As a business owner, you must learn to navigate the complex world of finance before you can even think about designing growth strategies and development plans. The good news is that the world is full of experts and skilled professionals who can provide insightful guidance.
But which ones do you need and when? As your business grows, your need for expert advice changes. Also, it’s crucial that you figure out if you need in-house assistance vs. outsourcing these services.
In today’s article, we’ll help you understand the main differences between CPAs and CFAs, and how each of these professionals can be of use to your business.
CPA vs. CFA – What’s the Difference?
Both CFAs (Chartered Financial Analysts) and CPAs (Certified Public Accountants) work in financial management and play a critical role in your business’s financial growth. The main difference is that each of them caters to different aspects of finance and accounting.
A CPA refers to professionals who excel in fields such as auditing, tax accounting, financial reporting, and business consulting. They are the go-to people when you want accurate financial records or advice on tax returns.
On the other hand, CFAs focus more on investment analysis and portfolio strategy. As a generalization, you could say that CFAs look at the broader market scenario while CPAs drill down into specific financial figures.
To better understand the differences, imagine your business has finally accumulated significant profits, and you’re looking at investing some of it back. In this case, you would need a CFA’s guidance, who can point out investments best suited for your risk tolerance.
In contrast, suppose there’s an issue with revenue recognition or building budgets. That’s where you want the help of a skilled CPA. Keep in mind that both professionals require accurate financial data, so it’s crucial that you implement a data-driven culture. Businesses that fail to recognize the importance of real-time data processing and reporting are doomed to fail in the near future.
Which Does Your Company Need, a CPA or a CFA?
At the end of the day, whether you decide to hire a CFA or CPA largely depends on your business needs. For instance, managing taxes and financial statements might be more pressing if you’re in the early stages of your business. Hence, a CPA’s expertise would likely be more beneficial.
On the other hand, if you’re looking to expand operations and need help with investments and portfolio management, a CFA could be a better fit. Of course, you may be in a place where your business needs both of these professionals.
Once you understand your needs, you’ll also know if training your employees or outsourcing the services is better. Let’s have a look at the pros and cons of each of these scenarios.
Training an Employee as a CPA
Training an existing employee to become a Certified Public Accountant (CPA) has many benefits. But you also have to consider the drawbacks, such as taking the time to find the best courses for CPA prep and paying the exam registration fees and other expenses.
You also need to take into account the time commitment since the trainee must invest extensive study hours over several months before they can take the exam. Lastly, you may have to increase your employee’s salary to ensure their current level of education fits the bill.
On the bright side, having an onboard CPA ensures accurate financial records and effective tax handling whenever these services are needed. Plus, having such a professional on your side also helps improve your decision-making process due to access to advanced financial knowledge and analysis.
Training an Employee as a CFA
A trained CFA is skilled in comprehensive investment analysis and portfolio strategy, which could bring more sophisticated decision-making within your organization. Furthermore, when you have a CFA on your team, it shows your organization values expertise and professionalism, which brings extra credibility to the company brand,
But you also have to consider the cost investments needed to train an employee as a CFA. First, you’ll need to acquire CFA study materials and maybe classes or tutoring sessions. There’s also the exam registration fee and the time commitment since training often spans at least 18 months. Plus, the recommended study time for each exam level is around 300 hours!
Further, qualified CFAs require higher salaries due to their vastly improved skill set.
Outsourcing the Services
When you outsource these services, you get access to a broader range of experts (not just the people you’ve trained). It’s also a more cost-efficient move since you don’t have to worry about paying salaries or training expenses.
But these benefits only work for smaller businesses. Bigger companies would rather have their in-house specialists since it can be challenging to establish effective communication with an external team. This way, they eliminate any room for error or misunderstandings from the get-go.
Lastly, outsourcing involves trusting sensitive financial information to an outside firm. Although confidentiality agreements are standard, the risk remains something you need to weigh against potential benefits.
Wrap Up
Whether you decide to hire a CPA or a CFA (or both) or you’re taking the outsourcing route, it’s your decision. Both scenarios come with their unique set of benefits and challenges, and you should decide based on your company’s needs and plans of development.