Maximizing tax savings for a company and its owner requires teamwork between both its CFO and CPA, each contributing different perspectives, skills, and functions.
However, many business owners believe that they do not need a Chief Financial Officer (CFO) when they have a tax CPA. There is good reason for this confusion as some CFOs have CPA licenses and some CPAs do perform some CFO type duties. However, there are two distinct and separate roles for each.
CPAs typically provided technical expertise in attest and tax functions such as preparing compilations, reviews and audits of financial statements as well as provide expert advice on tax matters. Some CPAs specialize in international taxation, audits, etc. These functions are performed outside the organization since independence from their client is often required. CPAs must have years of training, pass technical exams, have specified practical experience and are certified to perform these services.
CFOs are primarily responsible for managing the specific daily, monthly, and long term financial risks of a company, its financial planning, record keeping, and financial reporting responsibilities. CFOs have frequent interaction with a company’s staff and management, so they are aware of a company’s current situation and the direction it is taking. Through this extensive interaction with both the leadership and all parties involved at an organization, , a CFO understands the specific issues, tax rules, regulations, and culture to help management and owners run their businesses. Additionally, a CFO recognizes potential opportunities for tax planning. A sample of these items are 100% vs 50% deductible travel and meal entertainment expenses, research and development tax credits, management and owners personal tax situations and goals, etc.
A CFO needs to actively communicate these opportunities for tax planning and then understand and apply the CPA’s advice. Working together, the CFO and CPA can be an effective team to help management implement tax strategies and minimize taxes.
One way I ensure effective tax strategies is to require a 4th quarter tax planning meeting between the CFO, CPA, and management. In this meeting, we discuss the current year to date financial results, tax and business strategies to optimize the business and business owners’ tax situations, and develop longer term strategies for the following year(s).
As a consulting CFO at a2zCFO, LLC, we bring more than 30 years of diverse experience in finance, accounting, strategies, tax planning, and compliance to small and mid sized businesses, family offices, and nonprofit organizations. We are collaborators and team players with CPAs, tax attorneys, bankers, and mostly CEOs and business owners, to “keep your ship on course.”