| For your business to be successful you must manage a multitude of variables, among them the nuts and bolts of your product or service offerings, the complexities of your marketplace and shifting political inclinations that affect the legal environments in which you operate.
However, no matter how well you manage your business activities, you must also account for those business activities properly.
“But,” you say, “That is really not the business of running the business”…or is it? Very much so. It is, in fact, integral to running your business successfully.
To be successful, your business need not only manage its product or service offerings and respond to the market, but be capable of summarizing and clearly communicating the outcome of business activities for financing, tax and legal purposes as well. More specifically, it must communicate those results in the unique language of business: accounting. And for that, the business should seek guidance from an expert in that language: an accountant.
Just as words and grammar are used to communicate meaning and describe conditions, accounting uses numbers and generally accepted accounting principles to communicate business transactions and conditions. Fundamentally, a certified public accountant (CPA) is a communications expert, a professional who can help you precisely describe the activities of your business in that language and enhance your understanding of that language.
Some perceive CPAs as calculating clairvoyants capable of divining an exact mix of expenditures that allows businesses to minimize taxable income while maximizing cash flows to owners; others see them as overly organized professionals who delight in regulatory minutiae and crunching numbers. Regardless, they are essential to every business.
Equally essential is the establishment of an accounting system capable of capturing, recording and appropriately summarizing your business’s activities. Today computer software is universally employed to accomplish this task. Given the variety of specialized software available, however, the selection of it should include a discussion with your CPA to insure it is capable of meeting your needs.
Understand that the method employed to input data has a significant impact on any software’s ability to communicate accurately the activities of the business. The old adage “Garbage-in, Garbage-out” comes to mind. Here’s where a CPA’s training and experience with analyzing the flow of transactions through a business and identifying points in the flow where control procedures can be performed is critical.
Simple procedures, implemented and operating properly, insure the reliability of the information about the business operations and, more importantly, help the CPA in developing controls to insure that your business’s resources are being fully employed, preventing misappropriation of assets or early detection to minimize the cost of any such occurrences to your business.
Furthermore, the results of your business activities obtained from your accounting system can be compared against specific performance measures and benchmarking data unique to your industry. The results of this comparison can be analyzed with the help of your CPA to determine whether your business is operating efficiently and any areas in need of improvement.
Historically, a CPA’s most important contribution to helping you to communicate the results of your business has been to provide reasonable assurance that its financial statements recognize only the transactions occurring during the period covered by the statements and that the transactions have been measured and disclosed in accordance with generally accepted accounting principles. They check the grammar so to speak.
While not immediately evident, this assurance reduces a business’s cost of financing. It provides lenders with confidence that the financial statements accurately reflect the business operations and are reliable, enabling them to extend credit at the lowest cost possible.
To give further creditability to the assurance they provide, every CPA firm that issues a report as to the accuracy of financial statements is required to undergo an examination, referred to as Peer Review, of the system the firm maintains to insure such engagements are performed in compliance with auditing and accounting standards. Consequently, if your business will need an audit or review, the firm you select must have completed its Peer Review. While a firm that does not perform assurance services, it is not required to complete a Peer Review and not completing one should not detract in any from its competencies or capabilities in non-assurance services it renders.
Common sense dictates that, if successful communication requires you to use as unique language, you should utilize a professional trained in and possessing experience with it. For communicating in the unique language of accounting, a CPA is just the professional you can count on.
John D. Blair Sr. is a managing partner at Blair, Bohle & Whitsitt, PLLC, a CPA firm that provides accounting, assurance, tax compliance and planning services, in addition to strategic planning and tax minimization strategies to privately held businesses. Contact him at 704-841-9800 or visit www.bbwpllc.com.