Hiring an Accountant: Before and After

Hiring an accountant

Last Updated January 8, 2024

In the dynamic landscape of business, managing your finances efficiently is paramount to success. As your business grows, so do the complexities of financial management. One crucial decision entrepreneurs often grapple with is whether to handle their accounting internally or hire a professional. In this comprehensive guide, we’ll explore the key considerations before and after hiring an accountant, while adhering to both the United States and IRS guidelines.

By doing your accounting, you miss the following:

Managing your accounting might seem cost-effective, but it comes with its set of challenges. Here are six critical aspects you might overlook:

  1. Compliance Issues: Navigating the intricate web of tax codes and regulations can be daunting, potentially leading to costly compliance issues. An accountant ensures your business stays on the right side of the law.
  2. Time-Consuming: The manual nature of DIY accounting can be time-consuming, diverting your focus from core business operations. An accountant automates processes, saving you valuable time.
  3. Error-Prone: Manual accounting increases the likelihood of errors, which can have significant repercussions on your financial health. An accountant’s meticulous attention to detail minimizes the risk of costly mistakes.
  4. Lack of Financial Insight: Without professional expertise, you might miss valuable insights into your business’s financial standing. An accountant provides in-depth analysis, allowing you to make informed strategic decisions.
  5. Inefficient Resource Allocation: DIY accounting takes time away from strategic planning and growth opportunities. An accountant ensures your resources are allocated efficiently for maximum business growth.
  6. Missed Deductions: An accountant’s expertise ensures you take advantage of all eligible deductions, optimizing your tax position and saving your business money.

How do you know if you need an accountant?

Recognizing the right time to hire an accountant is crucial for business sustainability. Consider these signs:

You’re unsure where your business stands financially:

If deciphering your financial statements feels like navigating a maze, it’s time to seek professional help. An accountant conducts a comprehensive financial analysis, providing clarity on your financial position, and enabling informed decision-making.

You no longer have the time to manage the financials:

As your business expands, so do your responsibilities. When financial management becomes a burden, hiring an accountant frees up your time for strategic planning, client acquisition, and growth initiatives.

Tax season is the most stressful time of the year:

If tax season induces stress and anxiety, an accountant can alleviate the pressure by ensuring compliance and optimizing your tax strategy. They handle the intricacies of tax preparation, allowing you to focus on your business operations.

You plan on expanding the business:

Business expansion brings new challenges, particularly in financial management. An accountant helps navigate the financial complexities, ensuring a smooth transition into a larger operation. They offer insights into budgeting, forecasting, and financial strategies to support growth.

How your business’s structure affects your accounting needs:

The structure of your business significantly influences your accounting requirements. Sole proprietors, partnerships, LLCs, and corporations have distinct accounting needs. Understanding these differences is crucial for accurate financial management and tax compliance.

Should you hire a CPA or an accountant?

Choosing between a Certified Public Accountant (CPA) and a general accountant depends on your business needs. CPAs undergo rigorous testing and have a broader understanding of tax laws, making them suitable for complex financial situations.

Why you should hire a CPA:

  1. Expert Tax Planning: CPAs excel in tax planning, helping you minimize liabilities and maximize deductions through intricate knowledge of tax codes and regulations.
  2. IRS Representation: CPAs are authorized to represent you in front of the IRS, providing a layer of protection during audits and ensuring effective communication with tax authorities.
  3. Comprehensive Financial Advice: Beyond tax matters, CPAs offer valuable insights into overall financial planning and strategy, providing a holistic approach to your business finances.
  4. Credibility: Hiring a CPA adds credibility to your financial reports, crucial for attracting investors or securing loans. Their certification is a testament to their expertise and ethical standards.
  5. Specialized Knowledge: CPAs stay updated on the latest tax laws and financial regulations, ensuring your business remains compliant and takes advantage of new opportunities.
  6. Auditing Services: CPAs can perform audits, ensuring the accuracy and reliability of your financial statements, and providing assurance to stakeholders and regulatory bodies.

Why you should hire a general accountant:

  1. Cost-Effective: General accountants are often more budget-friendly for routine bookkeeping tasks, making them a sensible choice for small businesses with straightforward financial needs.
  2. Everyday Financial Management: General accountants efficiently handle day-to-day financial transactions, freeing up your time to focus on strategic aspects of your business.
  3. Business Advisory: They provide valuable advice on financial decisions and budgeting, offering insights that contribute to your business’s financial health.
  4. Streamlined Processes: General accountants focus on routine tasks, ensuring your financial processes are organized and efficient, contributing to overall business efficiency.

Where to look for the right accountant for your small business:

  1. Professional Networks: Seek recommendations from fellow entrepreneurs, industry peers, or professional associations. Networking within your industry can lead to valuable insights into potential candidates.
  2. Online Platforms: Utilize online platforms, such as LinkedIn or specialized job boards, to find qualified candidates. Ensure candidates have a professional online presence and relevant experience.
  3. Local CPA Firms: Contact local CPA firms that specialize in small business accounting. These firms often have a pool of experienced professionals with a track record in your industry.
  4. Referrals: Ask your business network or current accountant for recommendations. Word of mouth can be a powerful tool in finding a trustworthy and reliable accountant.
  5. Educational Institutions: Consider hiring recent accounting graduates who bring fresh perspectives and knowledge. Many universities have career placement services that can connect you with qualified candidates.
  6. Freelance Platforms: Explore freelance platforms to find experienced accountants for short-term or project-based needs. Ensure they have a proven track record and positive reviews from previous clients.

What to look for when hiring an accountant:

  1. Qualifications: Ensure the accountant holds the necessary certifications, such as CPA or relevant degrees. Verify their educational background and professional credentials.
  2. Experience: Look for a candidate with experience in your industry or similar business structures. An accountant familiar with your specific challenges is better equipped to address your needs.
  3. Communication Skills: Effective communication is key to a successful working relationship. Assess the candidate’s ability to explain complex financial concepts clearly and understandably.
  4. Technology Proficiency: Ensure the accountant is familiar with accounting software and modern financial tools. Technological proficiency is crucial for efficient and accurate financial management.
  5. References: Check references to gauge the accountant’s reputation and reliability. Speak with previous employers or clients to get insights into their work ethic and professionalism.
  6. Fee Structure: Clearly understand the accountant’s fee structure and ensure it aligns with your budget. Transparency about fees helps avoid misunderstandings and ensures a mutually beneficial partnership.
  7. Compatibility: Choose an accountant whose working style aligns with your business needs and values. A good fit in terms of personality and work ethic contributes to a harmonious and productive partnership.
  8. Trustworthiness: Trust is crucial in financial matters; choose an accountant you feel confident in. Conduct thorough background checks and ensure the candidate has a history of ethical behavior.
  9. Proactive Approach: Seek an accountant who proactively identifies opportunities for financial improvement. A proactive accountant is more likely to contribute to the overall success and growth of your business.

You’ve hired an accountant. Now what?

Collaborating with an accountant is an ongoing process. Ensure a smooth working relationship by:

  1. Regular Communication: Maintain open and regular communication with your accountant. Keep them informed about changes in your business, financial goals, and any challenges you may be facing.
  2. Timely Provision of Financial Data: Provide your accountant with timely and accurate financial data. This ensures they can perform their duties effectively and helps you make informed decisions.
  3. Stay Informed: Stay informed about changes in tax laws, regulations, and industry standards. Your accountant can guide you, but being aware of these changes is crucial for the overall health of your business.
  4. Plan Ahead: Work with your accountant to plan for the future. Whether it’s budgeting, forecasting, or strategic financial planning, collaboration is key to achieving long-term success.

Bottom Line:

Hiring an accountant is an investment in the financial health and longevity of your business. Whether you opt for a CPA or a general accountant, the expertise they bring can help you navigate complex financial landscapes, ensure compliance, and position your business for sustained success. As you embark on this journey, remember that informed decisions about your financial management today will pave the way for a prosperous tomorrow. Consider this not just an expenditure but an essential step toward securing the financial future of your business.