Q&A with Tom Porter of ProActive Tax & Accounting
The Business Report sat down with Tom Porter to discuss the many important reasons why business owners benefit from working closely with a CPA.
TBR: For those who may not be certain, can you start by explaining what CPA stands for and what it means?
Porter: CPA stands for Certified Public Accountant. Those who have earned the CPA designation have met rigorous standards set by their state’s Board of Accountancy in the areas of education, experience, ethics and—of course—successful completion of the CPA exam. CPAs help clients meet their tax filing requirements and address issues that clients may face with the IRS or state authorities.
CPAs also help individuals and businesses plan for the future in ways that will minimize taxes and improve their chances for success.
TBR: Why is it important for business owners, especially small business owners, to utilize the services of a CPA?
Porter: There are two key reasons why business owners should work with a CPA. The first is that many business owners don’t know what they don’t know. Ignorance of the law is not a valid excuse, and the penalties that businesses can incur for their failure to follow various state and federal requirements can be quite steep, sometimes running to tens of thousands of dollars. Unfortunately, at ProActive Tax & Accounting we see many examples of this scenario every year.
The second reason we recommend working with a CPA is that a successful small business owner is going to make more money by doing what they know best—running their business—than they will if they spend a lot of time trying to do tax and accounting work themselves. Leave those jobs to us and make more money for yourself and your family!
TBR: What are some considerations business owners should consult with a CPA about on a regular basis?
Porter: At least annually, business owners should meet with a CPA to review the financial statements and tax return for their business, as well as their personal tax return, to make sure that any areas of concern are addressed and to identify effective tax-saving strategies.
Most small businesses would also benefit from a regular CPA review of their accounting system and procedures. For example, there are frequent technological innovations, updates and new products that can help businesses to capture, record and share business financial data in more efficient ways.
TBR: How can a CPA help a business owner clamp down on their cash flow and assess the overall value of their business?
Porter: A CPA can help a business owner compare key financial and performance ratios for their business to what is considered “normal” for their industry, in order to assess a particular business’s strengths and weaknesses. Obviously, the more strengths a particular business has, the higher its overall value.
A CPA can also help a business owner analyze cash flow by looking at trends over time and comparing them to industry standards (for example, how does the business’s average Cost of Goods Sold compare to its industry’s average?).
TBR: What advice would a CPA give to help a business owner prepare for (and survive!) tax season?
Porter: Be proactive! Schedule a meeting with your CPA BEFORE tax season starts (that is, before the end of the year) and talk about any unusual events and/or transactions that occurred during the year. Ask questions that have been on your mind about the business and see if there are tax-saving moves that can be made before yearend.
Also, once the tax year is past, get your stuff to your CPA EARLY! Clients who bring their stuff to us in January (or at least early in February) get their returns done early and have more time to plan for any taxes owed. Well-organized tax documents also streamline tax return preparation and reduce the number of follow-up questions to clients.
TBR: What are the most common mistakes business owners make when working with their CPA?
Porter: Clients, particularly small business owners who are enjoying great sales growth, frequently underestimate the amount they need to set aside for taxes in order to avoid having to write a large check on April 15. If your business is having its best year ever, share a yearend projection with your CPA and be better prepared!
Another common mistake we see is the client who comes in close to a tax filing deadline, only to find out they could have saved a lot of money if they had come in BEFORE the end of the tax year, when they had more options. Be proactive and avoid this mistake!
TBR: What is the best part about your job?
Porter: I love the clients I get to work with and how much I learn about the many ways that people find success in our community. We have a lot of smart, hardworking folks in the North Florida area, which makes this a great area to live and work.
Tom Porter is the Senior Tax Manager at ProActive Tax & Accounting in Jonesville.