How CPAs can help tip the balance toward success in your family business

In family-run businesses, the employees and family members wear many hats, and usually one of these is an accountant’s visor.

“When they are not trained and skilled in accounting matters, misunderstandings and mistakes happen,” says Mark A. Ulishney, CPA, partner at Case | Sabatini.

In many instances, the family business relies upon external assistance from CPAs with general accounting issues, financial reporting and income taxes. As the business grows, executives are usually able to bring in skilled employees to perform more accounting functions.

Smart Business spoke to Ulishney about family businesses’ accounting struggles and where a CPA can provide assistance.

I’ve heard a good CPA will help a family business operate in a professional fashion. How can he or she help the leaders make decisions that are best for the business?

The relationship of a CPA with his or her clients, especially in the case of family businesses, is one of trust and confidence.

Since a quality CPA is well skilled and versed in accounting and tax matters, the family business owners rely upon the CPA’s knowledge, not only in general day-to-day functions, but especially in presenting the best financial picture of the business to financial institutions while reducing the tax bite to the lowest level possible.

When it comes to longevity in a family business, what are the keys to developing a succession plan or exit strategy?

The longevity of a family business is, first and foremost, dependent upon it being successful — both financially and in its community image. It should be a desired provider of products and/or services in its field.

The members that make it successful must pass along the knowledge and skills they have obtained to either the next generation or youthful employees. This is no different than a father and mother passing on their family life skills.

How else can companies use accounting management to better maximize profits and generate more revenue?

A CPA brings experience and skill to the table and can assist family business leaders in devising plans to increase the bottom line. Because the CPA works with several businesses across different industries, he or she has a broad base of knowledge as to what has worked and what has not, and can provide suggestions of what actions would work to the business’s benefit.

There is always a cost/benefit approach to any business decisions and each business is unique in that endeavor and analysis.

How should a family business seek out a CPA?

Word-of-mouth referrals are a great place to start, and business owners should always interview a prospective CPA before engaging them. If the family business is a member of a chamber of commerce or industry-specific association, it would pose a great opportunity to network within those groups and perhaps familiarize themselves with a CPA who works with businesses in its industry.

In what areas should family business owners consult with their CPA on an ongoing basis?

The family business should not hesitate to consult with their CPA if there is uncertainty in accounting matters. Most importantly, they should keep their CPA in the loop as to what they are doing.

The last thing a CPA wants to see happen is for the client to make uninformed business decisions or to take actions that the CPA only finds out about after year-end. At that point, the CPA has not only lost the ability to plan, but also the ability to correct any mistakes. The CPA can only mitigate the financial damage.

Specific areas where the CPA should be consulted are obviously major business purchases or sales, and of course, income taxes. Other items the CPA can assist with include debt financing, lease versus purchase, employee benefit plans, software evaluation and utilization, payroll matters and more.

If there is only one takeaway from this discussion, it is to plan — with your CPA — before enacting financial business decisions.

Insights Accounting is brought to you by Case | Sabatini