Is Your CPA Hurting Your Business?

CPAs often seem hellbent on keeping your taxes as low as possible. But this can be a false economy that can actually hurt your business and lead you, the owner, to not understanding how your business is really working.

Here’s an example.

If you manufacture in one season and sell in another, you can wind up with a cash crunch. Think toys or fashion.

A competent finance person can help you secure seasonal financing to cover manufacturing before the sales are made.

• In one case, a savvy fashion designer hired a business planner, who discovered that the company’s CPA was expensing all her inventory, making it look like the company was losing money. That was fine for tax purposes but dumb for financing.

• The planner recast the financials to match expenses and revenues – a principle dating back to the Renaissance, when double-entry bookkeeping was invented. It turned out the company showed a net profit.

• With the fresh business plan and financials, the designer was able to secure a line of credit from her bank to fund production of her fall collection, which she was showing at the February Fashion Week in New York.

What are you doing to manage your finances?

Do you have a solid finance person who can make sure your CPA is accounting for your operations accurately?

 

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