The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, this calculation is used with the customer lifetime value (LTV) metric, that also projects the customer’s profitability to calculate the newly acquired customer’s value.
It’s primarily used to measure a business’ sales and marketing departments to figure out their profitability, profit margin and return on investment figures.
How to Calculate
CAC = Sales and Marketing Expense / Number of New Customers
Examples of the expenses include product and service promotion expenditures, special compensation and commissions, regular wage payments, and operating expenses.
The tally of newly acquired customers is simply how many new, unique contracts the business acquired. It’s important to keep the expenses and customer acquisition numbers consistent over the same periods.
Why It’s Important
Business owners and their managers, along with investors, can look at sales and marketing efforts from the return on investment of their expenditures and outcomes. For example, there could be multiple channels that sales and marketing took to obtain new customers over a quarter, half-year or 12-month period (such as email marketing, social media marketing, conferences, etc.). Based upon each channel, the customer acquisition cost is determined by dividing the financial outlay per customer acquired.
From there, each channel can be analyzed to see which one works well and, equally important, which ones don’t work well and should either be discontinued or modified. Internal stakeholders and external investors (both existing and potential) can look at trends to see how ongoing efforts may be working and if existing management is productive or needs to be replaced with more competent individuals.
Accounting Considerations
Based on FASB’s Accounting Standards Codification 340-40, businesses are required to document and capitalize incremental costs of securing new customer business if the related expenses are projected to be recouped.
An incremental cost in the scope of obtaining a contract is a cost an entity incurs to obtain a contract that wouldn’t have been incurred if the contract hadn’t been obtained.
While a sales commission (be it fixed or a percentage of a new contract) may be considered an eligible incremental cost to one of its employees, it’s not necessarily always the case. Rather, the true test of whether an incremental cost is capitalizable depends on the subjective interpretation of if a mandated financial expenditure for an incremental cost is attributed to signing a contract with a new customer.
The following sample situations often require more investigation to determine whether the capitalization of costs is applicable:
Equity issuances based upon meeting production and essential function goals
Employee compensation according to previous years’ executed contracts
Sales commissions allocated over multiple timeframes and/or to more than one employee for a single contract
ASC 340-40 also stipulates the amortization schedule of capitalization costs of obtaining a customer contract on a scheduled timeline that follows the delivery to the customer of the contracted goods or services.
Conclusion
While the customer acquisition cost may be straightforward, when it comes to subjective cases, businesses that have experience with murkier situations are able to make the most of their subjective sales and marketing expenses when navigating the tax and accounting landscape.
Alan F Burke CPA
Understanding the Customer Acquisition Cost (CAC)
April 1, 2026 · Accounting News, Blog
⏱ 3 min read
The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, this calculation is used with the customer lifetime value (LTV) metric, that also projects the customer’s profitability to calculate the newly acquired customer’s value.
It’s primarily used to measure a business’ sales and marketing departments to figure out their profitability, profit margin and return on investment figures.
How to Calculate
CAC = Sales and Marketing Expense / Number of New Customers
Examples of the expenses include product and service promotion expenditures, special compensation and commissions, regular wage payments, and operating expenses.
The tally of newly acquired customers is simply how many new, unique contracts the business acquired. It’s important to keep the expenses and customer acquisition numbers consistent over the same periods.
Why It’s Important
Business owners and their managers, along with investors, can look at sales and marketing efforts from the return on investment of their expenditures and outcomes. For example, there could be multiple channels that sales and marketing took to obtain new customers over a quarter, half-year or 12-month period (such as email marketing, social media marketing, conferences, etc.). Based upon each channel, the customer acquisition cost is determined by dividing the financial outlay per customer acquired.
From there, each channel can be analyzed to see which one works well and, equally important, which ones don’t work well and should either be discontinued or modified. Internal stakeholders and external investors (both existing and potential) can look at trends to see how ongoing efforts may be working and if existing management is productive or needs to be replaced with more competent individuals.
Accounting Considerations
Based on FASB’s Accounting Standards Codification 340-40, businesses are required to document and capitalize incremental costs of securing new customer business if the related expenses are projected to be recouped.
An incremental cost in the scope of obtaining a contract is a cost an entity incurs to obtain a contract that wouldn’t have been incurred if the contract hadn’t been obtained.
While a sales commission (be it fixed or a percentage of a new contract) may be considered an eligible incremental cost to one of its employees, it’s not necessarily always the case. Rather, the true test of whether an incremental cost is capitalizable depends on the subjective interpretation of if a mandated financial expenditure for an incremental cost is attributed to signing a contract with a new customer.
The following sample situations often require more investigation to determine whether the capitalization of costs is applicable:
Equity issuances based upon meeting production and essential function goals
Employee compensation according to previous years’ executed contracts
Sales commissions allocated over multiple timeframes and/or to more than one employee for a single contract
ASC 340-40 also stipulates the amortization schedule of capitalization costs of obtaining a customer contract on a scheduled timeline that follows the delivery to the customer of the contracted goods or services.
Conclusion
While the customer acquisition cost may be straightforward, when it comes to subjective cases, businesses that have experience with murkier situations are able to make the most of their subjective sales and marketing expenses when navigating the tax and accounting landscape.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
When investors think about building a strong equity portfolio, U.S. stocks often dominate the conversation. The United States is home to many of the world’s most innovative, profitable, and well-known companies, and has a history of delivering strong long-term returns. However, the United States is not the only country with successful, growth-oriented businesses. In fact, nearly half of the global equity market is located outside the United States, offering investors a much broader opportunity than in domestic markets alone.
Despite this reality, many investors stick to a home country bias. This behavioral tendency means they prefer companies headquartered in their own country because they’re more familiar and feel safer. Unfortunately, home country bias can unintentionally increase portfolio risk. A singular concentration of investments in one geographic region exposes investors to country-specific economic cycles, policy changes, and market disruptions, while limiting access to attractive opportunities elsewhere in the world.
Global investing offers the following benefits:
Overall Diversification – Spreading investments across different markets, sectors, industries, companies and currencies in various countries improves opportunities for higher growth potential while balancing risk.
Highly Regarded Brand Names – Investing internationally offers access to a larger universe of well-established global brands. Household names such as Toyota, Nestlé, and Samsung are headquartered outside the United States, yet they generate revenues throughout the world, boasting strong balance sheets, consistent cash flow, and favorable long-term prospects. International stocks offer investors exposure to global innovation and consumption trends beyond U.S. markets.
Sector Diversification – In recent years, the U.S. stock market has become saturated with information technology and related industries – even among broad market index funds. While tech is a powerful growth driver, this concentration increases portfolio risk if the sector underperforms. International markets tend to have greater representation in other sectors, such as industrials, financials, materials, and consumer staples, so adding international stocks can help diversify overall sector exposure.
Currency Diversification – International investing exposes U.S. investors to foreign currencies, which reflect the economic conditions of their respective countries. Because currencies do not always move in tandem, holding assets denominated in multiple currencies can help reduce overall portfolio volatility. For example, if the U.S. dollar weakens, gains from foreign currencies may partially offset losses in U.S. dollar-denominated investments. While currency movements can add risk in the short term, they may provide an additional layer of diversification over the long term.
Country Diversification – International investing extends beyond developed markets to include emerging economies around the globe. Emerging markets are countries experiencing rapid economic growth, industrialization, and rising household incomes. Examples include India, Brazil, South Korea, and Taiwan. While emerging markets can offer higher growth potential, they also tend to be more volatile. For this reason, investors should consider allocating only a modest portion of their international exposure to emerging markets as part of a diversified strategy.
Diversify Risk Via Your Investment Vehicle
While international stocks offer diversification and growth potential, they also come with distinct risks, including regulatory differences, lower market liquidity, and political instability. Also note that international investments may involve higher transaction costs compared to domestic securities, especially when purchasing individual foreign stocks
Investors can help mitigate these risks by choosing inherently diversified investment vehicles, such as international mutual funds and exchange-traded funds (ETFs). Broad index-tracking funds are often the most cost-effective way to gain exposure, while professionally managed mutual funds can actively navigate changing global conditions.
International stocks provide access to companies, markets, and currencies that cannot be reached through domestic investments alone. When thoughtfully integrated into a portfolio, they may enhance diversification and improve long-term risk-adjusted returns.
Alan F Burke CPA
The Value of Diversifying with International Stocks
March 1, 2026 · Blog, Financial Planning
⏱ 4 min read
When investors think about building a strong equity portfolio, U.S. stocks often dominate the conversation. The United States is home to many of the world’s most innovative, profitable, and well-known companies, and has a history of delivering strong long-term returns. However, the United States is not the only country with successful, growth-oriented businesses. In fact, nearly half of the global equity market is located outside the United States, offering investors a much broader opportunity than in domestic markets alone.
Despite this reality, many investors stick to a home country bias. This behavioral tendency means they prefer companies headquartered in their own country because they’re more familiar and feel safer. Unfortunately, home country bias can unintentionally increase portfolio risk. A singular concentration of investments in one geographic region exposes investors to country-specific economic cycles, policy changes, and market disruptions, while limiting access to attractive opportunities elsewhere in the world.
Global investing offers the following benefits:
Overall Diversification – Spreading investments across different markets, sectors, industries, companies and currencies in various countries improves opportunities for higher growth potential while balancing risk.
Highly Regarded Brand Names – Investing internationally offers access to a larger universe of well-established global brands. Household names such as Toyota, Nestlé, and Samsung are headquartered outside the United States, yet they generate revenues throughout the world, boasting strong balance sheets, consistent cash flow, and favorable long-term prospects. International stocks offer investors exposure to global innovation and consumption trends beyond U.S. markets.
Sector Diversification – In recent years, the U.S. stock market has become saturated with information technology and related industries – even among broad market index funds. While tech is a powerful growth driver, this concentration increases portfolio risk if the sector underperforms. International markets tend to have greater representation in other sectors, such as industrials, financials, materials, and consumer staples, so adding international stocks can help diversify overall sector exposure.
Currency Diversification – International investing exposes U.S. investors to foreign currencies, which reflect the economic conditions of their respective countries. Because currencies do not always move in tandem, holding assets denominated in multiple currencies can help reduce overall portfolio volatility. For example, if the U.S. dollar weakens, gains from foreign currencies may partially offset losses in U.S. dollar-denominated investments. While currency movements can add risk in the short term, they may provide an additional layer of diversification over the long term.
Country Diversification – International investing extends beyond developed markets to include emerging economies around the globe. Emerging markets are countries experiencing rapid economic growth, industrialization, and rising household incomes. Examples include India, Brazil, South Korea, and Taiwan. While emerging markets can offer higher growth potential, they also tend to be more volatile. For this reason, investors should consider allocating only a modest portion of their international exposure to emerging markets as part of a diversified strategy.
Diversify Risk Via Your Investment Vehicle
While international stocks offer diversification and growth potential, they also come with distinct risks, including regulatory differences, lower market liquidity, and political instability. Also note that international investments may involve higher transaction costs compared to domestic securities, especially when purchasing individual foreign stocks
Investors can help mitigate these risks by choosing inherently diversified investment vehicles, such as international mutual funds and exchange-traded funds (ETFs). Broad index-tracking funds are often the most cost-effective way to gain exposure, while professionally managed mutual funds can actively navigate changing global conditions.
International stocks provide access to companies, markets, and currencies that cannot be reached through domestic investments alone. When thoughtfully integrated into a portfolio, they may enhance diversification and improve long-term risk-adjusted returns.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Most people approach tax season thinking about one thing: getting their return done. What they rarely think about is what the experience looks like from the other side of the desk. Having seen it from both angles, I can tell you there’s a real difference between clients who make a preparer’s job easy and those who quietly make it harder than it needs to be.
Here’s why that matters to you specifically: being a better client isn’t about being polite for politeness’ sake. It translates directly into lower bills, faster turnarounds, and better advice. This is entirely in your own interest.
First, Understand How You’re Being Charged
The way the preparer bills you should shape how you work with them. There are three common arrangements, and each one rewards organization in a different way.
If you’re on a flat fee, the dollar amount doesn’t change whether your documents are immaculate or a complete mess. But here’s what does change: a preparer who powers through your tidy file in two hours now has time to actually think about your situation. That might mean spotting a deduction you’ve been missing for years or flagging something worth changing before next filing season. Advice like that can easily be worth more than the return preparation itself, but it only happens when there’s time and mental energy left over to give it.
Hourly billing leaves no room for ambiguity. Every follow-up email, every clarifying phone call, every minute your return sits untouched while you track down a missing form, it all runs the meter. Most of that extra cost is entirely preventable with a little upfront effort.
The hybrid model, which is a base fee with overage charges for complexity, is the most common setup you’ll encounter. Most preparers are generous about absorbing minor extra work without comment. But when documents arrive in scattered batches, questions go unanswered for days, and the timeline keeps slipping, that goodwill has a limit. And again, the extra charges that result are almost always avoidable.
There’s one more piece to this that doesn’t show up on any invoice. Tax preparers are human, and like anyone doing service work, they have clients they genuinely enjoy and clients they quietly dread. The ones they enjoy tend to get more, for example, a heads-up about a planning opportunity, a faster turnaround when things are hectic, and a little extra thought applied to their situation. Difficult clients still receive competent, professional service. They just don’t get the extras. That’s not a policy; it’s just how people work.
The Three Things That Actually Move the Needle
None of this requires becoming a tax expert. It really comes down to three habits.
Send everything at once, and send it organized. Before you submit anything, set aside an evening to go through your documents. W-2s, 1099s, interest statements, charitable contribution records, mortgage forms, gather everything. If your preparer sends you an intake organizer or questionnaire, use it. It exists because it tells them exactly what they need in the format that’s easiest to work with. If they don’t use one, just organize things logically and label your files clearly. “Scan_final_2” is not a file name. A small amount of effort on your end saves a disproportionate amount of time on theirs.
Don’t send documents as they trickle in. It’s tempting to forward your W-2 the moment it hits your inbox, making you feel like you’ve gotten ahead of things. In practice, piecemeal delivery creates more problems than it solves, for example, things get overlooked, work gets duplicated, and many preparers won’t even open a file until they believe everything has arrived. There are legitimate exceptions: a K-1 that shows up late, a corrected 1099 that comes in after the fact. Any experienced preparer will understand those situations. But make them the exception rather than your default approach.
Respond promptly when they reach out. When your preparer sends you a question, it usually means they’re actively working on your file and have hit a wall they can’t get past without your input. A week-long delay doesn’t just slow things down; it forces them to set your return aside entirely and context-switch back to it later. That kind of stop-and-start cycle costs time, and depending on your billing arrangement, it may cost you money too.
Conclusion
A single organized evening and a commitment to responding quickly when questions come up. That’s genuinely most of what separates the clients’ preparers who enjoy working with them from the ones they don’t. In return, you get a smoother process, a more accurate return, and very likely some guidance you’d never have received if you’d shown up with a shoebox and gone quiet.
Alan F Burke CPA
What Your Tax Preparer Wishes You Already Knew
March 1, 2026 · Blog, Guest Post of the Month
⏱ 5 min read
Most people approach tax season thinking about one thing: getting their return done. What they rarely think about is what the experience looks like from the other side of the desk. Having seen it from both angles, I can tell you there’s a real difference between clients who make a preparer’s job easy and those who quietly make it harder than it needs to be.
Here’s why that matters to you specifically: being a better client isn’t about being polite for politeness’ sake. It translates directly into lower bills, faster turnarounds, and better advice. This is entirely in your own interest.
First, Understand How You’re Being Charged
The way the preparer bills you should shape how you work with them. There are three common arrangements, and each one rewards organization in a different way.
If you’re on a flat fee, the dollar amount doesn’t change whether your documents are immaculate or a complete mess. But here’s what does change: a preparer who powers through your tidy file in two hours now has time to actually think about your situation. That might mean spotting a deduction you’ve been missing for years or flagging something worth changing before next filing season. Advice like that can easily be worth more than the return preparation itself, but it only happens when there’s time and mental energy left over to give it.
Hourly billing leaves no room for ambiguity. Every follow-up email, every clarifying phone call, every minute your return sits untouched while you track down a missing form, it all runs the meter. Most of that extra cost is entirely preventable with a little upfront effort.
The hybrid model, which is a base fee with overage charges for complexity, is the most common setup you’ll encounter. Most preparers are generous about absorbing minor extra work without comment. But when documents arrive in scattered batches, questions go unanswered for days, and the timeline keeps slipping, that goodwill has a limit. And again, the extra charges that result are almost always avoidable.
There’s one more piece to this that doesn’t show up on any invoice. Tax preparers are human, and like anyone doing service work, they have clients they genuinely enjoy and clients they quietly dread. The ones they enjoy tend to get more, for example, a heads-up about a planning opportunity, a faster turnaround when things are hectic, and a little extra thought applied to their situation. Difficult clients still receive competent, professional service. They just don’t get the extras. That’s not a policy; it’s just how people work.
The Three Things That Actually Move the Needle
None of this requires becoming a tax expert. It really comes down to three habits.
Send everything at once, and send it organized. Before you submit anything, set aside an evening to go through your documents. W-2s, 1099s, interest statements, charitable contribution records, mortgage forms, gather everything. If your preparer sends you an intake organizer or questionnaire, use it. It exists because it tells them exactly what they need in the format that’s easiest to work with. If they don’t use one, just organize things logically and label your files clearly. “Scan_final_2” is not a file name. A small amount of effort on your end saves a disproportionate amount of time on theirs.
Don’t send documents as they trickle in. It’s tempting to forward your W-2 the moment it hits your inbox, making you feel like you’ve gotten ahead of things. In practice, piecemeal delivery creates more problems than it solves, for example, things get overlooked, work gets duplicated, and many preparers won’t even open a file until they believe everything has arrived. There are legitimate exceptions: a K-1 that shows up late, a corrected 1099 that comes in after the fact. Any experienced preparer will understand those situations. But make them the exception rather than your default approach.
Respond promptly when they reach out. When your preparer sends you a question, it usually means they’re actively working on your file and have hit a wall they can’t get past without your input. A week-long delay doesn’t just slow things down; it forces them to set your return aside entirely and context-switch back to it later. That kind of stop-and-start cycle costs time, and depending on your billing arrangement, it may cost you money too.
Conclusion
A single organized evening and a commitment to responding quickly when questions come up. That’s genuinely most of what separates the clients’ preparers who enjoy working with them from the ones they don’t. In return, you get a smoother process, a more accurate return, and very likely some guidance you’d never have received if you’d shown up with a shoebox and gone quiet.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
The Customer Acquisition Cost (CAC) measures how much a company spends to obtain new, additional customers. Oftentimes, this calculation is used with the customer lifetime value (LTV) metric, that also projects the customer’s profitability to calculate the newly acquired customer’s value.
When investors think about building a strong equity portfolio, U.S. stocks often dominate the conversation. The United States is home to many of the world’s most innovative, profitable, and well-known companies, and has a history of delivering strong long-term returns. However, the United States is not the only country with successful, growth-oriented businesses. In fact, nearly half of the global equity market is located outside the United States, offering investors a much broader opportunity than in domestic markets alone.
Most people approach tax season thinking about one thing: getting their return done. What they rarely think about is what the experience looks like from the other side of the desk. Having seen it from both angles, I can tell you there’s a real difference between clients who make a preparer’s job easy and those who quietly make it harder than it needs to be.