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22-Sep-2020 By - ewmaccountantsadmin

Should I hire an accountant for my small business?

It's tempting to think of accounting and recordkeeping as a "necessary evil" because they're both developed and kept in order to comply with government reporting requirements, most prominently taxes.

The fact of the matter is, however, that accounting and recordkeeping systems are not only something that you are required to be doing because it is something that is required of you by the law, but they are also created for you to make informed decisions regarding customers, marketing, pricing, and vendors.

Do Small Businesses Need an Accountant?

When tax season rolls around, you'll frequently hear owners of small businesses discussing the necessity of hiring an accountant. However, business owners can benefit in a variety of ways from the professional expertise of an accountant. An accountant is trained not just to "crunch the numbers" but also to analyse the financial data, report on it, and make recommendations that can make businesses more profitable.

  1. They regularly communicate with you and return your calls quickly. ...
  2. They strategically plan throughout the year, not just for big deadlines. ...
  3. They show you how to budget. ...
  4. They are constantly learning. ...
  5. They are happy to explain things to you.

Introverted sensors, ISTJs are known as the best personality type for accounting jobs, CFO positions, or careers as auditors. This type is loyal, hardworking, and understands the importance of their roles; but the real predictor of success here is their analytical nature that enables them to work quickly and precisely.

Here are some tips on what accountants can do to ensure they enjoy a long and rising career in accounting.
  1. Don't fear technology. There is no escaping the fact that software skills are vital, says Jotkowitz. ...
  2. Learn to analyse data. ...
  3. Hone your communication skills. ...
  4. Learn how to lead. ...
  5. Seek sector-specific experience.
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How Accountants Can Help Every Small Business?

If your company is expanding, as we sincerely hope it is, scheduling a meeting with your accountant every three months may be beneficial in a number of different ways. Keeping up with your accountant on a quarterly basis will assist you to ensure that you are becoming more financially savvy. If you can believe it, expansion may occasionally be disastrous for a company. Therefore, you should schedule regular meetings with your accountant so that you may avoid developing in the incorrect way or too quickly.

  • Your quarterly tax payments are adequate. Your legal obligation to pay taxes is proportional to your income level. In the event that you have a big increase in business, it is possible that the predicted tax payments you started with will not be adequate. Having regular visits with your accountant will help you avoid the unpleasantness of discovering that you have underpaid your taxes.
  • You have the ability to look beyond your own blind spots. Even while the owners of small businesses know their companies better than anyone else, there are moments when it might be challenging to see the bigger picture. Hiring an accountant may assist you in seeing your company from a broader perspective, which is essential for the company’s continuing expansion.

When to Engage a CPA

The overwhelming majority of accountants would agree with the statement that they could have saved their clients who operated small businesses a substantial amount of time, money, and headaches by providing better service. That is assuming, of course, that those customers didn’t wait such a lengthy period before asking for assistance. When it comes down to it, there are a few key times in your business life when you do not want to go it alone without an accountant. The simple truth is that these are the times. These are significant times, which call for serious consideration on everyone’s part.

Forming Your Business

One of those crucial periods is when you are first establishing your company. 

  • You might get assistance with writing your company plan if you hire an accountant. However, do you really need a business plan if you aren’t going to try to get any finance for your venture? It is possible that the landlord will need you to have one if you intend to lease office, retail, or manufacturing space. In addition, it is preferable to have a plan as well as specific objectives for your company rather than leaving everything up to chance.
  • You will receive guidance on the entity structure of your company. Although the majority of businesses begin as sole proprietorships, the nature of your enterprise or your personal financial circumstances may indicate that a different corporate form might be more appropriate for your company. As a freelancer, the best way to safeguard your legal and financial interests is to establish a limited liability company (LLC), at the very least. A professional accountant can guide you through this process.
  • Help you get all of the required licences and permits for your business. Oh my gosh, employee records, permits to collect sales tax, and licences to conduct business – what a load of paperwork! When it comes to launching a business, the requirements and procedures may be rather different from one state to the next and even from one city to the next. In addition, several industries have various requirements for the qualifications that applicants must possess. A certified public accountant is a person who can assist you in navigating the labyrinth of red tape and ensure that your company gets off to a good (read: legal) start. This can be accomplished by ensuring that your firm is compliant with all of the regulations.
  • Help you set up your bookkeeping software. I’m going to let you in on a little secret of mine, even though doing so puts me in risk of having the membership card for my bookkeeper taken away: The vast majority of small businesses do not, at the moment, have an immediate need for the continuous services of a bookkeeper. There will come a time when you will need to decide whether to outsource or subcontract the bookkeeping for your small business. However, up until that time, you should be able to do your own bookkeeping and then engage a bookkeeper to do periodic reviews of the job you’ve done.

In light of this, it is strongly advised that you do not attempt to set up your own business accounting software, regardless of how straightforward the programme might appear to be. In fact, it is strongly recommended that you do not even try to do so. Your chart of accounts may have been meticulously set up with the assistance of an accountant, and they may even have given you instruction on how to use the software that you make use of in your business. Even if your accountant does not directly offer this service, they almost certainly have a book-keeper in their professional network who does.

You’ll need advice when you write a business plan

Engage an accountant in the process of developing your business plan. They will be able to utilise accounting software to add financial predictions and other data to the document. If you involve an accountant in the process of producing your business plan, you should do so. This will assist you in developing a business strategy that is practical, professional, and has a greater chance of being successful.

If you hire a professional at this early stage, you will be able to take advantage of their extensive financial expertise and advice from the very beginning of the process. As opposed to employing one later, this might save you both time and money.

You’ll need advice about your company’s legal structure

Every company doesn’t need to have the same legal structure because several distinct criteria determine various forms. Others could be referred to as solo traders or owners, while others might be referred to as limited businesses, limited liability partnerships, or corporations. These aspects differ from one nation to the next.

Before determining which one is ideal for you, you need to consider all the different types seriously. As an illustration, you may run your company as a sole trader or proprietor, meaning that you would be self-employed and issue invoices under your own name. If this is the case, you may be eligible to deduct some of the costs associated with your living expenses from your taxable income.

On the other hand, this implies that you might be held personally accountable for any liabilities that are tied to the firm. For example, if your company does not pay a supplier, cannot make payments on a debt, or loses a case, the creditor may have the right to go for your home and other property.

Things are handled differently when the company is structured as a limited liability corporation. So it should come as no surprise that the company’s responsibility is restricted to the assets owned by the company and not to you personally (though there may be exceptions in some circumstances).

Your accountant can walk you through the many legal business structures that are open to you and assist you in selecting the one that is going to work in your favour.

Compliance and Tax Issues

Even if you have a documented business plan, all of the necessary permissions and licences, and brand-new software that is up to date and ready to use for your bookkeeping, there is still a possibility that your firm might fail. This is because you are not yet prepared to proceed without the assistance of an accountant.

There are still hundreds of obstacles to clear in terms of compliance that need to be addressed. So you shouldn’t try to wing it without the help of an accountant if you have any of the following:

  • Complex sales tax issues. Compliance with sales taxes in the United States is rapidly becoming a nightmare. You will want to ensure that you are in compliance with all of the appropriate tax rules if you plan to ship your items out of state or even in certain situations inside the same state. This is especially important if you will be sending your products to another country. There are applications available that can aid with this on an ongoing basis, but you should have an accountant to initially assist you with setting up everything.
  • Complex payroll difficulties. Wage and labour compliance difficulties have the potential to bring even the most successful firms to their knees. As is the case with sales taxes, some applications and systems may assist you with compliance on an ongoing basis; nevertheless, you should still have an accountant review your work at least once every three months.
  • Additional criteria for reporting These can be regulations imposed by licencing bodies or financial institutions. Even the more complicated tax concerns described above have the potential to result in additional tax liabilities in a number of states. Continue working with an accountant if you are obliged to report on your financial status for credit or credentialing or if you do business in more than one state since these are both situations in which you will need to report on your financial condition.

You’ll need an accountant to help with the finances

When handled on your own, accounting for a small firm may rapidly become quite complicated. An accountant may assist you in regaining your footing if you feel as though you are losing control of who owes you money and how much they owe you.

You can also consider measuring crucial company measures, such as the ratio of total revenue to total employee payments such as salary and other employee payments. Again, an accountant will be able to assist you with the management of your payroll and the production of graphs that will show you how the ratio shifts over time.

If your accountant works with accounting software hosted on the cloud, they can simply and rapidly share your company’s financial information with you. Additionally, they are able to develop tables and charts that will assist you in gaining a quick understanding of the present financial position of your organisation. This will assist you in tracking vital aspects of your company, such as the cash flow, allowing you to monitor your firm’s pulse better.

Hire an accountant when you have to deal with the government

When you manage your own company, dealing with the paperwork required by the government may be a very stressful experience. When it comes time to file taxes for the first time, a large number of owners of small businesses opt to engage an accountant.

However, they are able to assist you with more than simply filing your tax returns. They are able to assist your organisation in various aspects of its interactions with the government.

A capable accountant will be able to perform the following for your company: 

  • Complete and submit all of the necessary legal and compliance paperwork
  • Make sure your business complies with the most recent tax rules.
  • Create financial statements on a yearly basis.
  • Maintain an accurate record of your firm‘s standing in the government’s company registration.
  • Ensure that records of directors and other administrative employees are kept up to date.
  • Plan out and keep track of the distribution of shares and stocks, such as at the time of the company’s founding, when a business partner retires, or when a new partner is welcomed.
  • Take care of your payroll and check to see that all your employees’ tax codes and payments are entered accurately.

If you correctly prepare your tax records, you might save money – possibly even more than the fees your accountant costs you. And a skilled accountant will utilise their understanding of tax regulations and legislation to advise methods in which you may free up cash flow, save money, and generate funds for development by utilising their expertise in these areas.

Hire an accountant in case you’re audited

Because there are so many small businesses and a relatively low number of government auditors, the likelihood of your firm being audited is statistically quite low. However, if it does occur to you, it may be a stressful, time-consuming, and financially burdensome experience.

At this point in time, it might be wise to engage an accountant if you do not already have one working for you. They will be able to provide you with guidance on how to proceed with the auditing process. They can also assist in guarantee that you do not breach any tax regulations after the fact, which is helpful given that the government will almost probably be monitoring the situation.

However, it is best to engage an accountant before an audit ever takes place. This is especially true if you are able to locate an accountant who will also provide audit insurance. For example, suppose your company was required to reply to an official enquiry, review, investigation, or audit by a tax authority. In that case, the audit insurance will cover the amounts that you would have been responsible for paying otherwise. If an accountant provides audit insurance, it signifies that they won’t charge any further fees despite the significant amount of additional labour required during the auditing process.

A reliable piece of accounting software will have an audit trail. Because of this, you and the government will have an easier time determining precisely which transactions have taken place over time and who was responsible for authorising them.

When You Need Advanced Business Analysis & Reporting

Analysis of a company’s financial situation is a speciality of accountants. You don’t know for sure where your money is going, do you? Do you want to discover where you can make the most reductions and save the most money? Accountants are well-versed in all of this and much more besides. They are able to assist in the creation of reports and provide financial insight and analysis, allowing you to take the information provided and apply it to enhance your company.

You’ll need an accountant when you apply for a business loan or overdraft

When they give out money, banks want to be sure they’ll receive it back eventually. Since the credit crisis, the majority of nations have seen a decrease in the amount of money lent to small firms. Because of this, it is even more essential that you submit a convincing business plan together with your application for a loan or an overdraft.

Hiring a certified public accountant can greatly enhance your odds. Even the mere fact that you have an accountant might be enough to sway the bank’s decision in your favour because it suggests that you take your company seriously. In addition, your accountant will be able to give facts and numbers that back up your application for funding if the accounting software they use is good. They will also be able to respond to any inquiries that your financial institution may have regarding the predictions of your revenue and spending.

Your accountant will also be able to guide you through the process of selecting a loan and will be able to inform you whether or not the terms and circumstances of the loan offered by your bank are favourable to you.

Get an accountant’s advice before you take on a franchise

The purchase of a franchise is a common way for people to get their feet wet in the world of business, particularly in industries like automobile grooming, cosmetics supply, lawn mowing, enterprises that carry packages through courier, and quick-service restaurants. Of course, you can continue to be your own boss even if you buy into a franchise. However, in exchange for a cut of the business’s revenue or ownership, the franchise corporation will assist you in promoting and selling your brand, as well as supplying it with products and handling a variety of other crucial responsibilities.

This can mitigate some of the dangers that are associated with beginning a new firm. On the other hand, because a portion of your revenue will be sent to the parent business of the franchise, you will have less freedom to make commercial decisions, and your operating expenses will go up. In addition, because franchise contracts are all different, the amount of money you pay and the money you retain will also be different.

It can be difficult for someone who is new to operating a business to determine whether or not it would be beneficial to take on a certain franchise. That’s when the aid of an accountant comes in handy. They can check through the franchise deal to determine the fees and percentages levied, and then they can assist you in estimating your potential revenue once those costs have been subtracted.

You alone are the only person who can determine whether or not you wish to take on the franchise then. However, if you have a comprehensive understanding of the financial situation, you will be able to make that option with a higher degree of assurance.

When Buying Or Selling A Business

Consult with an accountant before making any major decisions about purchasing a new company or franchise or expanding your existing enterprise. They will be able to judge whether or not the acquisition is a financially sound decision through the use of this criterion. In the event that you make the decision to sell your business, an accountant will be available to walk you through each stage of the process from start to finish.

When Purchasing Or Selling Real Estate (And Other Assets)

In a similar vein, you should consult with your accountant before purchasing or selling any business assets such as real estate, machinery, office furniture, and so on. Because they are familiar with your company’s financial situation, accountants will be able to advise you on whether or not making the acquisition is a good investment.

For instance, they will tell you whether you have the cash flow to buy all new computers for the workplace or if you should wait until the following month when the cash flow trends forecast greater sales. If you wait until the following month, they will tell you if you should wait until the following month, they will tell you if you have the cash flow to alternately, they will advise you as to whether or not you should hold off until the following month, at which point the cash flow patterns anticipate a higher volume of sales. Accountants are able to help you with the management of your assets, the tracking of depreciation, and the accurate writing off of the tax deductions to which you are entitled. They may also aid you in the preparation of financial statements. Your accountant will be aware of the proper way to record this information on your tax return in the event that you sell any assets, whether they be real estate or something else.

As you can see, accountants are able to be of service to you during the whole of the expansion of your company. They may do this in a number of different ways. Naturally, this does not suggest that you are required to hire an accountant; but, if you do decide to do so, the right accountant should make your life easier so that you can concentrate on the activities that you take pleasure in accomplishing.

Your expertise is in the management of your company. Therefore, you should let a professional accountant handle the financial details. Suppose you and your accountant utilise accounting software that is hosted in the cloud. In that case, you will be able to monitor what your accountant is doing and to have a clear picture of the financial state of your business at a glance.

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