It isn’t cheap to hire an accountant. And if you’re a small business owner, it can be tempting to avoid reaching out for help—especially on a tight budget. But a good accountant possesses a lot of hard-won knowledge when it comes to financial planning that goes beyond the finer nuances of taxes.
Chances are, at some point, they’ve worked with companies just like yours that have succeeded and failed. That experience, in addition to their Certified Public Accountant (CPA) training, means they’re able to offer financial advice in ways you might not expect.
In this guide, we’ll explain what an accountant does, share some advice on when you should consider hiring one, and offer some tips for getting the most value from your CPA.
What an accountant does
In business accounting, an accountant helps you make strategic financial decisions.
Your financial records are typically handled by a bookkeeper, who’s in charge of tracking your daily income and expenses and providing monthly financial statements. Then, an accountant helps you interpret those numbers to provide financial advice.
Accounting services can include tax planning, forecasting, payroll services, and more, but that’s not all: they tailor their services to your business needs. Think of them as financial advisors who can also file your taxes and help you through an audit.
Are you ready to hire an accountant?
If your business is in its hobby stages, you don’t need to worry about hiring an accountant. But you should still talk to one early on. It will benefit your business at no cost and can help you form your business plan.
Most accountants provide free consultations. They want your business, and a consultation is their chance to show how they can help. In return, you’ll get free advice and a better understanding of what they’re able to offer you in case you choose to hire an accountant down the line.
While there’s no “right” time to hire an accountant, it’s a smart idea to have a CPA on hand once your business starts turning a profit. If your small business is already a for-profit endeavor, but you’ve yet to bring on a CPA, here are several milestones that indicate it’s time to hire an accountant:
- You plan on expanding your business (especially into another state)
- Your business has recently experienced rapid growth
- Investors are asking for financial reports
- It’s time to file your taxes
- You’ve made errors filing taxes that cost your business money
- You are about to be audited
- You plan on selling your business soon
A qualified CPA with experience in your industry can help you navigate these circumstances.
How Bench can help
While you can wait a while to hire an accountant, your bookkeeping responsibilities start the day your business does. With Bench, you’re paired with an expert bookkeeper who will provide you with automated monthly reporting that’s IRS compliant. If you’re not ready to commit to a full-time CPA, you can add tax filing to your subscription and gain access to tax professionals who can help you make the best choices for your business. Learn more.
Finding the right accountant
The American Institute of Certified Public Accountants (AICPA) has a CPA-location resource to help you find an accredited accountant in your area.
The best accountant for you is one who understands your industry and has experience working with businesses similar to your own. Talk to contacts in your industry for referrals; they’ll know CPAs who are familiar with your business type.
Generally speaking, here’s what you should look for in the right accountant:
How well they understand your business
Look for someone who has experience in your specific industry. They can help you qualify for common tax breaks, deductions, and credits that apply to your business.
Further reading: Tax Credit vs Tax Deduction: Keys to a Lower Tax Bill
If they communicate jargon-free
Any discussion involving taxes—or the IRS—is in danger of becoming bogged down with technical language. Look for an accountant who can communicate high-level topics in an accessible way and helps you more deeply understand your business.
What accounting software do they use
Some accounting firms will universally use one software and insist on you doing the same. If they’re asking you to make the switch, it might be time to look elsewhere. Many accountants will work with the accounting software you’re already familiar with.
The size and strength of their team
Accounting firms vary in their size of operations. A smaller firm may mean a smaller portfolio which can mean a more personalized service—but they still need enough personnel to be able to do what you need when you need it. A bigger, more established accounting firm is better at turning around tasks quickly, as they have the employees to do so.
How often you’ll need to work with them
Depending on what type of services you’re looking for—from yearly tax help to intensive financial planning—you will be meeting more or less frequently with your accountant. Do you want monthly face-to-face conversations? Or maybe quarterly phone calls? Ask them directly, and make sure their expectations are a match with yours.
How much does an accountant cost?
Many accountants charge by the hour, while some work on a monthly retainer fee. Pricing can vary greatly, depending on the services the CPA provides. Based on the conversation during your initial consultation, you should have an idea of how frequently you will be meeting with your accountant, which also affects the cost.
As you interview multiple accountants, obtain quotes from each of them so you can compare prices.
It may seem painful to pay that much money to have your taxes done, but remember: you’ve saving hours of labor by having a pro handle the task. Also, an accountant will likely have a better understanding of tax laws for your industry and may be able to secure savings that outweigh the cost of hiring them.
How to work with an accountant
When it comes to taxes, in particular, there are certain things you should always review. Here are the right questions to ask to make sure you’re getting the most value out of your accountant.
What business expenses can I deduct?
Remember, only the ordinary and necessary expenses of running your business can be deducted from your taxes. Your accountant can tell you whether you qualify for certain deductions and highlight others you may not know about.
Are any of my business expenses partially deductible, and how can I maximize these deductions?
Not all business expenses are one hundred percent deductible—for instance, meals and entertainment expenses, business travel, and any that are mixed-use home office items, such as cell phone or internet service. An accountant’s tax advice ensures you properly calculate which percentage to deduct depending on how frequently you use the item for work.
Do any recent changes in tax law affect my business?
Tax regulations are constantly being updated. Some changes may benefit your business, while others won’t. Part of your accountant’s job is staying up on tax law changes and leveraging them to save you money.
How does the legal structure of my business affect me at tax time?
Ask your accountant if any tax benefits or disadvantages apply specifically to your business’s legal structure. They may be able to help you change business structures in a way that will help you save on taxes. For instance, some LLCs can file as S corps which reduces their likelihood of being audited.
Can I deduct the cost of my health insurance?
As a self-employed person, your health insurance premium is tax-deductible. However, if you are eligible to be included in your spouse’s health insurance plan, you can’t sign up for your own plan and then deduct it. An accountant can elaborate on these rules and determine whether your plan qualifies to be deducted.
Working with an accountant won’t just help you file an accurate tax return. Consider your CPA as part of your small business team; they can help advise you on financial decisions, ensuring your business’s long-term sustainability and growth. Enlisting the help of a qualified accountant is an investment that costs time, effort, and money, but in the long run, it pays off.