CPA, CMA or CFA: A Glossary of Financial Advisory Options

By Barry Moltz

3 min read

In addition to the seven people who can make your business idea a reality, there are a lot of financial professionals that can help your business. The problem is that they all seem to have different letters after their name, each signifying a variety of professional degrees. This alphabet soup of letters can get confusing.

The first thing that needs to be recognized is that there is a difference between financial and accounting degrees. Finance is the study of investments, which includes the changes of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Accounting is the measurement and communication of financial information about an organization’s economic activities. Each professional needs to be used in the correct way to get the most value from their services.

CPA (Certified Public Accountant)

A Certified Public Accountant is someone that has passed the Uniform CPA Examination, which is sponsored by the AICPA. Once passed, an accountant is licensed to practice in the United States. It means that they understand financial statements, regulation and tax laws.

When to use them: CPAs can set up a company for payment of all taxes, provide general high level budgeting services and handle financial reporting like the chart of accounts. They can also be used if the IRS or any other taxing and regulation authority comes calling.

When not to use them: Don’t use CPAs for basic bookkeeping, like paying bills and collecting money from clients. These tasks will be too expensive for them to perform, and can easily done by a trained bookkeeper or administrative assistant using the processes in QuickBooks.

CMA (Certified Management Accountant) 

The Certified Management Accountant credential is a professional credential that can be earned in the advanced management accounting and financial management field. This certification shows that the person has knowledge in the areas of financial planning, analysis and control.

When to use them: When sophisticated financial modeling is needed to set company prices, acquire assets or to make a choice between various corporate investments.

When not to use them: CMAs are too expensive to be used for bookkeeping, and are not fully qualified to give tax-planning advice.

MAFM (Masters in Accounting and Financial Management)

The content of an MAFM degree varies by university program. It typically covers accounting and financial skills, with classes in managerial accounting, financial analysis and audit.

When to use them: Use an MAFM graduate when you need sophisticated financial modeling and auditing of processes inside and outside the company.

When not to use them: MAFM graduates are not needed for preparation of monthly financial statements, bookkeeping or to manage financial investments.

CFA (Certified Financial Analyst)

Certified Financial Analysts have passed the CFA Institute exam, and thus are qualified to give financial investing advice in the United States. There is also a Certificate in Investment Performance Measurement (CIPM) program for advanced investment performance and risk evaluation skills.

When to use them: CFAs can help you plan for the financial success of your business. They can guide the small business owner on the most tax-efficient manner by which to take the profits out of the company in the short and long terms. Their expertise can include retirement plans, insurance-based products and other tax-exempt annuities. They can help set up college funds and ensure long-term financial security.

When not to use them: CFAs are not stockbrokers or financial traders, and consequently are not meant to help you maximize short-term returns in the equities and bond markets.

Most small business owners will not need all of these people to help grow their business. Find a good CPA that can be trusted to determine the chart of accounts in QuickBooks. They can also help set up regular tax payments and assist with tax planning for the year. The CPA can also review financial statements on a quarterly basis and complete the annual tax return.

Get an effective bookkeeper to do everything else in QuickBooks, such as bill clients, pay vendors, collect payments and prepare monthly financial statements. Payroll should be done using an outside service such as QuickBooks Payroll. This is critical, since a company needs to comply with all the complex rules involved when paying employees. Find a financial adviser that can help manage all the money that the company makes. They can invest it wisely according to the goals that are set.

Finally, no matter how many qualified advisers the small business owner has, it is still his or her responsibility to understand what is happening financially inside and outside of the company. As a business owner, you should know the risks of all financial decisions. This is not a task that can be delegated to anyone, regardless of their qualifications.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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