Small Business: America’s Economic Backbone
Walk down any main street in America and you’ll be surrounded by small businesses. Barbers, flower shops, nail salons, restaurants, and more are independently owned and operated by people who love what they do.
There are 31.7 million small businesses in the United States employing 61 million people, or approximately half of the entire private sector workforce. Since 2000, small businesses have created 65.1% of all new jobs.
Small business owners know their time is valuable and it’s best spent serving customers, but behind the curtain there’s a wide range of core business functions that must be met in order to be successful. Small-business owners are often experts in their craft but need help navigating the murky waters of compliance, tax, accounting, and other administrative nuances. Enter the CPA.
Payroll Isn’t Automatic
Getting paid the correct amount on time is essential for employees, but it’s not automatic. CPAs help small-business owners calculate the correct payroll schedule for each employee. They also help set up businesses with the right technology to make payments to employees and vendors.
Taxes Are Essential
Not paying taxes is the fastest way to make a business fail. Not only do small-business owners need to estimate withholding from employee paychecks (social security tax, income tax, etc.), they must also estimate their own taxes on profit before cutting checks to the IRS and state government. CPAs accurately estimate taxes to keep businesses operating and small-business owners out of jail.
Know Your Numbers, Know Your Business
Revenue comes in and payments go out. New product inventory arrives, and old inventory gets sold. In the middle are records - records of everything, including inventory, sales, depreciation, accounts payable, and accounts receivable.
Those records must be accurate so business owners can make informed decisions about their business. CPAs give small-business owners the tools they need, and help them develop processes, to keep accurate records so they can live up to the saying: Know your numbers to know your business. Not only do CPAs assist with accurate records so business owners can make informed decisions, CPAs also understand what makes the business work often from an operations standpoint and certainly from the inter-relationships of the financial activity – cause and effect. CPAs work with the business owner to understand the impact of transactions on business success.
Innovate to Participate
Most small-business owners don’t have the resources to assemble focus groups and take years to develop a new product or service. They have an idea that meets a need for their customers and immediately put it out into the marketplace. Their community and customers are a mirror that will quickly reflect the value of the new offering.
But what will you charge? How much will it cost in terms of time and materials? CPAs understand pricing models, impact of capital expenditure, what it takes to bring products or services to market and relay those insights so the small business owner can continue to innovate and participate in an ever-changing marketplace.
Lean On Me
When the pandemic threatened to shut down small businesses in towns across America, communities rallied to provide support. The profession helped connect relief funds to those who needed it. There are countless examples of CPAs helping small businesses navigate the complex Paycheck Protection Plan (PPP) loan application process so they could continue to make payroll and remain solvent.
Thousands of restaurants were forced to shut down due to the pandemic, and those that remained open had to get creative. CPAs helped independent restaurant owners transform their business model, from offering contactless pickup and delivery to digitizing menus. Many restaurant owners have said they’ll make the changes permanent.
While these are recent and stark examples, the same is true when small businesses must adapt to new government regulations, apply for grants, or otherwise engage with areas of the government beyond paying standard taxes—there are almost always financial implications that need to be understood and accounted for.
Approximately half of new small businesses fail after five years because competition is fierce and the marketplace is constantly changing. CPAs help small businesses solve critical problems, strengthen business operations, and be more competitive to keep up with the changing business landscape.
This makes CPAs strategic business partners for many small business owners. For example, if you’re a main street store offering great local-made products to customers walking through the door, a CPA can help you join the digital revolution and sell products online, potentially reaching millions of new customers.
CPAs can help because they have the knowledge, experience, and ongoing training to give businesses on main street a leg-up in the marketplace. While CPAs work to ensure core operational needs are met, small-business owners can focus on what they do best, serving their customers, providing valuable services to their communities, and innovating new solutions to common problems.