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Examining The Differences Between A CFO And A CPA

The roles of a CPA and a CFO are often confused. While it is true that in some circumstances one may perform the duties of another, they each have their strengths and weaknesses that need to be highlighted. Often times, whether you work with a CPA or a CFO will depend on the size and income of your business.

Perhaps you are considering hiring one or the other for your business. Or maybe you are just curious about what their job includes. Let’s take a look at these two different types of financial advisers and what they do for most companies.

What Is A CPA?

A CPA is a Certified Public Account. In the most basic sense, it is a person who has managed to pass the CPA exam and received a license to work as a CPA by any state in the United States. They must then continue to renew this license on a regular basis. Of course, that doesn’t say much about what they actually do for their job.

In most cases, a CPA will work as a part of a larger CPA firm that outsources their services to various businesses or individuals. However, some work as sole practitioners and manage their own personal clients. Regardless of their approach to acquiring clients, most of the work they perform is still the same.

A CPA can perform a variety of functions for a business. These functions usually relate to managing, reviewing, and preparing financial statements for the business. Most of their work revolves around taxes and thus they must have an in-depth knowledge of local tax laws. An EA (enrolled agent) also performs some tax functions, but there are important differences between an EA and a CPA.

In slightly more rare cases, a CPA may provide financial consultation or advice for a small business. Their expertise tends to be with tax-related issues, but they can provide general financial advice in many cases.

What About CFO?

Compared to the functions of a CPA, what are CFO services? A CFO far more equipped to provide strategical financial advice to growing businesses. They are not experts in tax law but are instead experts in general business finances.

CFO stands for Chief Financial Officer and their job demands that they understand all financial aspects of managing a business. They will have a long history working in corporate finance positions and are able to adequately gauge financial risks, manage a corporate budget, and create fiscal standards for the business.

While both parties can play an important role in the growth of a business, the job of a CFO is around the clock. On the other hand, a CPA may only be contracted to work during certain times of the year.

Sooner or later, most businesses decide they need an executive team and that team tends to include a CFO. This usually only happens after a business has crossed a certain threshold. Companies that still hover below the $20 million mark may find that a CPA is an adequate investment for now. However, some realize that the CFO could be what they need to break across that threshold.

It’s a tough decision for any business to make. There are obviously many great benefits associated with hiring a full-time CFO, but those benefits come along with a demand for a salary. A CFO is usually paid very handsomely, so it’s a big investment that must be considered carefully. Ironically, you could consult with a temporary CFO and ask whether hiring a full-time CFO is a smart financial move for your business.

At the end of the day, your business will need the services of both. The CFO will help your business grow and the CPA will make sure your financial records and tax returns are properly handled.

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