We get this question a lot, so don’t worry if you don’t know the difference between a CFO and a CPA. Here’s what you need to know as a small to medium-sized business owner.
What’s a CPA, and what’s a CFO?
A CPA is a Certified Public Accountant who provides tax and auditing authorization. A CFO is a Chief Financial Officer who manages financial strategy, with higher-level expertise.
All CPAs are accountants, but not all accountants are CPAs. Education, experience and opportunity distinguish the two. CPAs are certified through the CPA Exam. In addition to the exam, CPA’s are also required to meet an experience requirement and report continuing education requirements to their state licensing board to maintain active licenses.
While a CFO may have their CPA certification, they don’t necessarily have an accounting background. In addition to financial knowledge, their role requires a bigger-picture understanding of business and leadership. They often have a background in areas like business administration, operations, and resource management.
What does a CPA do?
A CPA manages essential accounting functions — most importantly, those related to tax and compliance law. They will:
- Manage and audit your financial records
- Prepare and file your federal and state taxes to maximize your returns
- Ensure your finances and reporting are compliant and audit-ready
- Provide tax planning and estimates
- Ensure your financials are in order before fundraising
- Represent you in front of tax authorities
What does a CFO do?
CFOs understand the longer-term strategy for your business and the market as a whole. They will:
- Prepare you for the future by building forecasts that turn your business goals into measurable plans
- Manage your entire financial plan across the company, from identifying cost savings to managing budgets, financing, and operations
- Interpret your financials to help you make important decisions
- Streamline your accounting process to manage growth and your changing needs
- Maximize profitability and invest your assets
- Create proactive tax and fundraising strategies
- Steer you through mergers, acquisitions, public offerings, and expansions
- Advise on financial markets, legislation, and trends, such as how blockchain will affect your business
- Manage relationships with lenders, investors, and shareholders
- Create a safety net by protecting company assets, identifying risks, and managing insurance
When do you need a CPA or CFO?
CPAs and accountants look back and record what has been done. CFOs, on the other hand, are forward-looking and future-focused.
Accountants can prepare and file your tax returns, but their ability to represent you before the IRS is limited. CPAs, however, can represent you if you’re audited and advise you on higher-level tax decisions.
CFOs are important if you’re focusing on business growth — especially if you plan on raising money. Investors look for more than just solid books. They want to be confident you’ll succeed, which requires a financial forecast and growth strategy. Experienced CFOs know what investors look for, and their presence alone communicates that you’re serious and sophisticated.
Don’t stress if you aren’t ready to hire a full-time person for either of these roles. Acuity can serve as an extension of your team. We provide whatever you need — and only what you need. Those are the benefits of working with a virtual CFO or a virtual CPA. Still not sure what you need or have additional questions you’d like to discuss? Get in touch today. We’d be happy to chat!