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When To Hire An Accountant For Small Business

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When To Hire An Accountant For Small Business

Running a business can be quite a juggling act. Between finding the right business software to getting the funding you need to buying business insurance to managing the actual day to day processes of your business, some things get put on the back burner.

Accounting and bookkeeping are often the first places business owners fall behind, but this is the last area where you want to drop the ball. Managing your finances is the key to a successful business. But when can you manage your books on your own and when should you hire an accountant?

In this post, we’ll cover when you should hire an accountant and how much it’s going to cost you.

When Should I Do My Own Accounting?

Can I Do My Own Accounting?

We all love a good DIY, but let’s face it, we don’t want your business to become a Pinterest DIY fail. Sometimes, you just need a professional. But is accounting one of those times? Can you do your own business accounting?

To answer this question, let’s first talk about the difference between bookkeeping and accounting.

Although the phrases are often used interchangeably, bookkeeping and accounting are not the same things. Bookkeeping consists of daily business finance processes, like data entry, bank reconciliation, entering sales and expenses, creating reports, etc. Accounting analyzes those reports and data and turns that information into actionable insight about your business’s big-picture finances.

Here are some of the other differences between bookkeeping and accounting:

BookkeeperAccountant

Handles the day-to-day financials of a business

Offers advice and insight about the big picture finances of a business

Compiles reports and business data

Analyzes reports and business data in order to offer actionable advice

Often has real-world experience, and sometimes a certification, instead of a degree

Generally has a bachelor's degree, preferably in accounting

Can assist with payroll and sales taxes, but does not file tax returns

Files business and personal tax returns

Has knowledge of the business's finances only

Has knowledge of the business's finances and client's personal finances

A business owner can do their own bookkeeping, but actual accounting should be done by a professional.

If business owners have the time and want to be hands-on with their finances, they can handle bookkeeping tasks like:

  • Bank reconciliation
  • Invoicing customers
  • Making payments
  • Accounts payable
  • Accounts receivable
  • Running payroll
  • Creating reports

Accounting software makes it feasible for business owners to perform these tasks with relative ease and manage their books successfully. However, we always recommend that business owners turn to accountants for business and tax advice.

Even as someone who is very familiar with dozens of accounting programs, if I started a business, the first thing I would do is hire an accountant. Yes, I could handle my own bookkeeping and day-to-day finances, but the advice of accountants is indispensable for running a successful business and creating and achieving long-term financial goals. Accountants can verify your bookkeeping, give business advice, analyze areas where your business can grow, offer tax advice, maximize your tax deductions, and much more.

Additionally, just because you can do your own bookkeeping, doesn’t mean you should. If financial tasks are eating up your time and taking away from the success of your business, hire a bookkeeper or delegate some of the tasks to a trusted employee. This will free up your time so you can get back to growing and running a successful business.

Oftentimes, businesses have both a bookkeeper and an accountant. Bookkeepers are more affordable, so they are a better option for daily finance tasks, whereas a better use of your money and your accountant’s time is big picture finances and business planning.

Remember: If you hire an in-house bookkeeper, make sure that you divide accounting tasks. No matter how trustworthy an employee is, you should never have one person in charge of all the books as this is the easiest way for fraud to occur. Delegate accounting jobs and put strong internal programs in place to prevent fraud, or consider outsourcing your bookkeeping instead.

When Should I Hire An Accountant?

Signs You Need To Hire An Accountant

As a business owner, you can handle your own bookkeeping, but when should you hire an accountant? What are the signs your business needs an accountant? And if you already have an accountant, when are the times you should turn to them for help?

Here are fifteen cases when you should hire an accountant for your small business:

1) When Starting A Business

The early stages of business are incredibly important. Put your best foot forward and set your business on the path to success by hiring an accountant as soon as you start a business. An accountant can help you:

  • Choose the right type of business entity (like a sole proprietor, partnership, LLC, etc.)
  • Set up your business EIN and any state licenses or requirements
  • Choose the right accounting software for managing your business
  • Create a business plan
  • Create a tax plan and explain which deductions you need to record through the year

And more importantly, they’ll be able to advise you on how to run a financially successful business.

2) When Incorporating Your Business

If you are starting out and want to become an LLC or if you want to make the jump to incorporating your business, an accountant will guide you through that process.

3) When You Need Business Advice

We said it once and we’ll say it again, one of the biggest benefits of hiring an accountant is the business expertise and knowledge you gain access to. Turn to your accountant when you need business advice. Is your cash flow lower than you’d like? Are you losing money on COGs and can’t figure out why? Having trouble obtaining certain data about your business? An accountant can help.

4) When Filing Taxes

One of the biggest parts of an accountant’s job is preparing and filing taxes. An accountant will help you with your personal and business tax returns. They’ll know which forms you need to fill out, which deductions you qualify for, and how to appease the IRS so you can sleep easy come tax season.

5) When Planning For The Future

If you need advice on how to grow your business and prepare for the future, an accountant can offer guidance and help you create a business plan.

6) When You Need Help Managing Cash Flow

Cash flow is the lifeblood of your business. Without enough cash flow, you won’t be able to pay your bills or employees; too much positive cash flow and you aren’t investing your extra money wisely. An accountant can help analyze cash flow trends, give cash flow predictions, and offer suggestions to improve your financial situation.

7) When You Need Advanced Business Analysis & Reporting

Accountants are experts in business analysis. Not sure exactly where your money is going? Want to know where you can cut back and save money? Accountants know all of this and more. They can help create reports and give financial insight and analytics, so you can take that information and use it to improve your business.

8) When You Want To Save Time On Financial Tasks

As we mentioned earlier, if you are spending to much time on managing your finances, hiring an accountant can free up your schedule so you can focus on running your business. (If you need help with daily tasks, we recommend choosing a bookkeeper over an accountant to save money on services. Read our full post CPA VS Accountant: Which Is Right For You? to learn more.)

9) When Buying Or Selling A Business

If you are considering buying a business/franchise or expanding your current business, talk to an accountant first. They’ll be able to assess if the purchase is a wise financial move. Additionally, if you need to sell your business, an accountant will walk you through the process.

10) When Buying Or Selling Property (And Other Assets)

Along the same vein, talk to your accountant before buying or selling business assets like property, equipment, office furniture, etc. Because accountants know your business finances, they’ll be able to tell you if the purchase is a wise investment.

For example, they’ll tell you if you have the cash flow to buy all new computers for the office or if you should wait until next month when the cash flow trends predict more sales. Accountants will also help you manage your assets, track depreciation, and properly write off the tax deductions you’re eligible for. When selling property or other assets, accountants will know how to records this on your taxes properly.

11) When Applying For A Loan

Believe it or not, having an accountant can help improve your chances of getting a loan. Lenders want to see that you are fiscally responsible and some lenders, like Fundbox, require that you’ve been using an accounting solution for a certain amount of time in order to be eligible for the loan. Accountants can also offer insight into how the loan will affect your business finances.

12) When Facing A Tax Audit

No one wants to be audited by the IRS, but in business, you have to prepare for the worse and hope for the best. And if the worse does happen, you want an accountant — a CPA to be exact — on your side. A CPA, or certified public accountant, can legally represent you and your business before the IRS in the case of an audit. Read our post on CPAs VS Accountants to learn which is best for your business.

13) When You Suspect Someone Is Stealing From You

This is another worst-case scenario, but if you suspect someone is cooking the books and stealing money from your business, you’ll need to hire a forensic accountant to investigate the fraud.

14) When Going Public

If you have a public corporation or want to go forward with an IPO (initial public offering), you’ll need an accountant. Public corporations are required to have audit reports to show to investors. Only a CPA can prepare these reports for you.

15) Whenever You Feel Out Of Your Depth

Bottom line: If you aren’t sure about some aspect of your business or its finances, ask an accountant. Accountants are invaluable resources that can help you whenever you feel out of your depth or like you don’t know what you’re doing.

Benefits Of  Hiring An Accountant

When Should Your Hire An Accountant For Your Small Business

Hiring an accountant will allow you to sit back and relax. You can trust that your finances are in good hands and get back to running your business with the advice and time you need to grow successfully.

Here are some of the biggest benefits of hiring an accountant:

  • Business advice
  • Quality assurance
  • Save time on bookkeeping
  • Tax support
  • Reporting and analytics
  • Managing cash flow
  • Peace of mind

Another important benefit of accountants (CPAs in particular), is that a certified public accountant can legally represent you and your business if needed. This peace of mind is priceless.

How Much Does Hiring An Accountant Cost?

Cost of Hiring An Accountant

It may seem contradictory that to manage your money, you have to spend your money on hiring an accountant, but the cost is more than worth it. Which probably leaves you asking, how much is this going to cost me anyway?

There is no set answer for how much an accountant costs. The price is going to vary significantly depending on:

  • Your business
  • The complexity of your accounting
  • The services you require
  • Whether you hire a bookkeeper, accountant, or CPA
  • The accountant’s experience
  • Location

Most accountants charge by the hour and will give you an estimate of how much the services you require will cost. The best way to figure out how much an accountant will cost is by deciding what you need your accountant to do and then searching for the right fit. Get quotes from multiple accountants and CPAs, ask if they do free consultations, and gather information and referrals from other business owners.

Also, remember that cheaper isn’t always better. A more experienced CPA may charge more than an accountant who’s just getting started, but your business may prefer the expertise of a CPA. Or, maybe one accountant charges a lower monthly fee but another, more expensive accountant is faster — the time saved could be money saved as well.

The real question isn’t how much an accountant will cost, but, can you afford not to have an accountant? That’s a rhetorical question. This is no time to be a Scrooge. The benefits of hiring a professional accountant far outweigh the cost. And, if you choose to forgo an accountant, your business and its finances may suffer. Plus, you’d have to do your own taxes, and let’s be honest, who wants that?

Next Step

It’s true! Behind every good business is a great accountant. Accountants offer financial wisdom and business insight, They make sure your books are balanced and that you get the most out of your tax returns. They walk you through business plans, cash flow management, and can even represent you before the IRS in case of an audit.

Accountants give you the tools to help your business succeed and are an important asset to have. Now that you know when to hire an accountant read our full post CPA VS Accountant: Which Is Right For You? to help you find the perfect accounting professional for your business. Then hop on over to our post How To Find The Perfect Accountant For Your Business to take the next step.

Chelsea Krause

Chelsea Krause

Managing Editor - Accounting
Chelsea Krause is a writer who has specialized in accounting for two years and is a QuickBooks Certified User. She has a BA in English & Creative Writing from George Fox University and studied at the University of Oxford as well. She has been quoted in Forbes and her work appears in Startup Nation, Small Business Bonfire, and Women on Business.
Chelsea Krause
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2 Comments

Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Sarah

    Nice post. You make some good points here. So many small business owners are looking for ways to save money, especially in the start-up phase. But, the truth is, investing in a bookkeeper or accountant is well worth the money. Thanks again!

      Chelsea Krause

      Hi Sarah,

      Glad to hear you liked the post! An accountant is definitely a wise investment that is more than worth the cost. We’re happy to help share this information with small business owners and readers like you. Thanks for reading!

      Best wishes,

      -Chelsea Krause

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