What is a CPA?
Let’s face it, there is a lot of jargon out there, and depending on the specific profession we are talking about it gets even worse. We are inundated by acronyms everywhere we look – NFL, NBA, MLB, okay so we know those, but what about CPA? What does CPA stand for and what do they do? Who needs a CPA? How much does a CPA cost? What is the difference between a CPA and an Accountant?
If you’ve ever wondered these questions or more, then keep reading because we will answer it all in this article!
Here at Diwan Accounting, we have touched most aspects of the business, from working for the big 4 accounting firms and some of the most successful tech companies in the world to helping small businesses and non-profits. With that said, there are a lot of other great articles out there about the questions we are going to tackle today (like this one for instance). I’ll do my best to link to them throughout this article so you’ll always have more resources for additional information if you need them.
If you are a small business or non-profit in the East Washington area and have any questions regarding these questions then please don’t hesitate to reach out to us personally and we will do our best to help you understand and guide you through all of the differences.
We love working with small businesses in our home town including Bellevue, Issaquah, Newcastle, Redmond, Kirkland, Lake Hill,Factoria, Lake Sammamish, Overlake, Clyde Hill, and others just east of Lake Washington.
We also serve many small businesses in Renton, SeaTac, Kent, Covington, Maple Valley and Auburn, closer to Tacoma.
You can contact us here.
With all of that being covered, let’s get into the reason you came to this article!
What does the term CPA stand for/mean?
CPA is an acronym that means “Certified Public Accountant.” This is more than just a simple acronym, only people who have been approved by their state can say that they are a “CPA.” The approval process to become a CPA varies state to state, but typically includes various requirements such as:
- College credits that add up to a minimum amount required (close to the Master’s Degree level)
- Experience working under a CPA (typically 2+years)
- Passing a difficult exam to prove your knowledge of accounting in different areas
- Keeping up with changes in the accounting practice by meeting the ongoing education requirements
Here are Diwan Accounting we are CPAs, if you’d like a snapshot into what we have to go through to get licensed and maintain it checkout the Washington state guidelines here.
What is the difference between an accountant and a CPA?
After looking at what a CPA is, you might have a decent idea of the difference between a CPA and an accountant, but just in case you’re still wondering, here it is: A CPA is an accountant with an optional license from their state that proves their qualifications. This means not all accountants are CPAs, but all CPAs are accountants.
It goes further than the basics though. Let’s dive into some of the more specific differences.
As a part of getting their license and maintaining it, CPAs have to follow a very strict code of ethics that exist to protect the public. This goes so far as to require ongoing education for ethics and for CPAs to pass a test regarding the specific rules they must follow before they are eligible to be licensed.
Additionally, because of these requirements a CPA can have grievances filed against them with their state’s board of accountants or whoever sponsors the CPA licenses. Check out Washington State’s Board of Accountancy here.
I don’t want to infer that non-CPA accountants don’t have ethics that they follow, but they are only the same ones that you or I have and aren’t enforced by any external organizations.
Fiduciary Duty for a CPA
In addition to ethical requirements by the state board to maintain their license, CPAs also have greater legal liability for any misconduct. This is because they owe their clients what is called a “fiduciary duty.” This is a legal term that means that CPAs have a responsibility to act in the best interests of their clients or face legal consequences.
All accountants could be liable for misconduct under a civil suit, but having a fiduciary duty makes it easier for the plaintiff to recover from the CPA than the accountant.
In addition to legal and ethical differences, CPAs and accountants typically differ in regards to the services they offer.
** Note - CPAs can have a great many different specialties that they operate in so this list won’t be exhaustive, but if you want more information on other services they can offer check out this great article by Ramsey Solutions here.
- Outsourced CFO
- This is where a CPA becomes a trusted advisor that weighs in on a small business owners decisions and how they will affect the company. The CPA will also provide bookkeeping, accounting oversight/management, and tax planning and preparation.
- Think of what duties a CFO would have if you were able to hire one and that is essentially what this is.
- Tax Planning
- This is proactive planning to reduce your tax liability that year based on your actions. Most tax preparers are working retroactively and have limited ability to change things.
- Financial advising
- This is similar to the Outsourced CFO role, but is less involved. Essentially just provided insight to the financial health of the business, but less of a partnership.
Both CPA and regular Accountants:
- Tax preparation
- Business and personal
What will a CPA cost me?
Now that we’ve outlined all the benefits that a CPA can offer, the next natural question is “how much does a CPA cost?” or “What will a CPA cost me?”
We can’t speak for other CPAs other than to give a broad, generic answer, but we can provide some insight to what we charge and what we offer here at Diwan Accounting.
General CPA Pricing Overview
Your average CPA pricing will depend a lot on location and specialization. A CPA who does personal tax returns will charge a lot less than one who is doing a business tax return because of the difference in risk and complexity. A CPA who does audits or helps with reconciliations will charge differently too.
In general there are three main pricing schemes that most CPAs will follow:
- Typically in the $150+/hr range
- Flat fee
- i.e. – CPA charges $500 for a personal tax return
- Monthly/Quarterly Retainer
- Offers a set of services for a monthly/quarterly fee
Diwan Accounting Pricing/Services
Here at Diwan Accounting we use the monthly retainer option. Flat fees don’t work well for the services we provide and we find that hourly billing can fluctuate a lot, which can hurt a small business’ cash flow.
Instead, we just set an agreed upon monthly rate so you always know what you have to pay and all of our services are included in that, from initial clean up to monthly bookkeeping and even tax preparation (please note there maybe a sign-up fee involved depending on the situation).
We work hard to keep our fees as reasonable as possible depending on what stage of business you are in. Below is an outline of our fees:
- New businesses/startups
- This is for small businesses looking to grow and expand
- Between $500-900/month
- Tax preparation
- Bookkeeping and Payroll
- Pro-active guidance
- Simple business activity
- Growing Businesses
- For growing businesses that have a small team of employees
- Between $900-1500/month
- Everything from New
- Tax planning
- Monthly 1 on 1 meetings
- Middle business activity
- Established Businesses
- For established businesses looking to leverage CFO services
- Between $1500-2500/month
- Everything from Growing
- CFO level guidance
- Complex business activity
If you’d like to see this in chart format you can check it out on our website here.
How to Find a Good CPA
If you’re in the market for a CPA, it's important that you find a good one. While meeting the requirements isn’t an easy thing to do to become licensed, not all CPAs are equal.
Look for one that is going to be customer focused and looking out for your best interests.
Also, as we discussed earlier, CPAs can work in a lot of different fields and have specializations. Make sure you are looking for a CPA that specializes in the field your needs are in.
If you are looking for a CPA to offer guidance that can grow with your business, then we would love for you to consider Diwan Accounting. We offer tax planning and preparation, payroll, bookkeeping, and advisory services to small businesses and non-profits in the greater East Washington State area.
Here at Diwan Accounting we believe in partnerships, and we know that your success is our success. We strive to give every customer the gold standard in customer service and treatment. Our goal is to help you focus on what you do best while having peace of mind that your accounting needs are satisfied.
If this is something you’re interested in, please reach out to us for a free consultation.