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The Difference Between Your CPA and a Controller – Part 2

Posted on August 26th, 2017

Jack Kern
Owner, President
Outsourced Accounting Department, Inc.

Our firm is unique in that, unlike most accounting firms, our initial focus (as the name of our firm implies), is on the client’s internal accounting (The Difference Between Your CPA and a Controller: M1).  We offer a full spectrum of accounting services all “under one roof,” ranging from bookkeeping services, to CFO and Controller Services, to year-end tax preparation.  In this way, the client’s internal books are always accurate and consistent with their year-end tax return.

However, from time to time we (my wife, Marianne, and I) each work with our own clients with whom the other person is not involved. Marianne is a CPA and her primary role is income tax preparation. As such, she has some clients who prefer to do their books themselves and just want her to do the taxes at year-end.

In contrast to Marianne’s role, my background and experience is as a controller and CFO.  As such, my primary focus is on the client’s internal (“book”) accounting.  And I have some clients who have their own tax accountant and came to me for their bookkeeping services only. They were either referred to me by their CPA who prefers not to get deeply involved in the client’s internal accounting and bookkeeping; or, they found me some other way not wanting to do their bookkeeping themselves, instead preferring to focus their time and effort on their own business.

As mentioned above, a few of Marianne’s clients prefer to do their own bookkeeping (against our advice). The occasional problem, however, is that her client doesn’t understand either accounting OR QuickBooks.  Consequently, they are making numerous bookkeeping mistakes throughout the year that Marianne has to clean up.  Plus, they are not receiving the ongoing financial explanations and tax planning they need as a small business owner.

One such client was surprised to learn that his business realized a significant net profit for the year upon which he now owes taxes. And why was he surprised? Because he had drained all of the cash out of the business either as payments to himself or for his personal expenses, and paying back loans. Consequently, his business was continuously starved for cash.  So to him, the business didn’t “feel” like it was profitable. In addition, he had not paid in any income or payroll taxes during the year, a big red flag for the IRS, especially for S-Corporations.

In short, this client (despite our best efforts) didn’t understand the difference between “profit” and “cash flow,” a subject about which I’ve written numerous articles. In fact, in one way or another, just about every article we’ve written would apply to this client. But rather than listing them all here, browse through our blog, including in the archives to the right of the page that are listed by month.

To sum up, this article from Entrepreneur Magazine addresses my main point perfectly: Getting the Most From Your Accountant Means More Than Just Doing Your Taxes.

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