5 Best Practices for CPAs Working with Family Offices

By Cheryl Mucha, CPA, CFO Your Way – December 10, 2019
5 Best Practices for CPAs Working with Family Offices

Family offices have a different set of operational parameters and considerations than publicly traded companies. These closely held entities can range from startups to enterprises, in any industry. While financial management and tax planning are core responsibilities for anyone working with family offices, there are issues beyond the balance sheet that any financial or business advisor should be aware of before starting an engagement.

1. Understand Family Relationships

The advisor must be a people person and be able to navigate family dynamics. Family members may not always get along or agree on everything; they require a neutral advi­sor who can guide them on what is in the company’s best interests — not what best serves individual members.

2. Facilitate Conflict Resolution

Decision-making and planning can be stalled by familial discord or disagreements over who should be doing what. The CPA is often the linchpin in the creation of the standard operating procedures (SOP), the office textbook for how every facet of the business operates.

Since the SOP also defines the roles and responsibilities for each position within the company, it can help streamline decision-making or reduce friction over members’ roles by outlining the hierarchy. The CPA can also help reduce interperson­al conflict by providing insights into the company balance sheet, showing members what is in the organization’s best interests from a more global business perspective.

3. Assist with Succession Planning  

Determine if there is a transition plan for the next generation to take over the operation and who those successors will be. The CPA can ensure a smooth transition by laying the groundwork with solid forecasting. Do the younger members fully understand how the prior generation has operated and why? The SOP is crucial here because it outlines every aspect of the operation. Make sure the successors know it.

The CPA should remind leadership of the importance of younger family members working their way up through the ranks. Through this experience they will learn the business from the bottom up gaining first­hand understanding of the organization as they prepare to take the reins one day.

Understanding the operation and planning for its future are different matters. Are the presumed successors up to the task of introducing new technology and implementing new ideas/services/products that will help the company grow and prosper? The CPA must provide accurate, reliable financial forecasts to help the new generation understand the business’s current operation, see the opportunities for profitability in the near future, and make the case for new tech­nology or new methods to drive sustainabil­ity and maintain a path to profitability.

With a 360-degree view of the operation and its financials, the CPA also plays a crucial role in helping leadership plan for the financial commitment needed for succession. For example, will there be a payout to the current generation that will affect cash flow? Will there be new employees or independent contractors working with the succeeding generation whose com­pensation must be incorporated into the operating budget?

4. Position the Business for Non-Succession

If the current family members will be the last ones to run the company, the CPA can advise leadership and help prepare for the next steps. This might be positioning the company financially for sale or for going public. Is there debt to retire or restructure? Is there anything on the books that may be a barrier to a merger or acquisition? The CPA’s guidance and expertise will be instrumental in these situations from an advisory or remediation perspective.

5. Maintain Financial Controls

Keeping close tabs on the company bank account keeps everyone honest. The CPA must have full access to all banking and credit card statements, invoices and other financial transaction documents in order to monitor all accounting operations. This enables the CPA to monitor cash flow and provide valuable checks against any suspi­cious activity through periodic audits and monthly reconciliations.

With full access to accounting records, the CPA is able to generate the reports that provide the financial road map to future growth. After all, the family office members won’t know where they’re going down the road if they don’t know where they are today. This access also enables the CPA to provide visibility for all members into the family office’s financial affairs, with timely, accurate financial reports to project cash flow and monitor performance. 


Cheryl L. Mucha

Cheryl Mucha, CPA, is the owner of CFO Your Way LLC. The firm creates pathways to profitability for growing local businesses with outsourced accounting services. She can be reached at cheryl@cfoyourway.com or 973-8978-0650.

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This article appeared in the November/December 2019 issue of New Jersey CPA magazine. Read the full issue.