If your business is becoming too complicated financially for you to feel comfortable handling it on your own then it may be time to hire an experienced accountant that specializes in small business.
Let's dive deeper to figure out if you need an accountant for your small business.
Do I Need an Accountant For My Small Business?
If you currently feel comfortable recording, categorizing, and analyzing your small business' financial data while also using that data to correctly pay your taxes then the short answer is no, you do not need an accountant.
The main goal of an accountant is to help you better track and understand your financial situation, as well as advise you on how to best decrease your tax liability throughout the year.
If your business is still small and rather simple, then you may only need help come tax time since recording and categorizing transactions for a new business is fairly straightforward.
However, if you feel overwhelmed by all the financial tasks that come with running your own business then it may be time to call in a professional.
Here are some questions to ask yourself when deciding whether your small business needs an accountant or not.
"Do I know what I'm doing when it comes to small business accounting?"
You should first determine whether or not you have the accounting knowledge to handle your own financial data.
If you have absolutely zero background in accounting then it may be best that you take a beginner accounting course or consult with a small business accountant before moving forward.
If you understand how to correctly record and categorize transactions then you will at least be able to handle preparing your own financial statements, but it may be best to still contact an accountant prior to tax time just to be sure that you have everything recorded correctly.
"What can an accountant do for me?"
Many small business owner feel as though they need an accountant solely because they operate a business and that just seems like the right choice to make.
However, the truth is that many small businesses owners don't actually know what they need an accountant for besides to prepare and file taxes.
Accountants are highly skilled business professionals that can provide valuable assistance within many different aspects of your business.
If you are comfortable recording financial data as transactions flow through your business but you don't know what a balance sheet is or how to read one, then it's probably in your best interest to contact an accountant to help with financial analysis.
If you simply don't know the difference between an asset and a liability, or revenue and equity, then it is probably best that you hire an accountant that offers bookkeeping services as well as financial analysis.
There are many different ways an accountant can help your small business and it's important to first understand what your business needs prior to contacting an accountant.
"Do I have time to do my own small business accounting?"
The hard truth is that running a business takes an incredible amount of time and focus if you want to be successful.
Many business owners simply don't have the time to worry about tracking every single expense or keeping up with never-ending bills as they fly through the door each month.
Outsourcing your accounting responsibilities is just like outsourcing any other responsibility within your business that you no longer have time for.
If you feel like there just isn't enough time in the day to give your finances the attention it deserves then it may be time to hire an accountant for your small business.
"Do I know how to correctly file a tax return?"
The most common use for an accountant within a small business is to act as a tax advisor, planner, and preparer.
The tax code is incredibly complex and everchanging as time goes on.
This creates a scenario in which it is difficult for busy small business owners to stay perfectly informed when it comes to doing their taxes.
In this instance, an experienced accountant can not only help you save tons of time, but they can help you save great amounts of money on taxes as well.
Since there are many nuances in the tax world, it is usually best to leave this aspect of your business to a professional that has dedicated their life to understanding the rules of taxes.
"Can I afford an accountant?"
There is no standard rate for a small business accountant, meaning that what you pay for accounting services will vary widely depending on your business' size, industry, and location.
You will need to evaluate your circumstances, contact accounting firms that service your industry, and make a decision based on your current financial situation to determine if hiring an accountant for you small business makes sense at this time.
"Am I likely to be audited?"
If you have a chance of being audited by a regulatory agency then it is most likely in your best interest to hire an experienced accountant as soon as possible to ensure there are no fines or other punishments handed down to your business.
An accountant will be able to go through all of your financial data to give you a clear picture of where you stand, as well give you advice on how to proceed through an impending audit.
Hiring a certified accountant, such as a CPA, can also be quite costly.
Therefore, it is important to weigh the costs of failing an audit versus hiring an expensive CPA to clean up the mess. In many cases, hiring a CPA will be far less expensive than failing to comply with your regulatory agency's policies.
"Am I likely to sell my business in the near future?"
If you feel as though you may be looking to sell your business within the next few years or so then it may be time to hire an accountant for your small business.
An accountant will be able to prepare audited financial statements that can then be used to present to potential buyers that will need to evaluate the financial position of your business in order to make an educated investment decision.
Without the help of an accountant, your financial statements may not be trusted by possible purchasers of your business and therefore may cause you to have to sell your business for less than it's actually worth.
An experienced small business accountant will also be able to help you through the entire selling process and also ensure that you have no outstanding issues with the IRS or any other regulatory agency prior to making the sale.
Do I Need an Accountant For My Small Business? Potential Downsides of DIY Accounting
When you get your first bill from your accountant it may be enticing to go back to handling everything on your own.
Here are a few potential problems that could arise if you handle your accounting or bookkeeping on your own without proper training.
- You may miss out on valuable tax breaks that could greatly reduce your tax liability
- You may fall behind with invoicing and not have a clear picture of which customers are past due with their payment
- You may underestimate how much you owe in taxes and run into some problems with the IRS or your local government
- You may experience fines due to not filing the correct paperwork on time
- You may end up with incorrect and disorganized books that don't give you an accurate picture of how your business is actually performing
- You may not have reliable financial information to base future business decisions off of
Benefits of Hiring an Accountant For Your Small Business
Here are the main benefits of hiring a small business accountant.
- Enjoy clean, accurate books at all times
- Never worry about your taxes as they will be handled correctly and timely each period
- Improve your cashflow by accurately tracking outstanding invoices
Do I Need an Accountant For My Small Business? Conclusion
There are many reasons why you may need to hire an accountant for your small business, including lack of knowledge, lack of time, or you might have run into some trouble with the IRS.
Whatever the reason may be, there are great benefits to working with a small business accountant such as having accurate financial data, paying less in taxes and late fees, and improving cashflow by properly tracking late payments from customers.
However, each situation is different, and only you will know what's best for your exact situation.
How Noon Can Help Your Business Thrive
Noon Bookkeeping is an outsourced bookkeeping and accounting solution for business owners consisting of a team of CPA's and certified, expert bookkeepers ready to help you organize the finances of your business.
Noon can handle all of your bookkeeping in one place so that you can focus on running and growing your unique business knowing that we’ve got your finances handled.
Learn more about how Noon can help you take control of your finances.