If you want to give your small or home business the best chance for success, then you should consider paying for the advice and assistance of an accountant. If you are afraid that hiring an accountant will cost you too much money, then read on.
It is common among bootstrapping small and home-based business owners to tend to the DIY approach when it comes to accounting; if they do hire someone, then they bring on a bookkeeper- the cheapest option. While these business owners may think that they are saving themselves a great deal of money, the truth is that many of them may be shooting themselves in the foot.
What many entrepreneurs and new small business owners in particular do not realize is that an accountant is one of the most important business professionals to work with- and not just at tax time.
Many accountants are qualified to do much more than file tax returns, maintain financial records and generate reports. They are also business consultants. A good accountant will be able to interpret the financial and operational data of a business and be able to offer valuable advice regarding operations and growth.
Here is a rundown of what an accountant can do for your business:
- General Bookkeeping Duties. All accountants are trained to maintain a business’ financial records and to generate standard financial documents or reports. They can also assist in opening a business bank account and setting up a direct deposit system for vendor payment and payroll.
- Compliance with Government Legislation. The legislative landscape is constantly changing… and getting more complicated. Many accountants, especially if they are Certified Public Accountants (CPA), are familiar with corporate and tax law, and they keep up to date with any pertinent changes to the legislation. This can help the small business owner in several ways including: determining the appropriate business structure for a venture and assisting with its setup, taxation registration and lodgement, and filing corporate tax returns with all the necessary deductions.
- Tax Planning and Reporting. In addition to standard tax reporting, a good accountant should be able to offer general tax planning advice to maximize business tax deductions. This is particularly important to small and home-based business owners who may not be fully aware of what they can and cannot claim, and it’s one area where the act of hiring an accountant can basically pay for itself.
- General Financial Consulting. As I mentioned above, an accountant can act as a business consultant providing advice on cash flow management, inventory management, price control, and business financing.
- Advice on Technology. There are several, versatile accounting software applications, services, and business tools on the market these days that specifically target the needs of small businesses. But knowing which one to choose can be confusing. A good accountant should be familiar with the major accounting software and services and should be able to offer advice on how to bring this technology into a business.
- Networking. If the accountant is located in the local community, and has been there for a significant amount of time (at least three to five years) , then he or she can be a good source of business and financing contacts as well as other community connections.
How to Save Money on Accountant Fees in a Small Business
Many small business owners shy away from hiring an accountant, fearing exorbitant fees. But the truth is there are several ways to keep the cost at a minimum, including doing some research, keeping the lines of communication open, and freeing the accountant to do those things that are the most vital to the business. Small business owners can follow the tips below to reap a significant savings on their accountant fees:
- Look for smaller firms or private individuals. Small accounting firms and self-employed accountants will generally charge you less for their services. But make sure you look into their experience, credentials, and any references they provide.
- Be clear about the price. Ask the accountant about his or her fee structure before you agree to work with this person. Most accountants these days are paid on an hourly rate, which, as I explain below, is something you can use to your advantage. Be sure to also find out what is the average amount of time that is required to complete each task.
- Take on what you can or hire a bookkeeper. One surefire way to keep your accounting fees low is to ensure you are not making your accountant spend time on tasks that you or your staff can easily do yourselves, such as recording transactions and organizing financial documents. Alternatively, you can hire someone to do your bookkeeping. In any case, you should make sure to consult with the accountant beforehand so that you present all of your data in a way that the accountant can easily access and use.
- Make sure your books are in order. As a follow-up to the tip above, it is vital that you send the necessary business documents and information to your accountant in an organized way. There are several points to keep in mind here:
1. Missing documentation will slow down your accountant and cost you money.
2. Many small and home-based business owners make the mistake if combining business transactions with personal ones, so do yourself a favor and open separate accounts and credit profiles.
3. Even if you are already working with a bookkeeper or an accounting software package, make sure to ask your accountant for advice on how transactions should be recorded and what accounting systems should be used.
- Include the accountant in business decisions. Before making any major decisions in your business, make sure that you first consult with your accountant. By doing so you can avoid losing significant amounts of money and/or getting yourself into trouble.
- Regularly check in with your accountant. Many small business owners make the mistake of only contacting their accountant come tax time. In order to maximize your investment, make it a habit of contacting your accountant every few months to discuss your business’ operational and financial performance. This will also help you to identify potential pitfalls before they happen and before they end up costing you a small fortune.
Bottom line: investing in an accountant can significantly help your small business and the advice you receive can quickly make up for the cost in accounting fees, but to enjoy these benefits you have to make an effort to do it right- from the beginning.