5 Things Your CPA Wants To Tell You But Won’t…

income-tax-491626_1280If you own a business, you already know what an asset a good CPA can be when dealing with tax issues. However, your CPA’s experience and expertise covers more than just tax issues. Think about it: He or she deals with business financial issues all day, every day, and his or her clients range from sole proprietors to large corporations. Your CPA learns from his or her clients’ missteps as well as the clients’ successes. There is a lot more knowledge there about general business and financial savvy than you might realize, but a smart CPA knows that offering unasked advice can be seen as “crossing a line”.

So what would your CPA tell you if they could?

  1. Pay your bills on time. Not early, not late, but on time. Paying bills late will adversely affect your credit score, which can affect you later on when you need to borrow money for business capital, buy a home, etc. Everyone knows this. But paying your bills early has no similar positive effect on your credit score. The only exception to this rule would be if you receive favorable terms to pay your bill early, which is usually a percentage discount off the total amount. This can be a great incentive to take care of your financial obligations early.
  2. Statement of cash is the most important statement you can look at as a business owner. Profit and loss reports can be misleading. There are several methods used by corporations on profit and loss reports that have the effect of making the business look more profitable to investors.
  3. Ask for a line of credit when you don’t need it. The reason why is simple: lending institutions are more likely to approve lines of credit when the business is in a period of smooth sailing, rather than when the business is having momentary difficulties… which is exactly when you need to have a line of credit.
  4. It is always better to talk to taxing authorities if you receive a notice then to ignore them. If there is a dispute, discrepancy, miscommunication or misunderstanding between a business and a taxing body (local, state or federal), there is a 0% chance that the matter will “go away” on its own. On the other hand, there is a 100% chance that ignoring the issue until later will end up being more difficult, more costly and more time consuming to resolve than if you keep the lines of communication open.
  5. If you provide more than 50% of living expenses for someone related to you, they could be considered your dependent. The age of that person or whether that person is a child or other relative may or may not be a factor. Talk to your CPA and they will be able to shed light on your particular situation.

(And before you ask… no, your dog named Jake and your cat named Kalamazoo do not count, no matter what percent of expenses you pay. Sorry.)

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