How a CPA Can Provide Expert Financial Analysis for Your Business

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CPAs can help a business owner prepare financial statements that are accurate and reliable. They also assist with tax preparation and filing to ensure federal, state, or local tax law compliance.

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They can help a retail business examine profit enhancement solutions in all areas of the operation, from supply chains to technology. They can also provide expert guidance when undergoing an IRS audit.

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Financial Statement Analysis

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Financial analysis is evaluating how a company is performing and making decisions. It can help ensure the business is earning a return on its capital, growing profitably, and generating enough cash to meet obligations and pursue opportunities.

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Strictly speaking, financial analysis is a part of accounting and includes reviewing three significant documents that every business must maintain: a balance sheet, income statement, and cash flow statement.

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These documents detail a business’s assets, liabilities (debt), and equity at the end of each accounting period. Analysis of these documents includes examining trends over time and using various performance metrics to conclude how the business is doing.

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Some financial analysis methods include horizontal and vertical analysis. Which examines line items in the statements and looks at how they’re related, and ratio analysis. Which brings data points from multiple statements together based on a specific metric. For example, a quick ratio KPI tracks the number of short-term assets like accounts receivable that can be converted to cash.

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Cash Flow Analysis

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A CPA provides detailed cash flow analysis to help you understand the health of your business. This financial analysis looks at the amount of money flowing into and out of your company over a given accounting period (month, quarter, or year). It includes cash from operating activities, such as customer payments and spending on goods and services. It also includes current assets and liabilities changes, such as accounts payable and accounts receivable. Cash flow analysis may include investing activities, such as purchasing key investments or properties, and financing activities, including money withdrawn from bank loans or paid to creditors and stock issues.

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A CPA can review your cash flow statement and identify any problems. For example, although the profit number on your income statement is positive, it might not indicate that all receivables have been paid because of accrual accounting. A certified personal accountant in Las Vegas can also calculate free cash flow, net operating cash flow minus capital expenditures. This figure shows how much money your business has to invest in growth, pay dividends to shareholders, or repay debt.

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Budgeting

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CPAs can help you formulate a budget and financial forecast based on strategic goals. They analyze historical data, identify trends, and make projections for resource allocation decisions and long-term financial planning. A basic budget consists of projected income and expenses, subtracting expenses from income to see what is left over for other purposes, (like investing in projects). Budgets can also be compared to previous periods to measure performance. If a project exceeds its budget, it can be amended to account for this and other unanticipated expenses.

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To build a budget, you must compile a list of your monthly expenses. Separate them into fixed expenses (like rent, utility bills, and credit card payments) and variable expenses (food, entertainment, gym memberships). You should also record savings in designated accounts such as traditional or high-yield savings or personal retirement accounts like a Roth IRA. Once you have a complete list, it is time to compare it to your budget and find out where you are spending too much or saving too little.

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Financial Planning

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CPAs have the expertise to help with various financial planning strategies. For example, they can advise new businesses on structuring their business as an LLC, partnership, S corporation, or sole proprietorship to minimize tax liability. They can also determine the best accounting method for a particular company, such as cash or accrual.

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In addition, a CPA can help a company set financial goals and develop a plan for achieving them. This may include creating a budget, preparing financial projections, and helping leadership determine the potential for short-term financing needs. This type of financial planning is essential in confirming that a company’s strategic goals are financially feasible.

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CPAs are experts at filing taxes, ensuring compliance with regulations and laws, and interpreting complex tax codes. They can also assist with retirement, insurance, and estate planning and advise on investments. They can even work with outside money managers or brokers to ensure a client’s investment strategy is on track.

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Tax Planning

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A CPA is trained to look at a large financial data set and understand what it will mean to your business over time. They can provide advice on growth strategies like acquiring new businesses, merging companies. When closing a company in the most cost-effective manner possible. They also offer tax planning services for individuals and small businesses. This includes preparing tax returns, filing for extensions, and advising clients about deductions they might need to learn. Unlike many tax preparers, who only work during the filing season, CPAs are fully engaged in this area of expertise year-round.

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A CPA’s expertise in accounting and finance is essential for the success of any business. A business can make intelligent short-term decisions that minimize cost overruns, lost purchase discounts, and uncollectable receivables by providing expert cash flow analysis, budgeting, and financial planning. This will help a business achieve its financial goals and ensure its stability. A CPA can also analyze a business’s comprehensive purchasing records and current inventory to calculate a precise cost-to-retail ratio.

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