January 21, 2020

When Is It Time To Hire An Accountant For Business Finances?

Accounting is a vital business function. However, it may not be something you can do independently At some point, you may find it necessary to hire an accountant to manage your business finances.

An accountant can help you analyze crucial financial data, create reports and budgets, file tax returns, and keep accurate records.

So, how do you know when you should hire an accountant? Below, we’ll explore the answer to this very common question so you can make an informed decision for your unique situation.

The Challenges Faced by Growing Businesses

While running a business can be exciting, it does bring some challenges including:

  • Waste and Inefficiencies: If you spend all your time and energy on growing, you may ignore operating costs and profit margins. This can lead to waste and inefficiencies that interfere with your profitability and long-term growth.

  • Cash-Flow Issues: As you grow, you may realize you need financing. If you haven’t planned for financing in advance, it’s likely that you’ll be stuck with high, unmanageable payments, which often lead to cash flow problems.

  • Complex Taxes: When you start your business, your taxes may be fairly straightforward. However, as you grow and earn more clients, they’ll become more complicated. Unless you’re a tax pro, you may be unaware of tax-saving strategies that can save you thousands.

  • Budgeting: A budget is the key to running a successful business. The budget you created for your business two years ago may not be relevant today. You need to evaluate and change your budget as you grow. Failing to do so can steer you into a cycle of debt.

  • Unforeseen Expenses:It’s all too easy to face unforeseen expenses as you grow. Some of these may be damaged equipment or stolen inventory. You should plan ahead for these types of expenses so they don’t take a toll on your finances when they do arise.

How Can An Accountant Help?

If you want to grow at a healthy rate and focus on what you’re good at, hiring an accountant is essential. An accountant can reduce your risk of financial problems and maximize your business potential.

They can also help you set measurable business goals and track your progress towards meeting them. In addition, you can use an accountant’s insight to make informed business decisions that will take your organization to new heights.

When Do You Need To Hire An Accountant?

There are certain situations that warrant the need for an accountant. By hiring an accountant, you can save yourself time, money, and plenty of headaches down the road. The good news is you don’t have to hire one full-time.

You may be able to hire them on a retainer basis or for only a few hours a week. No matter what you’re arrangement is, you’ll find that an accountant is well worth the investment. Here are some examples of situations where hiring an accountant is invaluable.

When Writing Or Modifying Your Business Plan

If you want to set your business up for success, a business plan is vital. A business plan can give you some direction and help allow you to save time, money, and resources. It typically includes the following components:

  • Executive Summary: The executive summary consists of your business name and location, the products and services you offer, mission and vision statements, and the goal of your plan.

  • Market Analysis: You’ll need to perform market research to write a marketing analysis, which will include the types of customers you’d like to target and a detailed evaluation of your competitors.

  • Strategy and Implementation: In the strategy and implementation section, you’ll explain how you’ll promote your business, how you’ll function, and details about cost, pricing, promotions, and logistics.

  • Financial Plan and Projections: The financial plan and projections will consist of historical financial data as well as forecasted income statements, balance sheets, and cash flow statements. A brief analysis of your financial data should be included as well.

Any time you write or modify your business plan, you should hire an accountant to take care of the financial plan and projection component. They can work on it once you’ve completed a market analysis and set goals for your business.

When Getting Advice About Legal Structuring

The way you structure your business matters and can make a huge difference in your finances. Here’s a closer look at the types of legal structures you can choose from:

  • Sole Proprietorship: A sole proprietorship is the simplest type of legal structure. It typically involves one individual who owns and operates the business. If you plan to work alone, a sole proprietorship may be right for you.

  • Partnership: If your business is owned by several individuals, a partnership structure may make sense. You can opt for a general partnership or limited partnership. In most cases, a general partnership where partners manage the business and assume liability for its debts is the way to go.

  • Corporation: A corporation tends to be more complicated and expensive than other business structures. It acts as an independent legal entity and requires compliance with more regulations. So, if you become a corporation, you don’t have to put your personal assets on the line and can sell stock to raise funds.

  • S-Corporation: If you’d like to reap some tax benefits while still getting the benefits of a corporation, an S corporation is a strong choice. With an S corporation, you’ll only have to pay one level of federal taxes.

An accountant can go over each type of legal structure in depth and help you choose the ideal one for your particular business.

When Determining Funding Opportunity

As your business grows, you’ll likely require some additional funding. There are numerous funding options available to you including:

  • Business Credit Cards: With a business credit card, you can receive the quick financing you need to pay for expenses. Fortunately, many small business credit cards offer rewards and cash-back programs for business purchases. They may also allow you to borrow money at 0% APR for several months.

  • Traditional Bank Loans: While it may take some time to get approved for a bank loan, you can land a low interest rate. Just keep in mind that this option may not make sense if you need money right away or don’t have the best credit.

  • Small Business Administration (SBA) Loans: The Small Business Administration partners with banks and other lenders to help small business owners like yourself secure funding. SBA loans offer perks like longer term lengths, interest rate caps, and lower down payment requirements. However, they are difficult to qualify for as they require a solid business history and credit score.

With an accountant by your side, you can determine the right type of funding for your current situation. They can ensure you don’t miss out on growth opportunities because you weren’t able to obtain funding.

When It Is Time To Delegate and Outsource Tasks

You can attempt to do your taxes on your own. However, as your business grows and your tax situation becomes more complicated, an accountant will be necessary. Without an accountant, you risk overpaying on your taxes and making costly mistakes. If you want to save as much as possible on taxes and lower your chances of an audit, you must hire an accountant.

An accountant can handle every aspect of the tax preparation and tax filing process. If you’d like, you can hire them to manage both your personal and business tax returns. They are tax experts and know which forms you need to complete, which deductions you qualify for, and how to get on the IRS’s good side come tax season.

In addition to income taxes, an accountant can advise you on payroll taxes, sales taxes, and any other types of taxes you’re responsible for. Tax mistakes can create a huge burden for small business owners so don’t overlook the importance of an accountant’s expertise.

The Role Accountants Play Is Crucial To Small Business Growth

As you can see, hiring an accountant can be a good idea for your business in many ways. Wondering how to hire an accountant? To find a reputable, certified public accountant (CPA), ask your fellow business owners for some recommendations.

You can also check out your state’s chapter of the Association of International Certified Professional Accountants and find professionals in your area. Once you hire the right professional, you’ll be able to operate more effectively and avoid the common pitfalls that many small business owners experience.