4 Reasons a Small Business Needs a CPA

Apr 2, 2024

4 Reasons a Small Business Needs a CPA

For many small business owners, the ongoing demands of daily operations and the constant change of laws and regulations present a daunting challenge. With limited resources and expertise, these entrepreneurs often find themselves in an uncertain position. Running a profitable business while attempting to promote growth becomes a constant juggle. Each decision carries weight, making the necessity for financial expertise abundantly clear. Some may view hiring a Certified Public Accountant (CPA) as an additional expense. However, the value they bring to small businesses is irreplaceable. Here are four reasons a small business needs a CPA:

Provides Expert Financial Guidance

CPAs are highly trained professionals. They have spent many years going through rigorous training to perfect their craft. Specializing in areas such as accounting, financial management, and taxation. Their extensive knowledge allows them to provide tailored guidance to your business. Helping to promote growth while assisting in achieving the business’ goals.

Ensures Compliance with Regulations

Laws and regulations, especially regarding tax, are ever-changing. On top of that, they can be quite complex. CPAs help small businesses navigate these ‘bumpy roads.’ They not only help with ensuring compliance, but also can help develop strategies that are beneficial for your business.

Improves Business Efficiencies

CPAs have a ‘knack’ for identifying inefficiencies in businesses processes and procedures. Often providing solutions to implement streamlined procedures, better accounting software, and establish internal controls. Having the skills to analyze data to identify strengths and weaknesses goes a long way as well.

Accurate Financial Data

CPAs help small businesses maintain accurate financial data. This is done through account reconciliations and trend analysis. Not only does this ensure accurate financial data, but it points out any anomalies that may need to be further investigated. Accurate financial data leads to accurate financial statements. CPAs prepare financial statements, which provide insight into a business’ financial performance.

These are four reasons a small business needs a CPA. Although, the expense of a CPA may seem like a burden to business owners. The vast amount of knowledge and expertise far outweighs the expense. Here at Cheryl Jefferson & Associates we specialize in helping business owners achieve their goals.

Contributed by: Elizabeth Partlow

The Importance of Data Security for Small Businesses

Mar 1, 2024

The Importance of Data Security for Small Businesses

Small businesses are growing more vulnerable to cyber threats and data breaches. They have become a prime target for hackers. Cyber criminals focus on these types of businesses because they often lack resources that their larger counterparts have. The consequences of a data breach can be devastating. Often leading to financial losses, damaged reputations, and even business closures. Small businesses must prioritize data security to safeguard their assets. Understanding what data security is, and following simple steps can help protect your small business from a data breach.

What is data security?

Data security refers to the protection of digital data from unauthorized access, corruption, or theft. It consists of three core elements: confidentiality, integrity, and availability. Data security involves implementing an array of techniques, technologies, policies, and procedures. This process is designed to safeguard data from potential threats and vulnerabilities. Data security seeks to mitigate risks associated with unauthorized access, data breaches, cyber-attacks, and other potential threats to sensitive information. It is essential for protecting the three core elements, ultimately, safeguarding businesses and their clientele.

Protecting your data

Small businesses have many options to be proactive and safeguard their data. This helps to significantly enhance their data security. By implementing a combination of these steps, businesses can protect their data against cyber threats and data breaches.

Implement Strong Access Controls: Establishing strong authentication methods, with role-based access controls helps to reinforce data security. This allows businesses to regulate access to sensitive data. Ultimately, ensuring that only authorized personnel can view or manipulate it.
Educate Employees: Investing in ongoing employee training programs on cybersecurity is essential in safeguarding your data. Employees play a crucial role in maintaining data security. Therefore, it is imperative that they understand the importance of strong passwords, recognizing phishing attempts, and following security policies and procedures. Prioritizing employee training can help reduce the likelihood of security breaches and enhance overall data security.
Encrypt Data: Businesses should utilize encryption techniques to protect data both at rest and in transit. By encrypting data, if an unauthorized user gains access to it, they will not be able to decipher it without the decryption key. Developing proper procedures for sensitive data through encryption helps to prevent unauthorized access to confidential information.
Backup Data Regularly: Regular data backups are essential for mitigating the impact of data loss due to a cyberattack. Businesses should have automated backup processes in place to create copies of critical data. Backups should be stored securely in cloud storage or somewhere offsite.

Data security is paramount for small businesses due to the number of risks and threats they face every day. Implementing data security measures helps to reduce the risk of a successful cyberattack. As a small business, we truly understand the importance of data security and the pain points you may be facing.

Contributed by Elizabeth Partlow

Signs You Have Outgrown Your Bookkeeper

Feb 1, 2024

Signs You Have Outgrown Your Bookkeeper

Bookkeepers play a vital role in managing financial records for small businesses. However, as a business undergoes development and growth, its financial needs may surpass the capabilities of a bookkeeper. Depending solely on a bookkeeper may become insufficient during these stages of growth. It becomes imperative for the business’ success to adapt to its evolving financial needs. But how does a business owner know when it is time to make these changes? The key is recognizing the signs that indicate the business has outgrown its existing bookkeeping setup.

Here are four signs your business has outgrown its bookkeeper:

You Are Too Involved in Bookkeeping

Business owners should be focusing on growing their business, not closing their books. An owner that is heavily involved in the day-to-day bookkeeping tasks is a clear indicator that the business may have outgrown its bookkeeper. It is natural for owners to be hands-on in the beginning. However, ongoing heavy involvement can become a bottleneck as the business expands. Business owners are most effective when they focus on strategic decisions, driving growth, and enhancing core business aspects.

Technological Adaptation is Limited

Leveraging advanced accounting software and integrating financial systems with other tools is essential for efficient financial management. A business’ bookkeeper must keep up with these advancements and improve their knowledge continuously. Without this development and knowledge in technology, there is a misalignment with the evolving needs of your business. Ultimately, a clear indicator that you have outgrown your bookkeeper.

Lacking Internal Controls

At times, a business’ ‘bookkeeping department’ includes one person performing multiple tasks. Internal controls are essential for detecting and preventing errors in financial processes. As a business expands, the volume and complexity of financial transactions grows. Without proper internal controls, including segregation of duties, risk of errors in record-keeping, reconciliation, and financial reporting increases. Lacking internal controls may be another sign you have outgrown your bookkeeper.

Your Business is Too Complex

As your business grows, its financial needs often become more complex. This is where strategic planning comes into play. Strategic planning involves forward-thinking, which focuses on forecasting and anticipating future goals. A bookkeeper’s role should evolve with the company. However, if your bookkeeper’s primary focus is on routine tasks and does not actively participate in the planning, this is a clear indicator you have outgrown your bookkeeper.

Recognizing the signs that your business has outgrown its bookkeeper is not an indication of failure. It presents you with an opportunity for strategic enhancement. At Cheryl Jefferson & Associates, we focus on accounting and forward-thinking development for small businesses.

Contributed by Elizabeth Partlow

Year End Checklist

Dec 22, 2023

Year End Checklist

Businesses worry about more than just gearing up for holiday festivities at year end. During this time they experience ‘crunch mode’ in order to complete many year-end tasks. Including closing their books, compiling annual statements, and meeting tax deadlines. Year-end requires a diligent approach to financial reporting. There are several steps that will help your business at year-end to ensure accuracy and compliance. To ease this process for you, we have put together a checklist for a seamless year-end review.

Get Organized

Now is a great time to embrace that accounting software you have been eyeing for awhile. It will help with efficiency, as well as accuracy.
Not ready to take on an accounting system? That is ok! However, you will want to organize your paper trail. Performing this task through out the year, helps to ensure you have comprehensive documentation of expenses.

Review the Trial Balance

After organizing your financial data, review the Trial Balance report. You will want to review the balances of your business’ accounts. Also, make sure to review the activity of accounts with zero balances.
Analyze balances for variances—incorrect debits or credits, unexpected account balances. Also, review the classifications of all transactions. If there are any misclassifications, be sure to resolve these.
Make sure to prepare reconciliations for the bank statements, credit card statements, and statements from third-party providers.

Payroll Expense Reconciliation

Payroll expenses are prone to error; therefore, it is important to reconcile the payroll expenses with the 941, 940, and SUTA tax returns.
To avoid penalties, ensuring compliance with the IRS regulations is essential.

Review Accounts Payable and Receivable

Review both the A/P and A/R aging reports
Ensure there is no missing information, and the outstanding balances, not only are accurate, but reconcile to the Trial Balance report balances.
- Accounts Payable: this means that all bills and bill payments have been recorded.
- Accounts Receivable: All invoices are recorded and have been sent out to customers. Any payments from customers have also been recorded.

Work-from-Home State Tax Implications

Asses the state tax implications for remote workers
Document all employees’ work locations, accounting for potential tax liabilities for different states.
Review rules for additional tax filings based on each state’s regulations.

Take Inventory of Property and Equipment

Do not forget to review your fixed assets, including those with remote employees.
Document any new assets, disposals, and modifications and update the fixed asset listing.
Ensure the depreciation balance is accurate for the year.

Review Trends

Reviewing trends helps to ensure that all financial data is complete and accurate.
Fluctuations will pose red flags and will require a deep dive into what is going on. Ultimately, identifying misclassifications, missing entries, etc.
Assessing the trends should be done over several periods. At year-end it is recommended to perform this over multiple years.

A thorough year-end checklist is an indispensable tool for any business. While this checklist provides guidance, it does not cover every detail of the year-end process. Our team helps facilitate a proactive approach ensuring your business is prepared for year-end challenges throughout the year.

Originally written by Cheryl Jefferson Cooke

Updated and additional content provided by Elizabeth Partlow

Joint Ventures

Nov 1, 2023

Joint Ventures

A joint venture is a business arrangement where two or more businesses work together on a specific project or business activity. They combine resources and expertise to achieve common goals. This collaboration is a way for businesses to pursue opportunities, share risks, and leverage each other’s strengths. However, businesses can still maintain a degree of independence. These ventures do require careful planning and clear communication between the parties. This helps to ensure the success of the venture and to manage potential conflicts. While there are many types, each provides a number of benefits for businesses.

Types of Joint Ventures

Joint ventures come in many different forms to meet the specific goals and needs of the parties. There are four common types, which are:

Project Based Joint Venture: Is a temporary and strategic collaboration between two or more independent entities. Entities execute a specific project or a series of interconnected projects. It has a beginning and end date and focuses exclusively on the successful completion of the project’s goals and objectives. Common industries for these ventures are construction, engineering, and real estate development.
Function-Based Joint Venture: Multiple entities perform specific business functions or activities. Each entity brings unique strengths, capabilities, and/or resources to the table. These ventures leverage the distinct skills of each entity to attain common objectives. The manufacturing, marketing, and research and development are a few industries that use this joint venture.

Vertical Joint Venture: Is a strategic collaboration between multiple entities at different stages of a supply chain or production process within a specific industry. The primary goal is to improve coordination, efficiency, and competitiveness. This is done by leveraging the unique strengths and capabilities of each entity. Also, they formalize their collaboration through a structured agreement. Some of these ventures create new legal entities to oversee joint operations. The agriculture and automotive sectors often used these ventures.

Horizontal Joint Venture: A strategic collaboration joining entities that operate within the same industry. This venture is designed to combine the entities resources, expertise, and capabilities to achieve their goals. While improving their competitiveness within the industry. Additionally, these joint ventures promote resource sharing, risk reduction, and the ability to capitalize on economies of scale.

Benefits of Joint Ventures

There are many advantages businesses that seek when choosing to collaborate and form joint ventures. First, there is resource sharing. The entities combine their resources, while reducing their costs.

Also, risk mitigation occurs. Risk is spread amongst all the businesses, helping to provide a safety net regarding unforeseen challenges. Joint ventures also open doors to new markets, and new customers. Lastly, by combining forces, companies can achieve a stronger competitive position in their industry, making it more challenging for competitors to match their capabilities.

Joint ventures provide many benefits to businesses. However, not understanding them can cause joint ventures to seem somewhat daunting. Allow our team of experts to help you!

Contributed by Elizabeth Partlow

Debunking Myths: Why Not Outsourcing Your Accounting Is a Missed Opportunity

Oct 17, 2023

Debunking Myths: Why Not Outsourcing Your Accounting Is a Missed Opportunity

As businesses evolve, the complexities of handling financials internally can become overwhelming. Despite the apparent advantages of outsourcing your accounting, many decision-makers hesitate due to certain prevailing misconceptions. Let’s dive into these misconceptions and shed some light on the realities.

Debunking Common Misconceptions About Outsourcing Accounting

1. “I’d be relinquishing control over my finances.”

Fear of losing control: The thought is that by outsourcing, one might be handing over too much power and could be kept in the dark about their own finances.

Reality Check: Outsourcing is about collaboration. You’re delegating tasks, but you remain in the driver’s seat, making informed decisions. You’re merely lightening your workload, not surrendering control.

2. “What if they mess up.”

Concern over reliability: There’s a belief that an external team might make mistakes, leaving the primary business responsible for cleaning up.

Reality Check: Established accounting firms prioritize precision and reliability. Their reputation hinges on delivering quality work.

3. “Outsourcing seems cost prohibitive.”

Misconception about cost: The presumption is that outsourcing accounting will cost an arm and a leg.

Reality Check: While there’s a cost involved, the potential returns in terms of time efficiency, error reduction, and insightful expertise are substantial.

4. “External parties might breach our confidentiality.”

Concerns over privacy: Some business leaders fear sharing sensitive financial data with external entities.

Reality Check: Any reputable accounting firm has stringent confidentiality policies in place. They’re committed to safeguarding client information.

Wrapping Up the Discussion

Having dissected these common reasons for not outsourcing your accounting functions, it becomes evident that many of these concerns might be unfounded. Embracing external expertise can pave the way for more streamlined operations and informed financial decision-making.

Looking to shift your focus to growing the business? Virtual CFO provides GovCon-centric strategic accounting for small businesses providing services in technology, architecture, engineering, aerospace, and project management industries.  

We know your pain points – let us help you relieve them – schedule a consult. 

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