Voices 10 common reasons why CPA firms fail

 Many small and midsized CPA firms fail to reach their full potential. Here are 10 reasons why.

1. Being undercapitalized with partner cash capital and too dependent on the bank for working capital. This becomes particularly problematic when monthly draws are paid from the bank line, not from earnings. In the best-of-breed firms, every equity partner is required to put a minimum amount of cash capital into the firm upon admission and, as the years progress, to continue to put in cash capital each and every year as a reduction of compensation until the firm’s required capital amount is achieved. If it is subsequently determined that the firm needs additional cash capital from the partners, such amounts will subsequently be funded.