Finding Your Small Business a Business Accountant: Quick Steps
1. Get referrals from within your small business network
2. Make sure it’s a CPA by using the American Institute of Certified Public Accountants directory
3. Find out their background working in your specific industry
4. Check what collection of services they are offering you
5. Figure out in what ways and how frequently you and your accountant will communicate
6. Ask about their billing structure for the services they provide
7. Negotiate. There are numerous possible fees and costs when it comes to accountanting services
8. Finally, draft the engagement letter with the agreed upon services costs and length of the relationship
Is a Business Accountant really necessary for my business right now?
With all the great apps and software out there, you’re probably thinking that doing your own accounting is another way to keep costs low at this point in your business. Fundamentally, every small business owner is focused on saving money, spending only when it’s a must. Indeed, this is key to survival!
Contrary to what some may think or practice, hiring a business accountant is a must if you want to see your business thrive. In the best case scenario, your accountant can save you hundreds, sometimes thousands of dollars while considerably lightening your workload.
So how do you hire the right one?
We’ve got you covered! Here are four steps to hiring yourself the right accountant for success.
Timing is Everything: Is this the right time for a business accountant?
If you know it’s the right time to hire one, then you have taken your first step in the process already!
That moment is unique in every business person’s journey. Here are some indicators that it’s time:
1. You are clueless about accounting
It’s important to have some accounting know-how at the beginning when you’re launching your business or even after launching as you start to gain momentum.
Some of the great things your accountant can help with include financial strategizing in your business plan, showing you how to do a good job managing the finances in your business, and creating reports and financial statements when you need them. Wise business owners think ahead. Your accountant can be your ounce of prevention from errors and omissions of key information that could cause problems in the future.
2. Figuring out the right legal structure.
Your choice of registering as a sole proprietorship, LLC, partnership, or corporation, will make a difference in your accounting. This is as important from a financial standpoint as it is from a legal one.
if you choose to go with a sole proprietorship, you’ll be working on a self-employed basis and invoicing under your name. If you go this route, you might be able to save on your taxes by deducting your living expenses.
All of these legal structure comes with baggage. For example, as a sole proprietor, your invoices should be under your own name and not the business name. There are possible tax savings connected with that legal status as well. Your business accountant is your in-house expert in that department. If you have one on board from the start, he or she can explain all the legal structures and help you pick the one that’s right for your business.
3. Taxes blur your vision.
If you have ever filed your own tax returns, you know it’s no simple feat. Well, it’s that much more complicated to do business taxes!
Your top reason to get a good business accountant is taxes. They will make sure you only pay the most necessary taxes for your kind of business and help you avoid fines and penalties.
The time of year your accountant is probably most valuable to you is tax season. He or she will do all your number crunching and help you learn all the tax credits and deductions your business is eligible for. This can translate into huge savings every year.
4. You are experiencing explosive growth in your business
Things are going well and the money is rolling in. Nice!
Now, what do I do?
Accounting is complex, even for small businesses. As your business grows, so does the complexity, with more clients, vendors, employees… it can become overwhelming. Your business accountant’s job is to on top of who you owe and who owes you so your cash flow is healthy.
Good accounting work in the early stages is a smart way to secure a healthy future for your business. Sound money management will make all the difference.
5. An audit is looming
Odds are you will never get audited. The IRS just doesn’t have the bandwidth to audit everybody. Nonetheless, if you happen to get that notice, your accountant will help you get through it.
If you don’t already have one, this a good time to hire one! They can lower your stress level by showing you how to navigate the audit procedures and coaching you on best practices moving forward. They can also save you a lot of time and money. Once you do get audited, the IRS will keep an eye on you, so you want to make sure you are on point. A good accountant will keep you complaint. All the better if you had your accountant on board before you get audited But if you haven’t hired one yet and the IRS shows up, that’s an unmistakable indicator that you need one.
6. Applying for a business loan.
It’s true that you can fill a loan application out without an accountant, but your accountant can be helpful in this process.
The lender will require certain financial documents that they will use to determine your eligibility for a loan. The right accountant should help you stay on top of your financials so that you’re ready when it comes time to apply for your small business loan.
Here are a few more good things your accountant can do for you:
When the lender is asking questions about your financials and your revenue projections, your accountant will have the answers
Just having an accountant demonstrates to your lender that you’re serious about your small business and that they can feel confident that you will make your loan payments.
When you get a loan offer, your accountant can give you advice on interest rates, terms, and conditions.
7. Buying or selling a business
No doubt that whether you’re buying or selling, sound financial planning is paramount.
For an acquisition, your accountant can help you sort through the company’s account and make the right decisions based on the value and ownership of the company’s assets and any outstanding debt on their books.
In a sale your accountant can make sure your financial records are up to date and accurate. He or she can generate statements of your business’s accounts that show how valuable you are to potential buyers. Then, when it comes time to sell, your accountant can make sure you get all the money you can, and that no value is lost in the transaction.
How to Find a Business Accountant
So you have figured out that you need an accountant, based on one or more of the 7 scenarios above. How do you go about picking one out? Here’s how:
Not on the Internet
You could use a search engine or an online directory to find a business accountant, but this is not the best way. Remember, this person will be a trusted advisor throughout the entire lifespan of your business. The internet is too impersonal for this particular task.
A better way to find a trustworthy accountant is through referrals. Ask a mentor, fellow business owners in your network, your lawyer, your banker for their recommendations.
Your local Chamber of Commerce or Small Business Development Center are good places to check, especially at their events or meetings.
Get Yourself a Properly Certified Business Accountant
There are accountants, and then there are CPAs (Certified Public Accountant). For business finance, a CPA is the way to go.
CPA is the only existing license qualification for accountants in the United States. To become a CPA, accountants need to pass an exam, and they have to renew periodically, so a CPA’s knowledge will be up-to-date.
A good CPA has been pre-screened, well-trained and experienced.
The American Institute of Certified Public Accountants (AICPA) has a directory of CPAs, accounting companies, and local accounting organizations. They are a great resource.
Vet Your Candidate with These Questions
You’re not hiring your business accountant as an employee, but you shouldn’t treat the hiring process any differently:
Hiring an accountant is very similar to hiring an employee for your business. Although the relationships are different, you still need to trust this person with confidential details of the business that you have worked hard to build. That said, the interview process is unique. Here are some questions you should ask when vetting a business accountant.
1. What is your experience with businesses similar in size to mine?
As a small business, your financial needs are unique and should be handled differently from those of medium and large-scale businesses. Depending on what stage you’re in, make sure they have experience handling the situations that you are dealing with in the complexities of running your business.
Feel free to ask for references. A professional accountant should have some and be willing to furnish them. Do call the business owners and ask them how their experience was working with this person and if they would recommend them.
2. Do you have experience in my specific industry?
Often, accountants specialize in specific industries, and indeed, different industries have unique financial requirements and different tax laws can apply to certain kinds of products and services. It’s important that the person you hire is well versed in these details.
This holds true for your business structure as well. As discussed earlier, sole proprietorships, LLCs, partnerships, and corporations have different accounting needs, especially during tax season. So it helps if your accountant has experience in your business structure also.
3. What will you do for me?
Tax and audit support are the most basic services that business accountants provide, but you may need more than that. Find out if they do bookkeeping, business valuation, budgeting, or risk assessments.
Highly qualified accountants offer a wide range of services, so get find out everything the accountant could potentially do to help your business.
4. What can you do that will contribute to the growth of my business?
The best CPA for you could turn out to be a valued adviser, contributing to your business growth over the years by equipping you with sound financial practices.
An excellent business accountant should not only put you on good financial footing today, but help you prepare for a successful future.
5. How will we communicate? (And if hiring from a firm, who exactly is my accountant?)
First off, if you are considering hiring from a firm, then you are better off working with a firm similar in size to your business. Small businesses often get assigned to junior accountants in larger firms. Secondly, even with a small firm, you want that one-on-one service, so find out which accountant you’re getting and make decisions about how often and in what modes – in person, by phone, text or email – you will communicate. Just like in marriage, communication is essential to a successful relationship. How much communication depends on the kind of help you need (see the 7 questions above). Your accountant needs to be aware of these needs and be prepared for the right frequency of communication to help you through.
6. What about the billing for your services?
How does that work?
The big question: how much is this going to cost me? Customarily, accountants charge an hourly rate ranging from $100 to $275 per hour. Some work on a monthly retainer. It’s ok, even advisable, to do quote comparisons between a few firms so you can get to know the market and make a sound decision. Don’t automatically go for the highest bidder. A big price tag doesn’t necessarily mean they are the best fit for you. That said, usually the more services your accountant offers, the more they charge.
And The Winner Is…
Your vetting process is done, and you have narrowed the field down to your ideal candidate. Now what?
It’s time to negotiate. This process should have educated you about what is available in accounting services, so now you can negotiate and try to arrive at an agreement that works for both parties. Your accountant may be a bit flexible on the topic of fees. The only way to find out is to politely inquire, and you may find that you save a little money in the end.
The next step is to put the agreement in writing in the form of an engagement letter. It should detail the services, fees and the duration the relationship as agreed upon by both parties.
Now you’re ready to move into a successful future with a good accountant on your team! Remember, communication is key. Meet or speak with him or her at least once a month.
Getting A Good Small Business Account is a Wise Choice
Small business owners value their time. If time is money, then doing your own taxes, bookkeeping and payroll is extremely expensive. Hiring an accountant early in the game will free up valuable hours that you should be spending doing what you do best: growing your business. While you’re doing that, your accountant is helping you manage the increasing revenues and expenses as you grow. That’s a winning formula.