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E-Myth – “Why most small businesses don’t work & what to do about it”

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CFO Services | Differences Between Designated And Undesignated Accountants

With the importance of choosing the right accountant for small businesses, CFO services says that many entrepreneurs do not even understand that there is such a thing as designated and undesignated accountants. They tend to assume that anyone who calls themselves an accountant has the same level of experience as everybody else. However, there are many differences between a designated and in undesignated accountant, that entrepreneurs should be aware of, is that they can end up hiring designated, or chartered professional accountants in their business.

The biggest difference between a designated and in undesignated accountant is the level of schooling that they have. All accountants will start with an undergraduate degree in business, majoring in accounting. After that for years, undesignated accountants are allowed to call themselves an accountant and work for an accounting firm, or even open their own says CFO services. They have four years of theoretical knowledge, but the schooling that is provided in the undergraduate degree is all theory and no practical.

This is where the difference of chartered professional accountants comes in. In order to obtain their CPA, they must get a job in an approved chartered professional accounting firm, and apprentice for three years with a chartered professional accountant. They will be working full-time hours, under the guidance of a designated accountant. They will work on real files for real businesses figuring out the solutions to real problems. In addition to that, they will be required to complete coursework at home during evenings and weekends. This coursework is designed to mimic the difficulties of real-life accounting situations. They must work on those cases, as well as past tests in a timely fashion in order to continue with their training. CFO services says that this is a very difficult designation to get, with about half of all accountants that attempt ever pass.

Many entrepreneurs do not know how to tell the difference between an undesignated in a designated accountant. The undesignated accounting firms will overplay their undergraduate degree. They will have their degree prominently displayed on the wall, but absent is the certificate from their CPA program. They will tell people that they majored in accounting, and say potentially that they have experience in the CPA program. Many entrepreneurs assume that that is all that is required to become an accountant, but it is interesting to note that while they say they have experience in the CPA program, if they do not say they have passed it, it means they left the program early, or they did not pass it.

In order to tell if an accountant has their designation, CFO services says business owners just need to look at the firmís name. Does it say professional association, or chartered professional accountant in the name of the business? If not, does it have these following letters after the name: LLP, CA, CMA, CGA, or CPA? These are all identifying factors that the firm is owned by chartered professional accountants.

CFO Services | Differences Between Designated And Undesignated Accountants

It is extremely important that entrepreneurs are hiring the right accountant to work on their small business finances says CFO services. The reason is that a great accountant can help them with efficient tax plans, a great business plan that can help them avoid problems, and do all of that efficiently. The failure rate for Canadian businesses is extremely high, 15% failing in the first year, 30% failing in the year two, and 50% failing by year five. The three most common reasons for businesses to fail in Canada is that they are unable to find the right market, they run out of money, or they are unable to find the right staff. All of these problems that entrepreneurs can face can be addressed upfront and early on in the business with an accountant. Efficient tax planning, as well as proactive business planning, are all things that accountants can help entrepreneurs with, that can significantly increase their chances of success.

One of the reasons why business owners end up with an undesignated accountant, and not even know it, is because as a new business, they are very budget conscious and are trying to save money and they do this by hiring the least expensive accountant that they can says CFO services. Undesignated accountants typically charge less per hour then designated accountants, because their lack of experience and schooling. However, when entrepreneurs have an undesignated accountant work on their finances, business plans and tax plans, even though they are less per hour, they often end up taking way more time to complete the tasks, and end up having a higher monthly charge. Business owners should avoid trying to save money by hiring the least expensive service, because they often will not end up saving money in the long run.

Another reason why trying to hire an accountant based on lowest price will backfire on the accountant, is because they will end up with poor work. CFO services say that business owners may not even understand that they are ending up with poor work, because it often shows up in their tax planning. Having an inefficient tax plan, entrepreneurs may be paying thousands more a year in additional taxes that a more experienced accountant may have been able to avoid them paying. How important this is to businesses, they should ensure their hiring the best accountant they possibly can. An efficient tax plan not only can help increase the cash flow in the business, which can significantly impact an entrepreneur succeeding in their business, but also impacts how quickly an entrepreneur is able to take money out of their business, so that they can accumulate their own wealth.

With how important it is for an entrepreneur to hire a great accountant, they should understand the difference between a designated accountant and an undesignated accountant, and not worry about paying higher hourly rates, because that increased hourly rates will help them save thousands in the long run.