5 Reasons Your Small Business Needs an Accountant
IMGCAP(1)] As a small-business owner, you probably thrive in a DIY environment; but the more hats you wear, the less you’ll accomplish successfully. Accounting is one of the most important areas for keeping your company profitable. As you start out and your company grows, software can only take you so far. Accountants can help your company move forward. Below are reasons why your business needs an accountant in all stages of your growth.
1. Your business is in the startup phase
There are many things to think about when you’re just starting out:
- 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 employees and independent contractors are classified correctly
- Oversee payroll and payment processes
- Create appropriate timelines for sending W2s and 1099 forms
3. 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.
4. 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.
5. 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 your financial forecast?
- Have you read the tax code?
- Do you have enough time to take care of all of 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.
How to find an accountant
You could do a quick Google search, but how would you know if the accountant is qualified? There are numerous databases of accountants, but to ensure that the accountant you choose has the knowledge and experience you need, look for a certified public accountant (CPA). These professionals will have passed a rigorous CPA exam and are licensed by the state in which they work. Enrolled agents are another option for tax preparation and tax resolution. Enrollment agents are authorized by the federal government to represent taxpayers before the IRS. They specialize in taxes, whereas CPAs often specialize in tax, accounting, and financial services to businesses in the state in which they are certified.
Accountant Bridge is a great place to start your search for a CPA that matches your needs.
Levi King is CEO of Nav, a business financing company.