Small Business Brief


Wondering If You Need an Accountant? This Is When a Business Should Hire One

Why do many small businesses fail? Nearly 30% of failures are because the business ran out of cash and 18% is because of problems with pricing and costs. You have to wonder whether many of these financial issues might have been avoided with the help of a good accountant. 

Are you wondering whether you need an accountant for your small business? If yes, then read on to learn when you should hire one.

What Is a Certified Public Accountant?

A certified Public Accountant or CPA is a professional person who is licensed or certified by your state examining board. This certificate is issued when a CPA meets the state’s legal requirements to practice as an accountant.

CPAs have statutory rights and responsibilities. They can certify the financial statements of companies. They must abide by certain standards and can be held accountable for professional misconduct.

Accountants sometimes specialize in a particular aspect of accounting. Some are tax experts, others handle mergers and acquisitions. Many accountants are generalists offering services that cover all aspects of business accounting.

Large corporations may directly employ accountants. Many smaller businesses find it more economical and practical to outsource this service. Outsourcing provides the benefits of a professional accountant but without the year-round overhead.

Not all accountants are the same. Look for CPA marketing that demonstrates the value they will add to your business. 

Writing a Business Plan

Every business should have a business plan no matter how small the business. Trying to run a business without one is like navigating through a strange country without a map. Your business plan helps you work out your destination as well as your route through the trials and troubles of the competitive environment.

It takes an understanding of business finance to make a business plan hang together. Sales projections, cost structures, loan requirements, and cash flow forecasts turn a business pipe dream into a practical plan.

You may need to show your business plan to a bank or another lender and so you want it to stand up to scrutiny. You might need to understand how much stock to buy or what you can afford to pay your people. A professional business plan is an invaluable tool in your drive for business success.

An accountant can help you draw up a business plan. They can make sure it makes sense in accounting terms. Often an accountant can use their experience of other businesses to warn you of potential problems or even suggest solutions.

Setting Up Your Business

When you first start-up your business you have some important decisions to make about its legal structure. There are several options and each option has advantages and disadvantages. What’s right for you and your business depends on your circumstances.

It may be simpler and cheaper to be self-employed and invoice your customers using your own name. But what are the tax implications and what expenses can you legitimately set against tax and what are the risks?

A limited liability company has some advantages in protecting you from risk if the business fails. It’s a more complex legal structure and it comes with some reporting obligations too. How do you decide if the benefits outweigh the disadvantages?

An accountant can help you work out which of the various options is right for your business. It’s better to do this at the very start of your business venture. 

Setting Up Your Accounting System

There are many accounting software applications that you can buy to help you run your business accounts. If you are trying to decide which one is best for you an accountant can help you decide.

You may have an accounting system but find it difficult to use or feel you are getting little benefit from it. An accountant can help you set it up and help you get the most from it. Getting you through the learning curve quickly and painlessly will mean you can get a return on your investment in the system.

Share the Load

Running a small business can be a lonely thing to do. If you don’t have employees it difficult to find someone who you can share the load with.

If you employ people your responsibility for them can make it difficult to lean on them. You may want to make them feel secure in their employment so who do you talk to about your business worries?

An accountant can be an advisor or even a good listener when you don’t have anybody else to turn to. Sharing the load when you need someone to talk to can see you through a difficult time. They may even help you achieve more than you expect to.

Business Advice

A Certified Public Accountant is likely to have a wealth of business experience. As they generally work with multiple businesses they have met and supported many successful business owners.

The business insight of a CPA can add much more value than simply doing your accounts. A CPA could identify when you have a business opportunity or a risk that you need to avoid.

An accountant is also at the center of a business network. Their connections may give you access to new customers, suppliers and potential investors. An accountant may advise you about who you should talk to as much as what you should do.

Personal and Business Tax

Whether it’s your personal tax or your business tax do you know the best ways to reduce your tax bill? Do you know how to keep your tax liabilities to a minimum while also not falling foul of the IRS?

Filing taxes is such a headache that it can feel great to know you have an accountant to handle it all for you. They know what forms you need to complete and how to keep the IRS sweet. They know the deductions that apply and those that don’t.

If you are facing an IRS audit, an accountant may be a great investment. It’s possible that they can help minimize your tax liability. They can also legally represent you and help you navigate through this stressful process.

Future Plans

If you’ve been running a small business successfully for some time when is it right to go for growth. Is your business ready for a growth spurt? What do you need to do to achieve its potential?

This may be a good time to hire an accountant. They can look at your business with objectivity. A fresh set of eyes and professional financial training means they can suggest ways forward for your business.

An accountant might suggest ways of attracting investment for a new venture. They may be able to help you obtain loans and work out how you will repay them. This advice can unlock opportunities for growth.

Cash Flow Challenges

Many small businesses are profitable and yet fail. How can this be? Surely a profitable business is a successful business?

These business failures are often due to cash flow problems. Cash flow is the lifeblood of a business.

Without a positive cash flow, you can’t pay your bills. If you have employees, you can’t pay their wages. If you have loan repayments to make, you may default on them.

Even if you have highly profitable sales, if your customers have not paid you yet or your money is tied up in stock, you can’t pay your bills. It only takes an impatient supplier or an inflexible bank to break your business.

An accountant can help you plan your cash flow effectively so that you don’t risk getting into trouble. They may be able to unlock cash that you have missed. They may even be able to put a persuasive case to the bank for patience and back it up with numbers. 

Analysis and Problem Solving

Part of the accountant’s training includes the analysis of accounting information. They can identify problems and opportunities by looking at a set of figures that might not be apparent on the ground.

If you are suspicious that there are problems but you don’t know what the causes are, it might be helpful to ask an accountant to analyze your business figures. This is especially true if you are considering buying a business.

Don’t risk buying a business without having an accountant investigate their accounts first. There can be hidden liabilities, worrying gaps in the accounts, and even downward trends that say avoid this business. On the other hand, an accountant might be able to identify opportunities, business strengths, and assets that make this business a great investment and well worth your time and effort.

Fraud and Theft Worries

Where are your profits going? You don’t seem to be making as much money as you think you should. Is somebody stealing from you without you knowing it?

If you suspect fraud or theft from within your business an accountant can help you discover how this is happening and who is stealing from you.

You Need an Accountant

There are so many benefits to having an accountant that if you own a business you almost always need an accountant. Even if things are going well, keeping things that way is something an accountant can help you do.

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