Many owners of small business do their own accounting, usually with the help of a software package such as QuickBooks. This can make sense if you run a one- or few-person operation, are familiar with basic accounting, and have the time and inclination to take on the work yourself. For you DIYers out there, we recommend our IOU Financial Business Budget Smart Sheet to establish and track your budget.
For some, the question of hiring an accountant is confusing. Here are nine signs that indicate you should go ahead and hire one:
- Knowledge: If you aren’t familiar with accounting terms, financial statements or report creation, you might need an accountant, at least in the beginning, to teach you what you need to know. If you don’t think you have the time to study the subject, you can keep the accountant on as long as needed.
- Taxes: Tax law is complicated, and one of the worst mistakes a business can make is to overpay its taxes. But even worse is to underpay and get caught, because then you’ll be hit by penalties and interest. Use an accountant if you don’t understand which deductions and tax credits to take, and/or if you don’t want to file your tax return on your own.
- Time: Let’s face it, bookkeeping can eat up your time and divert you from more important tasks. You need to operate the business, make staff decisions, market your offerings and troubleshoot problems. It shouldn’t be surprising that bookkeeping would be low on your priority list. You can hire a bookkeeper who knows how to do other accounting tasks – they usually charge less than full-blown accountants.
- Growth: Congratulations, your business is experiencing rapid growth. However, that also means you have more customers to attend to, more staff to hire, more vendors to negotiate with, and so forth. These activities require more paper pushing, number crunching and meeting time. With these management challenges, why not let an accountant lift some work off your shoulders?
- Profit margin: It’s nice when revenues grow, but less nice if profits don’t follow. The reason is invariably that your costs are too high. You could use an accountant with a sharp pencil to evaluate your overhead costs and suggest ways to save money. The savings could easily pay the accountant’s salary and hopefully a lot more.
- Investors: Have you grown to the point that you have investors? Well, they’re going to want to see professional reports that lay out the current financial condition of the business. Professional financial reports are also useful in recruiting new investors. An accountant can produce the reports you need and make them look professional – that will help keep investors happy.
- Expansion: If you are thinking about expanding into a new state, an accountant will help you meet the regional reporting requirements for payroll tax, income and sales. Expansion to a new state may include opening new locations, creating new distribution logistics and hiring new staff. An accountant can help you track the costs of these moves.
- Merger/acquisition: If you are looking to buy or sell your business, you’ll need an accountant to evaluate the entities involved and how to structure the transaction in order to minimize taxes.
- Audit: If the IRS has signaled that it wants to audit you, a CPA or other qualified accountant will be able to represent you to the IRS. This can help prevent you from making mistakes as well as lower your stress level. Generally, you don’t want to face the IRS on your own.