusting the numbers anyway.
That’s a dangerous place to operate from.
Clean Reconciliations Do Not Always Mean Accurate Books
Another example: we worked with a company doing around $1 million a year in sales. They handled all their bookkeeping internally and reconciled everything every month. In fact, they were proud of how clean the reconciliations were.
The problem was, they were reconciling incorrectly.
They were recording deposits from the bank feed as income, but also recording payments against invoices. So they accidentally duplicated large amounts of revenue.
Over a few years, they overstated their sales by hundreds of thousands of dollars. Because of that, some years that should have shown losses appeared profitable instead.
Now think about the ripple effects there.
Those financials were being given to the bank. Those numbers were being used for lending decisions. Those tax returns were being signed and filed with the federal government.
And the business owner had no idea the numbers were wrong.
That’s the scary part about accounting problems in growing businesses. Most of the time, it’s not malicious. It’s usually a well-meaning owner or employee trying to do their best without enough experience or oversight.
But unintentional mistakes can still create very real consequences.
Growing Businesses Often Outgrow Their Original Accounting Structure
This is where I think a lot of businesses outgrow the accounting support structure they originally started with.
Maybe the person doing the books was perfectly fine when the company was smaller and simpler. But once you start adding complexity, the level of accounting oversight needed changes too.
That doesn’t necessarily mean replacing people. But it may mean adding more support, structure, or experienced oversight around them.
Why Your CPA Needs Visibility During the Year
This is also why the people responsible for preparing the tax return should generally have enough visibility into the books during the year to understand what is changing and catch issues before tax season.
Good accounting work is not just about compliance. It’s about helping business owners actually understand what’s happening financially in their business while there’s still time to make better decisions.
That might mean:
· Reviewing financials regularly
· Helping clean up processes
· Answering questions about unusual transactions
· Helping with financing discussions
· Identifying problems early
· Making sure the books and tax returns actually tie together
If you’re making decisions off inaccurate financials, it’s a little bit like driving a car with a broken dashboard. You may still be moving forward, but you don’t really know how fast you’re going, how much fuel you have left, or whether there’s a problem developing under the hood.
At some point, that catches up with people.
Your CPA should not be somebody who disappears for 11 months and then reappears during tax season to hand you a return to sign.
As your business grows, your financial complexity grows too. Having proactive accounting oversight, clean financials, and ongoing conversations around the numbers is not just about taxes. It’s about running your business intelligently and protecting yourself from problems you may not even realize are developing.
This article is for educational purposes only and is not tax or legal advice. Every business is different, and you should talk with your own professional about what makes sense for your situation.
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