We often with speak with small business owners who rely upon DIY accounting programs. They say the program works good for them and makes operating their business a breeze. What we often find though is that even with the use of such programs, many business owners do not know the true profitability of their business. Or, if they have more that one office, they do not know which office is truly making money and which office is possibly losing money. Sometimes income and expenses are not being properly entered or categorized. Having an accountant help your company to grow, move forward, and save on taxes.
Here are reasons why your business needs an accountant at all stages of growth:
1. Your business is in the startup phase:
There are many considerations when you are just starting your business:
- Business Structure
- Business Plan
- Bank Accounts
- Government Regulations
You might think it’s too early to hire an accountant, but the way you set up your operations can have a serious impact on your future success. An accountant can help you determine the most appropriate business structure, analyze your business plan for financial compatibility, and assist you with making sound financial decisions throughout the startup process so you don’t have to spend more money to correct mistakes later.
2. Your business has employees
In the first few years of operation, you may not feel you have enough work for an accountant. The truth, though, is that an accountant will have the specialized knowledge to make your money work for you even though you don’t have a huge workforce. The accountant can:
- Help ensure employess and independent contractors are classified correctly
- Oversee payroll and payment processes
- Create appropriate timelines for sending W2s and 1099 form
3. Allows you and your employees more time in money making activities
Time is a limited asset. The more time you can spend in marketing your business and consulting with clients and customers will produce more income than the monthly fees charged by an accountant. Having an accountant saves money on taxes and benefits paid to an employee in a non-income producing activity. This employee can be reassigned to an income producing activity.
4. Your business structure requires audits
Not all small businesses are required to conduct audits, but unless you consult with an accountant you might not know until it’s too late. Publicly owned businesses are required to comply with the Sarbanes–Oxley Act (SOX), and private companies that are preparing for an initial public offering might also need to comply with certain SOX provisions. Furthermore, all businesses should comply with local generally accepted accounting principles (GAAP). Hiring an accountant can ensure your records are compliant with the appropriate regulations.
5. Your lender requests a financial statement
The Small Business Administration reports that small businesses borrowed over $6 billion last year. At some point your business will probably need additional funding, whether it’s for expansion, new equipment, purchasing property, or even establishing an emergency fund. Before you approach a lender, having an accountant prepare a financial statement can increase your chances of getting approved.
6. Your budget is falling short
According to the Bureau of Labor Statistics, about half of all businesses will fail within five years of opening. Although there are many factors related to failure, not meeting budget goals can decrease the chances of your business survival. Having an accountant on hand to analyze your budget, assist in making changes and catch errors will help you make sure your budget is on target for success.
Questions to ask yourself before hiring an accountant:
- Does your business planning match you financial forecast?
- Have you read the tax code?
- Do you have enough time to take care of all the accounting duties yourself?
- Are you sure your employees are classified correctly?
- Do you know what auditors look for when conducting an audit?
- Do you know what needs to be in a financial statement?
- Is your budget working for you?
If you answered "no" to any of these questions, you can benefit from hiring an accountant.