Accountants are not superheroes. None of them wear full-body spandex suits to work, and Marvel’s not coming out with a “1040Man” movie anytime soon. But given the amount of time and money they save your small business, they could be.
Even when money is tight, hiring an accountant is a smart investment. The value of having your financials in line, and your taxes done properly, will almost always outweigh the cost. And in case you doubted why you might need one, here’s all the stuff they do both better and faster than you can.
How to know if your small business needs an accountant
Typically, the answer is “always,” but in case you need some warning signs to slap you in the face, here’s what to examine to see if you need professional help.
First, if looking at balance sheets is like reading Aramaic for you, you probably need an accountant. Accounting and finance don’t come naturally to everyone, and if you’re more a creative/operational type than a numbers person, having a professional handle this is a must.
Even if you are comfortable with numbers, consider how much time you spend working on the books, and how much your time is worth. If you’re spending two hours a day on balance sheets, taxes and payroll, and that’s time you could spend earning revenue for your company, maybe an accountant is a good idea.
Along the same lines, if you feel you company has stagnated, or it can’t grow because you’re bogged down with financial work, hire someone to do it. An accountant can’t grow your business for you, but he can free you up to focus on new products and expansion.
Also, if you haven’t yet mastered cash flow, you absolutely need an accountant. Businesses that have high revenue but little profit are clearly leaking money somewhere, and accountants will find that leak. And that outside perspective is also helpful.
What can an accountant do for me?
An accountant will streamline everything involved in small business. From assisting with your business plan to helping with taxes to presenting to investors, accountants will make everything you do easier, and more impactful. Breaking it down, here’s how they’ll help you through different stages of the process:
The business plan – that big document you put together before you did anything else – includes a section on finances and funding. For creative types, this is a tedious, boring segment you wish you could pay someone else to write. But unlike with college term papers, you can! Accountants can pretty much put this section together for you as long as they have the right info. And let you focus on fun stuff like product development and marketing.
They can also help you figure out which type of corporation you should start. If C-corp, S-corp, and LLC sound like Sesame Street sponsors to you, get help from an accountant. They’ll also show you how to maximize profits and protect your assets, if your livelihood is dependent on the business’ success.
Does the postman’s daily visit feel like an avalanche of sharp-edged snow? Have you ever used the phrase “that $50,000 check is in this pile somewhere?” You, friend, have officially become overwhelmed by paperwork. You’re not the only small business to completely lose track of who owes you money and who you owe, but it doesn’t have to be that way. Sending invoices, checks, and other payments on to a bookkeeper or accountant will help you organize, and reduce the stress of overwhelming paperwork in the process.
Like we mentioned above, accountants can also help you find where you’re losing money, especially when you’ve got big revenues and small profits. They can also make sure you have employees and independent contractors classified appropriately, to avoid any issues from the IRS down the line. Along those same lines, accountants can handle payroll if you’re not outsourcing it already. They can also put together a convincing financial statement you can present to your lenders and/or investors, as well as to potential new investors down the line.
The most obvious benefit to hiring an accountant is their help with taxes. Even if you have a rudimentary understanding of the tax code, you don’t know as much as your accountant. Their entire job is keeping up to date on the latest laws and regulations, and can not only ensure you’re compliant, they’ll also maximize your deductions.
Accountants will also help you estimate your quarterly tax payments, and help you avoid any penalties for underpayment. They can sort your W2s and 1099s, handle payroll tax, and instruct you on how to pay sales tax appropriately. And heaven forbid you ever see the word “audit” in official IRS correspondence, they can help with that too.
CPA or Bookkeeper?
Once you’ve decided to get some accounting help, you need to decide whether to work with a Certified Public Accountant or a Bookkeeper. CPAs are board-certified in your state, and licensed to file taxes on your behalf, as well as a number of other functions. They also can run you $150-$400 an hour. Again, if you believe your time is worth more, then this is the route to go.
Bookkeepers are slightly less versatile in what they can do and their breadth of knowledge, but for daily maintenance of accounts payable and receivables they’re a much cheaper option. Typically they cost between $30-$50 an hour, and can take a big chunk out of your workload. Whichever option you choose, you can always negotiate a fee, and hire on a per-project basis, if you think you only need one during tax time.
No matter what your business, an accountant is always a good idea. They’ll free up time for you, keep your business finances in check, minimize your chances for an audit, and make sure you’re always tax compliant. Comic book icons they’re not, but come tax season they’ll definitely save the day.