6 Signs You Should Hire a Small Business Accountant

April 10, 2016

Small business owners wear more hats than a hat rack. At one point or another, you’ll play every role there is to play, do every job, and handle every responsibility your small business needs handled. However, no matter how smart, or driven, or on point you are, there will come a time when you’ll need an extra hand. For many small business owners, this extra hand belongs to a professional trained in the art of accounting, taxes, and financial planning.


Signs you need to hire a small business accountant

Unless you run an accounting practice, there is a very good chance that you didn’t start your business with hopes of filing 1099s and managing your basic accounting program. You could be missing out on big accounting insights that only an expert financial professional can glean. Be on the lookout for these six signs that you should hire a small business accountant.


1. Your small business is booming


One of the best times to be a business owner is when you’re growing. Finding additional revenue streams or watching existing streams become revenue rivers is exhilarating. However, with increased revenue comes increased accounting obligations, like taxes.

Small business accounting services can help you grow, and manage your growth, whether you’re experiencing a steady, continuous climb, or you’re in the midst of an overnight explosion of sales.


To a small business owner, growth can be hypnotizing. A growing business may boast more sales revenues, but what about the behind-the-scenes factors at play? More sales revenue usually means a higher cost of goods sold (COGS), and more payroll and tax. Professional small business accounting services can help you forecast revenue, find projected cash flow, avoid unnecessary tax burdens, and help you successfully and wisely spend your revenue in investments so your business can continue to boom.


Plus, an accountant can also caution you about harmful business purchases. Their reports could prevent you from making a regrettable investment. Increased sales with their increased variable costs to your business may turn out to be not much of an increase after all. Accountants can help you run ratios that show you if your boom is truly a boom, or just feels like it.


2. You’re launching a startup


Getting off to a good start can make or break your small business. Because your early financial choices can echo well into the future of your company, many small business owners hire an accountant to serve as an expert adviser and to guide key financial decisions. An accountant can help you choose between the types of business structures, which determines how you file and deposit taxes, and can also guide you in your hiring processes.

In the early stages of your business, you may not need to have full-time employees. Perhaps contractors would work better? That decision alone can create a massive difference in your projected budget and payroll structure. In fact, it’s the difference between having and not having a payroll!

No matter what you choose, an accountant will make sure you adhere to those not-so-subtle government regulations meant for your chosen business structure and type of worker. This is important since breaking tax code and business regulations can result in hefty fines that your cash-strapped startup may not be able to cover.


3. You’re creating a business plan


One of the major benefits of a business plan is how it can help you raise and secure capital for your small business. However, if you don’t know what investors or banks are looking for, you might not include the key information they want to see. Since many investors, and certainly banks, will have their own accountants advise them before they inject money into your business dreams, it’s wise to have someone on your team who speaks their language. This is where an accountant can really help your small business.


Your business plan will include financial reports and projections. A good business plan will talk about your potential return on assets (ROA), your planned use of profit, projected operating budgets, and many key financial ratios. Depending on the nature of your business, some of those ratios will matter more than others. An accountant can help you create, understand, and present your business’s financial figures in an accessible and confident way.


4. Taxes are a mystery to you


A mistake on your taxes could mean fines, audits, and possibly the end of your business. IRS penalties are costly, and if you’re not familiar with business tax codes, you also could overlook small business tax deductions that increase your refund. If taxes are a mystery to you, an accountant can help you make sense of it all. They can also help you estimate, file, and deposit taxes for you. Spending money on a good accountant means you run less risk of missing a payment to the government, or missing out on a chance to receive one from them.


5. You are being audited


When IRS audit red flags arise from bookkeeping errors, you could be in financial and legal trouble. If your company gets audited, all your financial history is exposed. A small business accountant can review your financial records and make sure they are accurate and up to code. Then they can check for missing information, reconcile accounts, and run reports that demonstrate your compliance.


6. You’re considering investments


What is depreciation going to look like on your income statement at the end of the year? When your business is ready to expand and purchase new assets, like equipment or a building, an accountant can help you decide how you’ll depreciate those assets over time in order to make get the maximum tax benefit against your investment. An accountant can also help you decide where to purchase your assets, as some states and localities may offer key incentives or tax credits as an investment inducement. Accountants aren’t financial planners; the role of financial planners is more tactical and involves giving you the pros and cons of possible investments. Another way to put this is, accountants can “run the numbers” for you to help you understand the value of an investment, both on the front end and over the projected life of your business. This kind of business understanding is key for strategically growing a sustainable business.

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