Do I Need an Accountant?
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When you open a small business, you may try to do everything — manage finances, HR, sales, marketing, product development, and more because you do not have the staff to help with everything yet. However, as your business grows, taking on more projects and hiring employees, it might be a good idea for you to hire an accountant. You may be wondering, "do I need to hire an accountant?" In this article, we will look at some of the reasons you might need to hire an accountant.
When You Might Need an Accountant
One of the big reasons that a small business owner will choose to be their own accountant is that it can be expensive, and they do not think they can justify the expense. But how long does it take to do the payroll, handle taxes, and other accounting duties? Is there something else that would be a better use of your time?
Delegation is something that most small business owners struggle with in the beginning. You want to do everything yourself, but if you do not delegate, you can find yourself overwhelmed. Your business' financial affairs are important, and it can be a good thing to delegate out to someone else.
There are many ways an accountant can help your small business. Let’s examine them.
Advice When You Are Writing a Business Plan
Writing a business plan is not necessarily something you might think to involve an accountant in but involving them in the process can be quite beneficial. An accountant can help add financial projections to your business plan, helping you create one that is realistic and likely to succeed. Getting financial insights can make a big difference in those early stages of your business that could save you time and money upfront.
Advice About Company’s Legal Structure
There are a number of factors that determine the legal structure of a business. There are sole proprietors and traders, limited liability companies (LLC), limited liability partnerships, and corporations. All of these are distinctly different from one another, and knowing which one suits your business is important.
For example, if your business is a sole proprietor or sole trader, you are self-employed, sending invoices under your name. Payments might be coming from a personal bank account instead of a business bank account. Sole ownership means you might be able to write off some of your living expenses on your taxes. The downside to this is that you can be held personally responsible for obligations your business has, meaning, if you default on a loan, do not pay a supplier, or lose a lawsuit, your home and personal possessions could be impacted. You also will be using your own credit score for purchases and loans instead of having a credit score for your business.
An LLC, on the other hand, functions much differently. Any liabilities, like defaulting on a loan, are limited to your business' assets, not your personal assets, with some exceptions.
Accountants can help you understand the different business structures and determine which one will fit your business the best.
If you are looking for quick and easy advice on a business finance question or situation, Bench is here to help.
Help Manage Finances
Managing the finances of a small business can be complex, and if you are doing it on your own, you might find yourself overwhelmed quickly. An accountant can help you stay on track and take something stressful off your plate. As a small business owner, you may be hesitant to delegate tasks like this, but it is important to do so because it will help reduce your stress and free up some of your time for other things.
An accountant can track important business metrics like the growth of your business financially. They can also run payroll for you. If you aren't ready to hire an accountant and you need to get a bit more organized Quickbooks can help. Quickbooks helps you with best practices and you can begin to do accounting without needing to hire right away.
Everything they do can help you watch the financial health of the business and track things like your cash flow, so you know if you can afford to hire more employees, give existing employees raises or bonuses, expand your business, and more.
Help Prepare Your Taxes
How many hours does it take for you to do the taxes for your business? Let's say it takes you 10 hours to do your taxes, and you are paying yourself $50 an hour. That means it costs you $500 to do your taxes on your own, and you run the risk of making errors. If you have an accountant to take care of taxes and other time-consuming taxes, you are probably paying them a lot less than you pay yourself. It also may take them much less time than the 10 hours it takes you to do your taxes since they are experts in the field. You will be freeing up time to focus on other duties for your business, and you will be able to have peace of mind since an expert is taking care of the taxes for you.
In Case You Are Audited
If your small business gets audited by the Internal Revenue Service (IRS), having an accountant on your team can be a huge help. There are not many government auditors with the IRS, so it is unlikely that you will be audited, but it is always possible. An audit can be stressful and time-consuming, and you will definitely want to have an accountant on your team if this happens. They can help you through the entire process.
You may be thinking, "I really only need an accountant if I get audited," but that is completely untrue. Having an accountant beforehand is important, especially if you hire one that offers audit insurance, which covers the fees you may need to pay to respond to any inquiries, investigations, audits, or reviews.
Help When You Apply for A Business Loan
When a small business needs a business loan, an accountant can help increase the chances that you will get one. They can give the bank facts and figures to help back up your need for the loan and ability to pay it back. Plus, having an accountant shows banks that you are serious about your business, and that alone can sometimes help you get a loan. An accountant can help you select the loan to apply for, too, and tell you if the interest rate, terms, and conditions are good for you.
When You Are in A Growth Phase
A business grows over time, but not necessarily at a steady, constant rate. You might get a new project or client that causes you to suddenly grow rapidly to fill in the gaps. Accountants can help you with a period of large growth. They can help you determine how many people you can afford to hire, at what rate, find new office spaces if needed, and other financial responsibilities to take that weight off of your shoulders.
Your accountant can also help you grow your business using financial analysis, helping you determine what you should introduce a new product or service.
Before You Buy into a Franchise
Many budding entrepreneurs will choose to take on a franchise to start their business because you can be your own boss, but the larger company will help you with marketing, products, sales, and other things. It removes a little of the risk that comes with starting a new business, but you do not have as much commercial freedom, and some of your cash flow goes to your parent company.
If you are considering taking on a franchise, consulting your accountant can be helpful. They can go over the franchise contract and help you estimate your income after any fees and percentages are deducted by the parent company. You can have a better idea of what you will be getting yourself into with the aid of an accountant.
Before Buying a Business
If you decide to buy an existing business, hire an accountant first. They can look at all of the company's recent financial information and let you know if there are any red flags in it. They can also let you know if the company's equipment is owned, leased, or partially paid for; you will also learn if the business has any outstanding debts.
When you buy a business, you should also consult with a lawyer. Between the lawyer and the accountant, they should be able to let you know everything about the business before you buy it, so you will know what you are paying for.
Before Selling a Business
If you sell your business, you need to have an accountant on your team before you do so. They will be able to organize the business' financial records and statements of all of your company's accounts to share with buyers. They can create charts and graphs to help show buyers what they need to know.
The accountant can also help you get the most out of the sale of your business by structuring your financial affairs. Having a good accountant on your side can make selling your business much easier.
What is the Difference Between an Accountant and a Bookkeeper?
While accounting and bookkeeping both keep track of your transactions and monitor the financial health of a business, there are some distinct differences between the two.
Bookkeeping has many tasks to track, including daily expenses, expense categorizing, record-keeping, and account reconciliation. A bookkeeper also manages invoices, processes payroll, and pays suppliers. There are many automated software options to take most bookkeeping tasks off of your plate.
An accountant's job is to build on the information your bookkeeping gets. They prepare your financial statements, prepare taxes, and analyze costs. Accountants can also help you manage your budget and plan for the future.
How to be Your Own Business Accountant
You might not need an accountant on your staff currently; if you want to do your accounting on your own for now, we have some helpful tips to get you started.
4 Tips for Doing Your Own Business Accounting1. Open a Bank Account for Your Business.
2. Establish a System for Bookkeeping.
You need to track your expenses accurately. You can use softwares like Quickbooks to help you keep track of all of your invoices, receipts, and more. You will need to categorize everything to keep it organized, and tracking software can help you do that.
There are some common categories for expenses that can help you stay organized:
- Business vehicles
- Employee benefits
- Office supplies
- Office expenses
- Meals and entertainment
- Rent, utilities, phone, and internet
- Professional services
- Debt payments (credit cards, loans, etc.)
4. Get Accounting Software
To make things easier on you, it is recommended to get some accounting software to make your invoicing and payroll easier to process. There are many accounting software options available these days for accounting, and they can be used to set up payment terms, generate invoices, and even notify you when someone is late making a payment.
Payroll software, like Gusto, can automatically process your payroll for you and deduct taxes and benefit fees from your employee's paychecks, making the entire process streamlined.
Do I Need Accounting Software for My Small Business?
While you can do it all yourself, accounting software like Bench will make things significantly easier for you to run your business and take some stress off of you. Accounting software can decrease your chances of making mistakes and free up a lot of your time to focus on other aspects of your business. The software will also make it easier for you to do your taxes at the end of the year, whether you hire an accountant or do them yourself.
Need More Business Funding?
We hope you have a better idea of the answer to “do I need an accountant?” now. An accountant may be an additional expense, but if you have other priorities as a business owner, are looking to grow, or have special circumstances it may be worth the money to make sure things get done right.
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