One of the most important decisions that you will make as an entrepreneur is the selection of a small business accountant and tax advisor. It is can also be one of the most intimidating decisions for most small business owners. This is a relationship that extends beyond just bookkeeping and will provide guidance and advice as your business grows.
You should engage an accountant at the start of your business in order to set up the correct legal structure. An incorrect legal structure can wind up costing you a lot in both taxes and legal fees. If you are buying a franchise or other small business, an accountant’s evaluation of the financial records is absolutely necessary. A small business accountant can also be very helpful in dealing with your bank’s loan officer and the bank’s requirements for particular financial reports.
Therefore, it is a mistake to delay engaging an accountant until tax time. Working with a small business accountant to set up the proper procedures for record keeping and financial projections can help you to avoid costly tax problems.
Research and Interview
This is a relationship that deserves your time and attention. Even solo operators will benefit from establishing a solid relationship with a small business accountant who can aid in setting up the business correctly and assist with questions.
As a small business owner, you should interview small accounting firms which can provide you with the personal attention that you will need. Beware of a solo accountant who may not be able to spend time answering questions because of their own workload. Additionally, you need to be comfortable with whomever you choose as you will be dealing with sensitive personal financial information.
Marshall Persky, a SCORE mentor and former chairman advises “…to build a shortlist of accountants that you would consider ‘partnering’ with because that is exactly what you are doing by hiring a business accountant.”
- Interview in person so you can gauge your level of comfort.
- See if they have experience with your specific industry. Accounting metrics can vary substantially by industry so you’ll want to hire a firm that has deep experience. It is imperative that the accountant or firm has experience handling small businesses.
- Verify credentials. A CPA designation is preferable and they should have access to current tax information. The AICPA maintains a directory of accounting companies for you to begin your search. You can also seek a referral from another local small business that you trust. The SBA suggests inquiring with your local Chamber of Commerce for networking events. Your business bank may also be able to aid you with suggestions.
- Make sure the accountant is available to answer questions with clear explanations- no technical jargon. It is imperative that you also understand what you are doing financially and why you are doing it.
- Keep yourself updated. The accountant should be accessible during the year to guide your financial decisions in growing your business and understanding your cash flow.
Define Your Needs
Make a list of requirements that you would want the accountant to handle.
- Be honest about how much time you can devote to preparing, updating and maintaining your financial records. Can you maintain your own accounting software? If not, you will need to keep organized records- not shoeboxes of receipts. See if there is someone in the accounting firm who can provide some training for you. Remember that your main responsibility is to run your business, so don’t take on more that you are capable of handling. Records that are not maintained correctly can be costly.
- If you are handling the daily accounting, allow your accountant access to your cloud payroll and accounting services. This will enable the accountant to stay updated and will reduce costly physical meetings and printing reports.
Make Sure You Are Covered For Taxes
Tax season is particularly hectic for both the small business owner and and for the accountant.
- Avoid the last minute tax crunch. Schedule a meeting with a small business accountant at the start of the year and supply all the relevant files and documents as early as possible.
- Find out how your accountant handles a government audit. These can be very costly in time, money and stress. It is essential that you have a good accountant to assist you.
- Use your accountant to aid in tax planning. You want to avoid unexpected tax bills.
What Are The Costs?
This is important and tricky, especially for the small business owner. Very often, you may not be able to afford a retainer structure. Hopefully, you will be able to develop a relationship with the accountant or accounting firm that will allow you to utilize their services strategically as you grow. Maintaining efficiency in your record keeping will also help to push the costs down. However, the expense is a constructive investment, allowing you to run your business more effectively and avoid costly financial errors.
Taking the time to establish a solid business relationship with an accountant you are comfortable working with will aid in the development of your small business, allowing you to stay organized, informed, and proactive. This will not only provide added security and peace of mind, but will pay off in both time and money.
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.