Roughly 50 percent of small businesses in the U.S. don’t employ an accountant. In most of these businesses, the owner wears the accounting hat.
As a small business running on a shoestring budget, it’s understandable that hiring an accountant might not be top in your priority list. While DIY bookkeeping can save you money and puts you in control of your business’s finances, it has major downsides than only hiring an accountant can solve.
In this guide, we’re sharing the top benefits your business will reap when it has an accountant on the team.
1. Preparing and Maintaining Financial Records
How many financial records does your business keep?
If you don’t have an accountant, it’s likely that you only keep a record of your company’s cash flows. This gives you a picture of how much money is coming in and how much is going out.
Yet, beyond the cash flow statement, there are different types of financial records every business needs to prepare and maintain. These include balance sheets, income statements, accounts payable, and tax returns.
Preparing these reports requires know-how, which the average small business owner lacks. An accountant is professionally trained to prepare these records. If you need any help understanding the financial information on those reports, your accountant will break it down for you.
Is it important to maintain all these records? Absolutely! They’ll give you a clear view of your company’s financial health, enabling you to make informed decisions.
2. Get Help with Financial Planning
An accountant’s primary responsibility is to track a company’s finances – down to every cent. While this is a crucial function, it doesn’t necessarily mean you’re managing your company’s finances prudently. You still need to do proper financial planning.
Established organizations hire financial planners for this function, but as a small business, your accountant can help you. For example, an accountant can analyze your company’s cash flow report to establish where the money is going. If the company is spending more than it should, the accountant can recommend areas in which to cut back the spending.
From your profit and loss statements, an accountant can determine the rate at which your profits are increasing — or the rate at which you’re losing money. With this information, you can, for instance, decide whether your company can afford to expand, or whether you need to raise additional working capital.
3. Filing Company Taxes
NFIB’s 2021 tax survey revealed that over 65 percent of small business owners struggle with federal and local business income taxes.
If you’re one of these small business owners, it’s time to hire an accountant. These professionals are trained to handle taxes for all types of business structures.
Filing business taxes isn’t just about reporting your business’s income to the taxman and paying up what you owe. Depending on the type of your business, there are various tax deductions you’re entitled to. You need to know how to make the most of these deductions, else you’ll be throwing away money that rightfully belongs to your business.
What’s making a mistake when filing business taxes can be costly. If you mistakenly underreport your income, for example, your business could be subject to a fraud penalty to the tune of 75% of the underreported amount. To illustrate, if you underreport your business’s annual income by $100,000, you could end up paying $75,000 in fines!
With a qualified accountant on your team, the chance of making a mistake during tax filing is almost non-existent. And, besides ensuring tax compliance, your accountant can help with tax planning.
4. Gives Your Company a Professional Image
One of your clients calls your business requesting a refund for an overpayment they made.
Since you don’t have an accountant, you have no choice but to tell them you’ll look into it as soon as possible. But if you had an accountant on staff, you’d simply have transferred their call to accounts, where they’d got more detailed information.
The gist of this is hiring an accountant gives your business a more professional look, which can help increase client satisfaction and loyalty.
5. Saves You Time (and Money)
The average small business spends over 80 hours a year on accounting tasks. Sure, this is a small portion of the overall time spent on managing the business, but it’s time that’s better spent elsewhere.
You might have learned a thing or two about bookkeeping, but you aren’t a professional accountant. You’re an entrepreneur and, as such, your time is best spent on other entrepreneurial functions.
Hiring an accountant takes the accounting function off your hands. You’ll have more time to focus on growing your business.
And how does an accountant save you money? Looking at the amount of money you’ll be paying your accountant is failing to look at the bigger picture. Over time, your accountant’s input will help you make cost-cutting decisions, as well as decisions that can increase the business’s earnings severalfold.
Hiring an Accountant Is a Smart Business Move
As a small business owner, you may balk at hiring an accountant because of the associated labor costs. Plus, basic bookkeeping isn’t complicated, so you might feel that it’s a function you can take over. But as we’ve demonstrated, having an accountant on your team is one of the savviest moves you can make.
Start the search for the best accountant today, and be sure to keep tabs on our blog for more helpful advice for small business owners.