5 Things To Know Before Hiring Your First Accountant
May 20, 2019 | Last Updated on: July 18, 2022
May 20, 2019 | Last Updated on: July 18, 2022
Accountants can help your business in more ways than just filing your tax returns, doing your payroll, and keeping track of your financial information.
Accountants can also provide help you with tax minimization and staying apprised of the latest tax laws. They can help with filing compliance documents, creating inventory strategies, organizing stock allocation, making lease-or-buy decisions, responding to audits, preparing annual statements, and optimizing key business metrics. One little-known fact is that accountants may even be able to help connect you to a buyer if youâ€™re ready to exit your business. But most of all, accountants help manage the finances of your business so that you can focus on running it!
Maybe you have been doing the businessâ€™s financials and taxes yourself and just need to start outsourcing the tax preparation to an accounting firm. Or maybe you want to bring some financial functions in-house and are seeking an accountant to be an employee of your business.
Either way, we have 5 crucial things you need to know as a small business owner before you hire your first accountant.
The accountant you hire should be knowledgeable about and have experience working with clients in your industry. Your accountant should know the unique tax laws, financial regulations, and business trends of your industry so that they can provide you with the best advice. For example, if your small business is a dentistâ€™s office, the accountant should be competent at valuing and depreciating expensive medical equipment. If you run a real estate rental business, the accountant should be very familiar with all things real estate.
The best way to find an accountant experienced in your industry is to ask fellow business owners for a referral or ask your prospective accountant to provide references of industry peers that are current clients. A great accountant will help you bring together your tax situation and financial situation each year, quarter, or even week, so that you can execute a coherent and financially informed business plan.
Most accountants offer tax services, which usually include tax return preparation, auditing, and responding to audits. Be sure to ask if the accountant is qualified to represent you to the IRS (much like a lawyer) if you are audited â€“ all CPAs are qualified but not all accountants are. The accountants qualified to represent you to the IRS are called Enrolled Agents, and they can be valuable partners in a tough situation.
Some accountants offer additional services like bookkeeping, business valuations, due diligence, overseeing or explaining financial transactions, managing business investments, and compiling investor reports or annual statements. You might want to find an accountant who offers more of the services you need, to streamline your businessâ€™s financial processes. This can help you avoid having to go out and find additional vendors for other components of your businessâ€™s needs.
When selecting your accountant, be sure to shop around. Donâ€™t base your choice exclusively on cost â€“ the cheapest accountant is probably not the best. However, do take care to understand the accountantâ€™s fees.
Most accountants charge by the hour â€“ typically around $150 â€“ $400 per hour â€“ but some may offer you a flat, project-based fee for something like compiling your companyâ€™s financial statements. You might even ask to see some sample client invoices to understand how the accountant charges for their time.
Be sure to clearly define any limits you may wish to put in place upfront and make sure that you and the accountant are on the same page before letting them run the meter. Ask your accountant how long they think a project will take, and ask them to commit to a certain number of hours before starting the work.
Accounting software can alleviate the administrative financial burden on your business, and can also eliminate some of the work that you might pay an accountant to do, such as bookkeeping. Most accountants are happy to work with your accounting softwareâ€™s outputs, which are usually spreadsheets (your â€śbooksâ€ť) that they can then use to prepare your tax returns or projections. According to Business Insider, 69% of small businesses use or are planning to use cloud-based accounting software.
Your accountant stands at a powerful vantage point, watching the financial wheels of your business turn from the inside. The best accountants will provide you with candid and useful insights about your business that they have gleaned from these observations.
Your accountant should be monitoring and making recommendations about your business’s key performance metrics, giving you suggestions that help you make important decisions, and making sure you are always in compliance with laws and regulations.
When selecting an accountant, try to figure out how proactive and strategic they are by asking them open-ended questions. You can try:
If these sound like job interview questions, well, they are. You are interviewing this person to see if they are the right fit for the work you have to offer
Not sure if an accountant or a bookkeeper is better for you and your business? Check out this helpful guide that explains when a bookkeeper or a accountant is better for your small business.
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