When setting up a business, a lot of factors come into play with respect to handling tax and financial responsibilities. This calls to mind the necessity of choosing a CFO or a CPA, or both. While some entrepreneurs contend that once they have one, they do not need the other (thinking they perform the same roles), nothing can be further from the truth.
Although they perform related functions and their academic background may even be similar in some respects, a CPA is not the same as a CFO, and vice versa. Having a thorough understanding of the roles and responsibilities of either profession, as well as their impact on your business, is pivotal to your success as an entrepreneur.
This article, therefore, describes who CFOs and CPAs are and their duties. It also highlights the major differences that exist between them and when you need either or both to run your business successfully.
WHO IS A CFO?
A member of an organization’s C-suite, a Chief Financial Officer (CFO) occupies the topmost strategic financial position in a company and oversees all the activities that relate to financial planning and analysis, financial strategy, financial reporting, financial risk management, fund acquisition and allocation, budget analysis and scrutiny, and mergers and acquisitions, among others.
The CFO sits high on the corporate ladder, helping organizations make sound financial decisions and also taking responsibility for the fiscal health of enterprises.
The CFO serves as the highest-ranking financial advisor of the company and usually reports directly to the CEO while collaborating with the board of directors.
WHO IS A CPA?
A Certified Public Accountant (CPA) is a qualified professional accountant licensed to provide accounting services to individuals, businesses, and other corporate organizations.
A CPA isn’t just an accountant. CPAs provide all the accounting services there are, but not all accountants can perform the same roles that a Certified Public Accountant can. A CPA is an accountant who has undergone further training and has passed rigorous licensing examinations before earning the CPA designation. It suffices to say then that all CPAs are accountants. The converse, however, isn’t true.
The responsibilities of a CPA are:
- Tax planning and preparation for clients
- Computation of tax returns
- Auditing of financial statements
- Ensuring clients are compliant with extant tax laws and regulations
- Offering vital financial insights on increasing profit margins
- Reducing risks
- Eliminating debt burden
- Tracking and optimizing clients’ earnings and expenses
Overall, CPAs help business owners reach their financial goals and milestones. To understand Provision’s full suite of Strategy, Accounting, and Bookkeeping services, see our Services breakdown.
DIFFERENCES IN EXPERTISE BETWEEN CFO & CPA
Despite being professionals within the same sector, CFOs and CPAs are as different from each other as chalk and cheese.
Some business owners, however, find it hard to distinguish one from the other and often reach a crisis point when deciding on who to hire for their business. As a result, they may receive services that are not aligned with their true business need.
There are two key differences that distinguish a CPA from a CFO:
1. BREADTH VS DEPTH
While CPA firms such as Provision CPA have a specialized focus on managing tax strategy for business owners, CFOs are skilled at designing overarching long-term financial strategies for an organization as a whole.
CPAs bring their wealth of experience in accounting, tax laws, compliance, and management to assist their clients in implementing efficient tax structures that not only keep them inside the law but also help them to save as much money as possible.
CFOs, on the other hand, are employed to execute financial strategies for organizations. They help companies formulate long-term financial policies and carve feasible prospects that are necessary for the overall financial health of the enterprise.
2. PROFITABILITY VS SUSTAINABILITY
CPAs explore all available options to improve a company’s profitability. They connect the dots and bridge the gaps in accounts, financial statements, and records to widen profit margins and rescue their clients from being or remaining in the red.
CFOs, however, are engaged in the all-around administration of a company’s financial escapades both in the short term and long term. The buck stops at their tables on all financial matters in a bid to ensure the survival and sustainability of the company.
THE FIRST STEP IN MAKING A DECISION IS ARTICULATING YOUR COMPANY’S GOAL OR PROBLEM
Before hiring a CFO or a CPA, have clarity on the urgent and critical problems to solve or opportunities to leverage in your business in the short term and long term. This will help you make informed decisions on who your best option is to move your business to the next level of growth that you desire. Are you looking to minimize tax? Are you looking to optimize your shareholder structures? Or perhaps take a more proactive approach to your organization’s profit and cash flow? Be prepared to discuss these in detail in your initial meetings with either a CPA or a CFO candidate.
So, what does your business need – a CFO or CPA? Or both?
WHAT ABOUT A CPA WITH ENTREPRENEURIAL INSIGHT?
Provision CPA is the entrepreneur’s accounting and taxation firm that does more than the ordinary business of accounting. Rather, we have a team of Tax Accountants and CPAs who are both accounting professionals and seasoned entrepreneurs. This way, we double the advantage of our clients by providing them with premium accounting, tax and financial strategy.
We take pride in being the only accounting firm in Vancouver, Canada, that guarantees every client on-call access to our strategic advisors per time all year round.
With over twenty years of entrepreneurial accounting experience under our sleeves, we guide our clients, walk them through their sore points, and help them overcome the odds stacked against them on their entrepreneurial journey.
Are you a business owner seeking answers to those questions that keep you awake at night? We’re just a click away! Let’s discuss your goals and opportunities and position your business for greater success.
Image credit: Sora Shimazaki on Pexels.