By Nishi Patel

As a small business owner, you are probably used to doing the books yourself. Some like to do it manually while others use accounting software or an app. So why would you need to hire an accountant who will cost you money?

Naturally, you will want to keep your costs to a minimum but hiring an accountant is actually a necessary expense. Not only will this financial professional save you money, they will also make your life as an entrepreneur a lot easier.

So how will you recognize that you need to hire an accountant? Here are several signs that will let you know.

1.     You are just starting out in business but you don’t even have rudimentary accounting knowledge

If you are just setting out in business, it would be beneficial if you had some accounting know-how before you start operating. Remember, you will be dealing with financial statements and reading reports that contain specialist accounting terms. Therefore, it would be wise to hire an accountant who will be able to explain all the technical details. And, as an added bonus, they will help you formulate your financial strategy and manage your company’s finances right from the start. It is vital that you don’t miss something that may prove costly at a later date.

2.     You want to determine which legal structure is best for your company  

There are several options:

•       Sole proprietorship
•       Partnership
•       Corporation or limited liability company (LLC)

According to this article, choosing the correct legal structure for your business is crucial so you need to consider this decision very carefully.

For example, a sole proprietorship is suitable if you are the only employee, self-employed, or create invoices under your name. With this structure, you may even reduce your taxes by deducting some of your living expenses.

Although every legal framework has its disadvantages, an accountant has the expertise to advise you on the best one for you.

3.     You want advice on how to legally lower your tax liabilities

You may be an expert in your particular trade, but that doesn’t mean you’re an expert in the best practices of tax filing. In fact, in all likelihood, you won’t have the time to do your taxes correctly.

This is why it is prudent to hire an accountant. They will be able to crunch the numbers, and check your tax credits and deductions. You may even end up with substantial savings on your tax payments.

4.     Your company is expanding rapidly

A rapidly growing business will ultimately mean success for you, but can you manage it?

Keeping business accounts is not an easy task and as your company grows, it can be difficult dealing with extra customers and vendors, and hiring more staff. You will also need a steady cash flow to keep your business operations going. If you are having difficulties keeping track of your creditors and debtors, an accountant may be able to help you with these tasks.

While you may be an expert when it comes to bringing in the money, it’s probably better to let a professional handle your financial dealings. They can objectively assess and reduce your costs, and ensure that most of your profit stays within the company.  

5.     The tax authorities are auditing your business

As a small business owner, a tax audit is an unlikely event. However, if you do get audited, an accountant can help you avoid stress and save you time and money. They can assist with the auditing process and ensure that you avoid violating any tax laws. It is advisable to have an accountant in place before any audit begins, but they are absolutely vital once the tax authorities start delving into your accounts.

6.     You require a business loan

It is possible to successfully obtain a business loan without even hiring an accountant. However, most businesses require expert guidance before starting their loan application. Lenders who provide finance will often want papers that are well-organized and detailed. The information they analyze in such documents will be the basis for their decision on whether or not to grant you a loan. A good accountant can also:

•       Answer any queries from lenders regarding your financial standing and revenues
•       Convince lenders about your serious intent and financial capacity to repay the loans
•       Provide relevant information regarding interest rates, including the terms and conditions required by the loan agreement

7.     You are buying a business or selling your current one

Whether you are buying or selling a business, the process requires a great deal of financial planning.

If you are buying a business, an accountant can:

•       Search for any potential red flags
•       Determine the real financial value of the company’s assets
•       Find out whether the outstanding debts listed in the books are accurate

If you are selling a business, an accountant can:

•       Ensure that your financial records and documents are current and accurate
•       Set up statements that will show how valuable your business is to prospective buyers
•       Ensure that you obtain the full amount due in the transaction

Remember, you will have worked hard to build your business so it’s crucial that you obtain the best value from its sale.

How to find an accountant

As the accountant you hire will be your trusted advisor, you must ensure that you enlist the services of the best finance professionals out there. You should ask for referrals from your network, lawyer, or banker. If you decide to look for an accountant on the internet, arrange a face-to-face meeting, and check their credentials carefully.  

How do you evaluate accountants?

Once you have compiled a list of suitable candidates, use the face-to-face meeting to check their qualifications. Here are some questions you can ask.

• How many companies similar to yours have they worked with?

Running a business requires sophisticated knowledge and skills. It is essential that you employ an accountant who will understand your company’s complexities and who has the experience to put your finances in order.

These professionals will usually be happy to provide references so you should be able to contact these clients and ask them for an assessment of the accountant’s work.

• How long have they been working in your industry?

Ask your candidates about their experience in your line of business. Many of them will have specialties in particular sectors and if your company has specific accounting requirements, you will need an advisor who possesses the expertise and experience to handle such tasks.

Also, consider asking them about their experience working with business structures such as yours. For example, a sole proprietorship and a partnership have different accounting requirements.

• What services do they provide?

Your accountant should be able to provide tax and auditing services. However, you should also ask whether they can offer any additional assistance in the form of:

•       Bookkeeping
•       Budgeting
•       Risk assessment
•       Business valuation

• How can accountants help expand your business?

Accountants can help expand your business by enabling you to obtain the financial resources to do so. It is crucial that you team up with an accountant who understands the nature of your business so they can help build and develop your company.

• What is their working style and how do they communicate?

It is essential that you have a smooth working relationship with your accountant. If you decide to use an accounting firm, ensure that you meet and work with an actual accountant. If you are a small business organization, it would probably be better to choose a small accounting firm as larger ones may simply assign a junior accountant to your company.

Conclusion

The costs of hiring an accountant are often the reason why many small business owners are hesitant to utilize their services. However, you will be wasting both your time and business opportunities if you have to file taxes and manage the books yourself. By delegating these tasks to a professional, you will be benefiting your business enormously. Accountants can manage your finances efficiently, and help improve and expand your company.

Author’s bio

Nishi Patel founded Northants Accounting after a successful stint as a management accountant and financial analyst. The company provides small to medium-sized businesses with high-quality accounting, tax planning, cash management, and accounting services.