Yohannes Zewudie, CPA
The Oregon Department of Human Services identifies adult foster home licensees as independent business owners. Owners, who are responsible for Adult Foster Home (AFH) businesses are usually expected to wear so many hats to discharge their responsibilities and achieve their company’s vision.
Small businesses, including adult foster homes, deserve the opportunity to be successful in their line of business. Regardless of the business size, accounting as a profession plays a significant role in creating a conducive environment for success.
It is with this in mind that I argue small businesses should consider having an accountant if not a certified public accountant (CPA) to achieve their ultimate goal.
Here are seven ways an accountant will benefit your adult care home business:
1. Effective and Efficient Business Management Businesses need historical, current and projected financial information to make the right decision in their business. Without complete and accurate financial recordkeeping and reporting, a small business owner cannot say for sure the true profitability of his/her business. Small businesses that tend to measure their profitability and success based on available cash flow or bank balance are only looking at one criterion. Business owners who rely on incomplete or wrong information usually make decisions that impact their business negatively. Accounting, as a support function to owners, is tasked with recording business financial data, analyzing them and generating timely and reliable financial reports to show the true picture of business status and profitability. It is for this reason that small businesses need accountant who can assist them in running and evaluating their business.
2. Peace of Mind In the ever increasing federal and state regulatory environment, small businesses are required to comply with various tax laws and regulations. Among other, businesses including AFHs have to report:
Federal Payroll & Income Taxes
Social Security and Medicare Taxes (FICA taxes)
Federal Unemployment Insurance Taxes (FUTA)
Federal Income Taxes
State Payroll & Income Taxes
State Payroll Taxes
Transit taxes (Tri-County Metropolitan Transit District (TriMet) and Lane Transit District (LTD)
Employment Taxes (State Unemployment Insurance or SUTA):
Workers’ Benefit Fund Assessment (WBF)
Workers’ Compensation Insurance
Local and City taxes
Periodic Payroll Reporting
W-2, W-3, 1099 and other annual reporting
Many AFHs are not well-equipped to meet these and other regulatory and compliance requirements. Having an accountant who properly handles these mandatory compliance requirements gives AFH owners peace of mind for them to focus on other important business matters.
3. Ease of Annual Business and Personal Income Tax Reporting The United State Internal Revenue Service (IRS) and the State of Oregon expect taxpayers to:
File a timely return;
Make accurate reporting; and
Pay the required tax amount by the due date.
Small businesses and their owners face challenges in compiling the necessary business records during tax season. Without a good recordkeeping and tracking method, it is daunting for small businesses to fully meet the tax reporting requirement. Lack of proper accounting system could result in understated business income and/or deductions that may result in higher taxes, interest and penalties. If the owner or business deliberately attempt to evade taxes or willfully fails to file or pay taxes, they could be subjected to criminal tax fraud cases. AFH owners can ease the stress associated to tax return filing by hiring an accountant who:
Maintains proper financial recordkeeping throughout the year;
Maintains proper classification of taxable income and non-taxable income;
Claims all available and qualifying business deductions;
Files annual & quarterly tax returns in a timely manner; and
Pays timely quarterly estimated payments.
4. Utilize Available Business and Financing Opportunities More than large and medium businesses, small businesses tend to miss out on available business and financing opportunities due to lack of information or poor financial recordkeeping. The missed opportunity to utilize the Small Business Administration Paycheck Protection Program (PPP) is a very good example. Significant number of small businesses failed to utilize federally available PPP. An accountant comes handy to assist small businesses to have the necessary records and enable them seize these available business and financing opportunities.
5. Quality of Life AFH owners assume so many duties and responsibilities (manager, receptionist, purchaser, accountant, janitor and many others) in a single day to be successful. Since AFH owners are not expected to be knowledgeable or proficient in every task, they might have to work more than 12 hours a day to accomplish all these tasks. These business burdens make the owners unhappy and inefficient. The opportunity cost of spending too much time at work may also negatively impact their health, family dynamics and other social life. An accountant can shoulder one burden and perform the accounting-related duties in the right way. Delegating the accounting tasks to the right professional would result in the following:
Improved quality of work.
Standardized financial reporting.
Reduced owner work-related stress.
Increased owner productivity and job satisfaction
Potential long term cost reduction.
6. Financial Consultation Based on available company financial data and their business environment, a certified public accountant can provide knowledge-based financial consultation to AFH businesses. These consultations could have a significant impact on tax savings and business growth.
7. Representation in Federal and State Audits In case of federal or state audits, a CPA can represent an AFH to handle their audit. Unlike an accountant, which is limited to the return prepared by him/her, a CPA can represent any business in federal or state audits. "While all CPAs are accountants, not all accountants are CPAs”. A CPA is an accountant that passed the rigorous testing and strict licensing requirement to practice in the state. CPAs are expected to abide by the code of ethics and must update themselves by taking the required continuing educations every year.
The benefits listed above are not an exhaustive list as to why adult foster care homes need an accountant, if not a CPA. It is always advisable for small businesses to reach out to professionals and seek advice on how they can achieve their ultimate business goals.
Written per request from
Alyssa Elting McGuire, MA, MPA
Consulting and Training Director
Oregon Care Home Consulting & Training