Here, we’ll break down the reasons why you may need an accountant, and how to go about finding one who’s a good fit for your business.
By doing your own accounting you miss on the following
Doing your own accounting can save you the money you’d spend on a professional, but it comes with its costs:
- Doing your own accounting can take six or more hours to do every month which adds up to almost two full nine 8-hour work days over the course of a month.
- Setting up your bookkeeping platform takes time and has to be done correctly, otherwise it can invalidate a full year of working to stay up-to-date.
- An untrained eye can make mistakes that cost money in the form of missing out on tax deductions or penalties for an incorrect tax filing.
- Getting blindsided by a reporting deadline can lead to a stressful, caffeine-filled crunch of catching up on your bookkeeping.
- Having incorrect financial statements can result in missing out on loans, grants, and other financing opportunities.
How do you know if you need an accountant?
Maybe you’re starting to notice subtle signs that your venture would benefit from the support of a dedicated numbers person. Or maybe you feel so overburdened with taxes and payroll that you need to onboard an accountant as soon as possible.
Hiring an accountant, either as a full-time employee or a contractor, makes sense if:
You’re unsure where your business stands financially.
An accountant can interpret your business’s financial reports and provide valuable insights into your income, expenses, and cash flow helping you make better informed decisions about how to grow your business.
You no longer have the time to manage the financials.
If your business has outgrown spreadsheets or fallen behind on its accounting tasks, it might be time to hire a professional.
Tax season is the most stressful time of the year.
Unless you’re expecting a windfall refund, tax season tends to be stressful for most small business owners——especially if you haven’t kept your records current. In addition to the work of getting all your information up to date, there’s also the worry of an audit or penalty for late filing. An accountant can give you peace of mind that your taxes are done correctly, provide thorough tax planning to maximize deducitons, and will provide necessary support should you be audited.
You plan on expanding the business.
An experienced accountant is not only a lifesaver at tax time, but also a trusted advisor who can give objective financial advice on growing your business. They can also assist with the financial analysis of your business plan.
Additionally, as your business grows, so do the scope and complexity of your financials. An accountant can be by your side during this time to ensure everything remains compliant and accurate.
How your business’s structure affects your accounting needs
The tax structure of your small business can also determine the complexity of your accounting needs.
If you are running your business as a sole proprietorship, for example, your business needs are simple and you can probably tackle your own books. Your taxes are simply filed on your individual return, and you include a Schedule C to report total revenue or gross receipts as well as expenses.
On the other hand, if your business is structured as an S or C corporation, you’re paying dividends to shareholders as well as processing payroll for employees. Now your business needs are more complicated and an accountant has a bigger benefit.
In addition to more detailed reporting requirements, business tax filings for S corporations and C corporations can be more time-consuming and include additional components such as payroll tax. In these cases, it’s wise to have an accountant oversee everything, or at least work with a bookkeeping and tax service.
Nonprofits have potentially the most complex business finances. In particular, they need to track how grant funding is spent and their year-end tax reporting is under the heaviest scrutiny. Having an accountant’s experience guiding your financial information can save massive headaches down the line.
Should you hire a CPA or an accountant?
Now that you know the differences between the CPA and a general accountant, which do you hire?
The answer will largely depend on your business’s financial reporting needs and budget, as well as your plans for the future. If you plan on expanding your business, or expect your fiscal reporting obligations to increase and your taxes to become more complex, hiring a CPA may be in your best interest.
Why you should hire a CPA
- Their knowledge of the tax code can help you save money come tax season, especially when it comes to tax deductions you may not be aware of. CPAs can also represent you during an audit.
- A CPA can offer expert advice on financial matters. They can also serve as a chief financial officer (CFO) for your business and offer future financial planning.
- A CPA can take over your payroll services and ensure all withholdings are done without errors.
- A CPA can be your sounding board for financial strategy ideas or help you troubleshoot cash flow problems in the business.
- They can take over your invoicing, accounts receivable, and expense tracking, as well as ensure your vendors and others are paid on time.
Why you should hire a general accountant
- General accountants typically charge less than CPAs, which is helpful for businesses on a tight budget or that are just starting out.
- Your small business’s financial records are not complex, so they don’t require extra specialized knowledge.
- You mainly need bookkeeping services, such as financial statement preparation.
- You only need occasional assistance with your books, rather than ongoing financial and tax advice. Whereas some CPAs have minimum fees, retainers, or service requirements in order to work with a client, general accountants are often more flexible.
Where to look for the right accountant for your small business
There are several places to search for an experienced and knowledgeable accountant.
- Research local general small business accounting and CPA firms and narrow down your list to those that have expertise working with similar businesses—especially those in your industry.
- Get recommendations from other entrepreneurs who have worked with different accounting firms.
- Experienced accountants who practice as freelancers often list their qualifications and work history on sites such as LinkedIn, Upwork, and Fiverr. Since they are not with a firm, they may offer less expensive accounting services to small businesses on a tight budget.
- Go online and read reviews or ask for referrals from your business network.
- If you are hiring a CPA, you can find an accredited accountant at the American Institute for Certified Public Accountants website.
If you’re still interested in doing your own accounting, consider some of these easy small business accounting software options:
- Freshbooks: With functionality that goes beyond recording transactions and checking balances, Freshbooks can also be your invoicing, time tracking, and mileage tracking solution making it a great one stop shop for small business owners needing maximum functionality at minimum cost.
- Xero: Tailored more to users with a bit of know-how, Xero can be customized for your specific needs—so long as you know what they are—and its robust set of integrations means it can be easily worked into your existing tech stack, banks, and credit cards.
- Quickbooks: One of the most widely used accounting software for the pros, many small business owners use Quickbooks since tax preparers are fluent in its functionality and can access the information remotely if you use Quickbooks Online. If you use Intuit for your payroll, you can get a bundle price and have all payroll expenses automatically imported into Quickbooks.
- Bench: If you want some level of input but without having to actually do the work, Bench is the perfect solution. You’re paired up with an expert team of bookkeepers who will work with you to customize the reporting to suit your needs and review everything for accuracy and completeness.
What to look for when hiring an accountant
While there’s definitely “good accountants,” there’s no one-size-fits-all approach to finding the right accountant for your business.
But there are some steps you can take to ensure that you end up with a great match, whether you decide to hire a CPA or a general accounting professional.
- Look for an accountant who is familiar with small businesses, especially those from your industry or stage of growth (for example, specializing in startups).
- Ask your accounting candidates for references from other small business owners.
- Find out their experience level with the business accounting software you’re using, and whether they’re open to working with it. If you’re happy with your current accounting software, you may not want to switch.
- Ensure the accountant has a thorough knowledge of the latest IRS tax laws and federal, state, and local regulations that affect your business.
- If you plan on recruiting an accountant as a consultant, get a written estimate of what their services cost.
- See if they’ll provide you with regular updates on how your business is doing financially and help you set goals to improve performance over time. Some accountants only work part-time or on an hourly rate meaning this communication might be inconsistent or come at a cost.
- Make sure they have excellent communication and customer service skills, without leaning too much on technical jargon.
- Look at the accounting system they use. If you want detailed access to your reporting, choosing an accountant that uses a cloud-based accounting software lets you see exactly what your accountant does.
- They should be highly organized and detail-oriented.
You’ve hired an accountant. Now what?
Once you’ve found your new accountant, you want to ensure you get the most out of your relationship. Here are a few tips.
- Have regular meetings to discuss your business’s objectives and expectations.
- Keep the lines of communication open, whether it’s through email, phone calls, or in-person meetings.
- Be open to their feedback and advice on how to handle your financials.
By working together closely and communicating openly and honestly, you can be sure that you’re using their expertise to help you make the best decisions for your business’ success.
The bottom line
While it may be tempting to try and do everything yourself, especially when you’re first starting out selling on Amazon, there are some tasks that are simply better left to the professionals. If day-to-day bookkeeping and filing tax returns have become a burden for you, or if you’re struggling to find the time for other essential business tasks, it may be time to consider hiring an accountant.