The United States is home to 669,130 active and licensed certified public accounts (CPAs). With the current US population of 333,347,223, that means there’s one CPA per about 498 Americans.
That’s about half less than the number of licensed lawyers in the US. After all, the nation is proud to have over 1.32 million of these practicing legal professionals.
So, does that mean CPAs aren’t in demand in the country? What does a CPA do anyway, and why would you ever want to hire one? Isn’t a bookkeeper enough to manage your finances?
We’ll serve you the answers to all those questions in this guide, so be sure to keep reading.
What Is a Certified Public Accountant?
A CPA is a financial advisor whose job is to help clients plan, manage, and reach their financial goals. Their clients, in turn, consist of individuals, small businesses, or giant corporations.
All CPAs are accountants, but not all accountants are CPAs. That’s because to become a CPA; one must satisfy state licensing requirements. Only accountants who pass the CPA exam get awarded a license.
Are Certified Public Accountants in Demand?
The Bureau of Labor Statistics estimates accountant and auditor jobs to grow by 7% from 2020 to 2030. That’s as fast as the average growth for all other fields of employment.
However, the BLS also notes that becoming a CPA may help boost job prospects. This implies that CPAs are more in demand than uncertified accountants.
What Does a CPA Do Then?
You can hire a certified public accountant to manage all areas of your finances, from income to taxes. You can also hire one for specific CPA services, such as when you only need help to prepare your tax forms.
Whether you hire one in the long run or only for a short time, you can expect your CPA to be able to do the following.
Bookkeepers collect and organize their clients’ financial details and records. Their tasks include recording cash inflows and outflows and paying their client’s bills. For business clients, they may also collect debts and oversee payroll activities.
Certified public accountants can carry out all those bookkeeping tasks on your behalf. After all, bookkeeping is one of the first things that CPAs study and obtain experience for.
Financial Account Management
About one in five start-up businesses fail in the United States fail in their first year. This goes up to 30% for start-ups in their second year and 50% in the fifth year. By the 10th year, only 30% of organizations manage to keep their doors open to clients.
One of the most cited reasons for start-up failure is running out of funds. The money may have disappeared due to overspending or not making enough sales. Another possible reason is financial mismanagement, such as misappropriating funds.
Regardless of the exact reason, it all boils down to poor accounting. That’s why smart business owners hire a CPA from the very start, even before they open their doors to the public.
For starters, CPAs can help new business owners by planning their pre-opening expenditures. These may include rent or mortgage fees, equipment purchases, marketing, and salary. CPAs may then advise their clients on which expenses they can trim to save on overhead costs.
From there, CPAs can help clients manage their accounts receivables and payables. They’d make sure all receivables are on time to keep the cash flowing in. At the same time, CPAs make sure their clients meet their dues by paying all payables on schedule.
Review Potential Expenses and Investments
Let’s say you want to buy a new house or invest in commercial real estate. In this case, you need to factor in these properties’ prices and the taxes you need to pay for them.
For example, your state may charge both sales tax and real property tax. If you then decide to sell that piece of real property after a few years, you may also have to pay capital gains tax.
Either way, not preparing enough for these costs can result in massive losses on your part. The good news is that a CPA will inform you of all legal federal, state, or local duties you may have to deal with. In addition, they will let you know if such expenses or investments are even smart in the first place.
Provide Attestation Services
An attestation service concludes the reliability of a company’s financial statement. However, accountants can’t provide such services; only CPAs have the authority to do so.
There are several types of attestation services, but the most common is a compilation. A compilation is a financial statement of a company prepared by a CPA. The CPA’s involvement serves as the attestation itself of the document’s reliability.
Compilations are very common because many small business owners use them the most. After all, many of them don’t have full-time accountants. As a result, they choose to outsource the task of preparing their financial statement to a CPA.
Represent Clients During IRS Tax Audits
Both accountants and CPAs can prepare their clients’ tax records and statements. However, only CPAs have the authority to sign these documents. Moreover, CPAs can represent clients during audits required by the Internal Revenue Service.
Most importantly, CPAs can help prevent the need for IRS audits in the first place.
Now, keep in mind that the IRS carries out about 300,000 audits per year. Some of these are random, based only on a statistical, algorithmic formula. However, many others occur due to erroneous or suspicious financial activity.
That’s why you’d want to ensure your financial statements are always factual. Having a CPA prepare, review, and attest to it can therefore lower your odds of having to undergo an audit.
Hire a CPA to Better Manage Your Finances
There you have it, the ultimate guide that answers your questions, “what does a CPA do, and are they in demand?” Now that you know, you should be able to realize how important they are for financial management.
So, as early as today, consider hiring a certified public accountant. The sooner you do, the sooner you can get help for improving your finances.
Interested in even more guides to help you take better care of your finances? Have a look at our other tips and tricks on money management then!