The amount of time you want and need to personally invest in your business’s accounting will be the driving force behind when you should hire an accountant. Depending on the stage of your business’s developmental plan, there are several times when it is extremely important to hire an accounting professional, such as:
And, depending on how often you need accounting services, you have options on the type of professional you will hire. You can either employ an accountant full-time or part-time, hire an accounting firm on retainer, or pay by the hour for necessary work. Just because you need to hire an accountant does not mean you are stuck with a huge bill. If you only need an account for a few hours of work or less, you should just pay an hourly rate. Hiring an accountant can reduce your stress by allowing you more time to concentrate on growing your business.
Accountants have skills in their toolkit that will help grow your business. It can be as simple as taking work out of your pile to allow you to focus on generating revenue.
Example: John just started his carpentry business. When he gets home from work, he finds himself buried in receipts and payroll when he should be returning customers' calls to bid on new projects.
Although it is difficult to determine how much work John is losing by not promptly returning his potential customers’ calls, the paperwork that takes John hours to complete may take an experienced professional only a few minutes. In situations like this, not choosing to hire an accountant could be costing John thousands of dollars in lost revenue.
To assist you in determining whether you should hire an accountant, ask yourself if completing the accounting work yourself is the best use of your time. Obtain a quote to help you decide if you could be generating more income for your business by reducing your accounting workload.
Accountants can help you develop a business plan, which can range from simple to complex depending on the nature of your business and business needs. In John’s circumstances, his business plan may include time for him to return home every day to allow for thirty minutes to return customers’ calls. Or maybe he wants to plan for the expense of a part-time assistant.
Hiring an accountant will help your business plan succeed. It will be more technical, because accountants have expertise and use professional accounting software to prepare their reports. Perhaps even more importantly, the business plan will be realistic, as you will have an objective third party working with you. Also, having an accounting professional when you start your business will help you start off with the financial knowledge you need to succeed.
Business legal structures vary from business to business. Many small businesses prefer the limited liability company or LLC for its simplicity, especially during tax time for sole proprietors or spousal partnerships. However, starting with the tax law changes that became effective in tax year 2018, it might be beneficial to set up your company as an S corporation to take full advantage of the qualified business income deduction (QBI). Many factors must be considered when making this decision, including business income and expenses, size of your business, and number of employees.
Although initially it may not feel worth it to hire an accountant or business attorney, getting your business started on a solid foundation could save you thousands of dollars come tax time. An accountant can assess your business needs and help you choose the best legal structure for your business.
You will know you are ready to hire an accountant to start delegating tasks when you are ignoring other important tasks in order to complete your accounting needs. Another sign you are ready to start working with an accountant is if you do not have time to chase down your payments. Do you have a client who you know will pay you if you could just make the time to invoice them? Have you waited so long to invoice a customer in the past that you decided it was too embarrassing to send the invoice now and just decided to write it off? If you are losing money because you do not have time to follow up with potential customers or do not have time to track down payments, it is time to seriously consider delegating work to an accountant.
An accountant can organize and track income and expenses and ensure customers are invoiced in a timely manner for work completed. Also, an accounting firm can provide cloud-based accounting software to help you stay on top of the financial pulse of your business.
When you are running a small business, it can be easy to think you cannot afford to hire an accountant. But, as we saw in John’s situation, hiring an accountant can help you generate revenue and save you hours of frustration. Remember, hiring an accounting professional does not mean you need to have an accountant on retainer or pay monthly fees. If you only need an accountant to complete a few hours of work, paying hourly probably is your best option. To discuss ways Gudorf Tax Group could assist your small business, schedule an appointment today with their accounting and tax preparation professionals.