Does your small business need an accountant? Most business owners do not like to do their own taxes or accounting themselves unless their specialty happens to be in those areas. Except for the very small businesses, most businesses find they need to hire a good accountant to do their taxes and perform some other accounting functions.
Some businesses already have a good accountant in house. There may be bookkeepers, accountants, and a controllers working inside the business. The bookkeeper performs the day-to-day posting and journaling functions of the business. The accountant actually develops the eight-step process that bookkeepers typically use in order to record the financial transactions of the firm and develops and interprets the firm's financial statements.
The controller of the firm helps the business owner navigate the finances of the firm. One of the main reason that business firms fail is lack of expertise in finance. A good relationship between the firm's controller and the firm management is necessary.
A business firm with good bookkeeping, internal accounting, and a good controller may still need external accounting help. An internal accountant may not have tax expertise. The accountant and controller may not have the management expertise needed to prepare and interpret complex financial statements. The bottom line is that the amount of external accounting help business firms need depends on the complexity of their financial operations.
Here are four factors you should consider when hiring a good small business accountant:
1. Good financial and accounting management is crucial to the success of your firm.
Most businesses fail because of lack of good financial management. Effective accounting, planning and control may mean the difference between the success and failure of your business. What does this have to do with hiring a good accountant? A good small business accountant can mean the difference between the success and failure of your business.
If you need more accounting help than you have in-house, don't hesitate to hire someone externally. The cost will be well worth it. Too many business owners view accounting as a necessary evil and largely a part of overhead of the firm. They try to minimize the costs of the accounting function of the business. This is a mistake. While a business owner doesn't want to pay too much for any necessary expense, they want the best accounting they can get.
2. A good accountant understands both financial and managerial accounting.
In many companies, accountants focus on debits and credits or the basics of financial accounting. The accountant uses the figures the bookkeeper arrives at through recording the daily financial transactions of the firm and develops the financial statements. Those financial statements and their interpretations are communicated to the owner or manager of the company.
Good accounting does not stop there. The firm controller should be able to use the financial statements as the starting point for firm budgeting, cash management, and other financial decisions. If the business is small and there is no controller, it is time to hire an outside accountant who does understand managerial accounting and can help firm management with financial planning.
3. A good accountant should be an expert in business tax preparation.
If you have an in-house accountants, they will probably not be tax experts. If your in-house accountant is not a tax expert, then you have to hire an accountant who is a tax expert. A Certified Public Accountant or CPA is usually the type of accountant you need for tax matters as they can certify your tax returns after they prepare them. It is very important to hire a professional to do your taxes so your expenses can be maximized and income minimized in order to lower your tax liability.
A CPA is not necessarily an expert in managerial accountant but many are. You might want to try to find a CPA who can also help you with the financial management of your business. Keep cost in mind.
Small businesses should still keep excellent financial records to give to their tax preparer each year. Accounting software programs assist in this record-keeping.
4. A good accountant should have small business clients and experience.
Some accountants, whether they are CPAs or not, have only individuals as clients while others have a mix of individual clients and business clients. Just like most employees that you hire, you want this employee to have experience; in this case, small business experience. A good accountant for a small business firm should follow the 60% rule. The accountant should have at least 60% business clients in order to be considered experienced enough to be a good small business accountant.