A small business owner’s life is full of responsibilities, from bookkeeping and taxes all the way down to hiring employees and marketing products. But if crunching the numbers becomes too time-consuming and overwhelming, it may be time to consider hiring an accountant for the job.
Here, we’ll break down the reasons why you may need an accountant, and how to go about finding one who’s a good fit for your business.
How do you know if you need an accountant?
Maybe you’re starting to notice subtle signs that your venture would benefit from the support of a dedicated numbers person. Or maybe you feel so overburdened with taxes and payroll that you need to onboard an accountant as soon as possible.
Hiring an accountant, either as a full-time employee or a contractor, makes sense if:
You’re unsure where your business stands financially.
An accountant can interpret your business’s financial reports and provide valuable insights into your income, expenses, and cash flow helping you make better informed decisions about how to grow your business.
You no longer have the time to manage the financials.
If your business has outgrown spreadsheets and DIY accounting software, it might be time to hire a professional.
Tax season is the most stressful time of the year.
Unless you’re expecting a windfall refund, tax season tends to be stressful for most small business owners——especially if you haven’t kept your records current. In addition to the work of getting all your information up to date, there’s also the worry of an audit or penalty for late filing. An accountant can give you peace of mind that your taxes are done correctly, and will provide necessary support should you be audited.
You plan on expanding the business.
An experienced accountant is not only a lifesaver at tax time, but also a trusted advisor who can give objective financial advice on growing your business. They can also assist with the financial analysis of your business plan.
Additionally, as your business grows, so do the scope and complexity of your financials. An accountant can be by your side during this time to ensure everything remains compliant and accurate.
How your business’s structure affects your accounting needs
The tax structure of your small business can also determine the complexity of your accounting needs.
If you are running your business as a sole proprietorship, for example, you can probably tackle your own books. Your taxes are simply filed on your individual return, and you include a Schedule C to report total revenue or gross receipts as well as expenses.
On the other hand, if your business is structured as an S or C corporation, you’re paying dividends to shareholders as well as processing payroll for employees.
In addition to more detailed reporting requirements, business tax filings for S corporations and C corporations can be more time-consuming and include additional components such as payroll tax. In these cases, it’s wise to have an accountant oversee everything, or at least work with a bookkeeping and tax service.
What’s the difference between an accountant and a CPA?
Once you’ve decided to work with an accountant, your next decision is choosing whether to hire a general accountant or a Certified Public Accountant (CPA).
The difference between the two comes down to certification and training.
While a general accountant must hold a bachelor’s degree, they are not required to hold a certification or license. However, a CPA must pass an extensive exam covering accounting topics as well as general business knowledge in order to become licensed. CPAs are also expected to maintain higher levels of expertise and ethical standards than accountants. This enables them to take on greater responsibilities and more complex duties within the business.
This also means that their pricing scale is typically higher than a general accountant’s. CPAs may offer a greater range of accounting solutions and services, as well as be able to take on a more advisory or strategic role in your business’s finances.
Should you hire a CPA or an accountant?
Now that you know the differences between the CPA and a general accountant, which do you hire?
The answer will largely depend on your business’s financial reporting needs and budget, as well as your plans for the future. If you plan on expanding your business, or expect your fiscal reporting obligations to increase and your taxes to become more complex, hiring a CPA may be in your best interest.
Why you should hire a CPA
Their knowledge of the tax code can help you save money come tax season, especially when it comes to tax deductions you may not be aware of. CPAs can also represent you during an audit.
A CPA can offer expert advice on financial matters. They can also serve as a chief financial officer (CFO) for your business.
A CPA can take over your payroll services and ensure all withholdings are done without errors.
A CPA can be your sounding board for financial strategy ideas or help you troubleshoot cash flow problems in the business.
They can take over your invoicing, accounts receivable, and expense tracking, as well as ensure your vendors and others are paid on time.
Why you should hire a general accountant
General accountants typically charge less than CPAs, which is helpful for businesses on a tight budget or that are just starting out.
Your small business’s financials are not complex, so they don’t require extra specialized knowledge.
You mainly need bookkeeping services, such as financial statement preparation.
You only need occasional assistance with your books, rather than ongoing financial advice. Whereas some CPAs have minimum fee or service requirements in order to work with a client, general accountants are often more flexible.
Where to look for the right accountant for your small business
There are several places to search for an experienced and knowledgeable accountant.
Research local general small business accounting and CPA firms and narrow down your list to those that have expertise working with small, but growing businesses.
Get recommendations from other entrepreneurs who have worked with different accounting firms.
Experienced accountants who practice as freelancers often list their qualifications and work history on sites such as LinkedIn, Upwork, and Fiverr. Since they are not with a firm, they may offer less expensive accounting services to small businesses on a tight budget.
Go online and read reviews or ask for referrals from your business network.
If you are hiring a CPA, you can find an accredited accountant at the American Institute for Certified Public Accountants website.
What to look for when hiring an accountant
Just like in dating, there’s no one-size-fits-all approach to finding the right accountant for your business.
But there are some steps you can take to ensure that you end up with a great match, whether you decide to hire a CPA or a general accounting professional.
Look for an accountant who is familiar with small businesses, especially those from your industry.
Ask your accounting candidates for references from other small business owners.
Find out their experience level with the business accounting software you’re using, and whether they’re open to working with it. If you’re happy with your current accounting software, you may not want to switch.
Ensure the accountant has a thorough knowledge of the latest IRS tax laws and federal, state, and local regulations that affect your business.
If you plan on recruiting an accountant as a consultant, get a written estimate of what their services cost.
See if they’ll provide you with regular updates on how your business is doing financially and help you set goals to improve performance over time. Note, however, that this will likely be an added service for an additional fee.
Make sure they have excellent communication and customer service skills, without leaning too much on technical jargon.
They should be highly organized and detail-oriented.
You’ve hired an accountant. Now what?
Once you’ve found your new accountant, you want to ensure you get the most out of your relationship. Here are a few tips.
Have regular meetings to discuss your business’s objectives and expectations.
Keep the lines of communication open, whether it’s through email, phone calls, or in-person meetings.
Be open to their feedback and advice on how to handle your financials.
By working together closely and communicating openly and honestly, you can be sure that you’re using their expertise to help you make the best decisions for your business’ success.
How Bench can help
If you’re still in the process of hiring an accountant for your small business, but need help with your books today, Bench can pair you with an experienced and knowledgeable bookkeeper to bring your financials up-to-date.
Even after updating your books, Bench bookkeepers are always available to answer questions and address concerns. They will also ensure that you’re ready come tax time with a Year End Financial Package containing all the information you need to file—our tax team can even file your taxes for you!
The bottom line
While it may be tempting to try and do everything yourself, especially when you’re first starting out, there are some tasks that are simply better left to the professionals. If bookkeeping and filing tax returns have become a burden for you, or if you’re struggling to find the time for other essential business tasks, it may be time to consider hiring an accountant.