Your CPA Isn’t Your CFO

“I have a CPA; why do I need a CFO?” is a common question we get from small business owners. We agree that a good CPA is an invaluable resource for companies, and we work closely with many individual CPAs and CPA firms. Full disclosure: Lucrum Consulting provides part-time CFO services for clients. While we may not be completely objective about the value of a CFO, our position and work with dozens of companies allows us to see the way the CPA and CFO roles can work together for the benefit of a company.

The differences, and therefore advantage, of each person is based on the things that drive the work.

CPAs
CPAs often specialize in a particular business niche. They’re driven by raw data, typically focusing on historical financials, and by regulations.

• Niche focus – Having a CPA with expertise in an industry sector brings the benefit of completely understanding the financial and tax implications for specific industries.
• Raw data – A good CPA takes the company’s revenues and expenses, applies available tax credits and deductions and determines the amount of tax owed to the U.S. and the state. CPAs don’t typically put together budgets or predict revenues and cash flows; they use information to estimate future taxes.
• Historical information – A good example of historical data is equipment purchase. A CPA knows how to properly set up equipment depreciation schedules and can provide guidance on how to best structure a lease for tax purposes.
• Regulations – Tax regulations change every year. CPAs help clients anticipate and adjust to tax changes that impact business and personal taxes. Both business and personal implications are important since many small businesses are closely-held companies.

CFOs
A CFO focuses on a company in addition to the industry. They’re driven by information, looking toward the future, and by business need.

• Company focus – A good CFO takes a 360 degree look at the company from a financial perspective. They work closely with the CEO or President to reach financial goals based on the company’s mission.  They work with the appropriate management team to develop product/service pricing, client and vendor contracts, and staffing.  They are usually responsible for developing and managing relationships with banks and other financial institutions.
• Information – CFOs use internal financial data and industry data to forecast future revenues, expenses and profits, develop budgets, and manage cash flow based on payables and receivables.  The analysis of organized information reveals opportunities and any underlying problems that need addressing for the health of the company.
• Future orientation – It takes an active day-to-day role to have a handle on current and future trends for revenues and profitability. CFOs take a ‘what if . . .’ approach to making financial decisions for the company. They consider what each decision will do for profitability and cash flow. For example, if a company wants a new piece of equipment to streamline processes, will it be better to lease or purchase? What are the costs and benefits for the equipment based on various assumptions?
• Business need –The CFO considers all aspects of the company to position the business to compete in the market and grow. Staffing plays a critical role in a company’s profitability. Balancing present and future needs are essential because of the financial labor burden of taking on additional people. The CFO looks at staffing from a cost/benefit perspective to determine profitability by department, job function, or individual.

Lucrum Consulting plays the role of generalist working with multiple professional resources. We often work with clients to ‘translate’ or implement CPA reports and recommendations. And while CPA firms often offer consulting, the overlap of what they do and what we do for clients is minimal. We’re not competitors; the information we share with a company’s CPA helps the CPA do his or her job better. We are often on the same page as a company’s CPA, presenting a unified voice and offering a client the benefit of two resources who are focused on the best interest of the client company.

Our clients are busy running their businesses. Having both a CPA and the services of a CFO adds value from a time perspective that also includes management strength and ideally, profitability.