What Your CPA Isn’t Doing For You

So you've decided to hire some support in the bookkeeping and accounting department. Where do you start?

I suggest having a both a bookkeeper a CPA at minimum. A CPA alone is not enough, and here is why:

When you hire a CPA, you likely assume that they're taking care of everything for you. But the chances are good that what you assume they're covering, they actually aren't!

There are some obvious trip-ups when working with CPAs like a lack of communication, forgetfulness, and complexity. But here I'm going to focus more on the things your CPA might not be doing that aren't quite so obvious.

In computer science, "garbage in, garbage out" (aka "GIGO") is the concept that flawed, or "garbage" input data produces garbage output.

It's the same with bookkeeping converting into tax data. The CPA will file the data that you give them, and this could result in garbage in = garbage out.

In other words, they simply file the bookkeeping data that you present them with, and probably don't verify it. 

The thing is, too many of us go to our CPAs thinking that they'll take care of bookkeeping disasters before they file your taxes. But after 17 years in the industry, I have countless stories of clients who thought their CPA was cleaning up the books before filing taxes, but weren't.

We're talking about and hundreds of thousands of dollars worth in tax filing mistakes due to faulty data.

Here's what actually happens when you give your CPA messy books:

• Your CPA will file your taxes on data you gave them. If you don’t hire a CPA to ensure that your bookkeeping is accurate, they won’t check it. There is even a disclosure you sign that says so!

Your CPA might move some figures around or cross-reference some things. But a majority of the numbers they use will be based on how accurate your accounting is.

Pro Tip: Wondering how you’ll know that they’ve checked your bookkeeping for accuracy before they file your taxes? You’ll see the bill for it!

• In the event of missing data in your books, your CPA will file based on a percentage of what you did last year. If your CPA doesn’t have data for certain areas in your books, they will likely just plug in numbers based on your past numbers to fill in the gaps. (For example, have you ever not tracked your mileage or made charitable donations, but you still see both of these things on your taxes?)

Bottom line: if your CPA is adjusts your books but doesn’t do the actual accounting, your books will be incomplete. And you can’t plan anything on incomplete books. Except maybe paying more taxes, of course!

Then, there’s the flip side. Let’s say that it’s obvious that your books are a mess. If your CPA can’t verify your data year after year, they’ll have no choice but to go into extreme last-minute organization mode to get your taxes filed on time. That sets your CPA up for all kinds of potential errors.

If your bookkeeping situation is that extreme, your CPA might fire you as a client because the risk for them is just too high.

Honestly, that situation isn’t much better because it leaves you with no tax help at all!

Here’s the long and the short of it: your CPA simply does what you hired them to do, but nothing more. They are not there to take care of the bookkeeping end of things.

CPAs are pressed for time. They're not paid to do a years worth of accounting in order to file taxes. They will take shortcuts (create journal entries) if needed to satisfy the basics (which is reactive information only) in order to file your taxes.

It's also likely that when you hired your CPA, you signed an engagement letter ensuring they are not liable to verify the data you have delivered, so no laws are broken in their doing so either. So you pretty much agreed to this, whether you knew what it implied or not.

This is why I recommend having a bookkeeper AND a CPA as part of your team.

Hiring an in-house solution for your day to day bookkeeping needs is more than "checking the boxes." It supports you paying the right amount of taxes with audit-ready books.

Bookkeepers are her assist you in real-time and proactive operations planning whereas a CPA is typically reactive and tax-focused. Both approaches are needed to keep your books and taxes on track.

So how do you go about learning how to delegate your bookkeeping and accounting with confidence? That's what this course is all about!

Let's dive into the next module, where I'll breakdown everything you're going to learn in this course.