If you are bootstrapping, or starting a small business on a limited budget, you have probably spent some time trying to figure out where you can cut business costs and do more on your own in order to stretch the funds you have available.
One area you may consider doing it yourself instead of hiring it out is accounting. If you have an accounting background and a solid understanding of business finances, then this may be a good place to cut costs. However, if you lack experience in managing the books of a business and expect to learn as you go, you should think twice. Managing your own accounting system incorrectly can hurt your business not only now, but also in the long-term.
Here is a rundown of the things an accountant can do for a small business owner. Review the list carefully, especially if you're still unsure why an accountant may be a good resource to add to your small business team.
During the Start-Up Process
When you start a business, there are a number of actions you need to take and systems you need to set up in order to create the foundation of a successful business. Here are some ways an accountant can help:
1. Determine the best business structure (i.e, sole proprietorship, LLC, corporation, partnership) for your situation
2. Assist with the financial analysis in your business plan
3. Provide advice on the type of accounting software you may need
4. Provide advice and assistance on opening a business bank account
5. Make sure your accounting procedures comply with government regulations and requirements
6. Provide advice on how to track expenses during your daily business activities
7. Explain the importance of keeping personal and business expenses separate
During Your Regular Business Operations
Once your business is off the ground, you will need to maintain the accounting system that your accountant helped you set up. Here are some specific actions your accountant may take to assist you on an ongoing basis:
8. Help ensure that your independent contractors are classified as such (and not employees) by the IRS
9. Explain your financial statements so you can understand the ins and outs of your business
10. Oversee company payroll and payment processes
11. Provide advice on estimated tax payments you should make during the year
12. Determine when, and to whom, you should send W2 and 1099 forms
13. Close out your books and create financial reports at the end of the year
14. Compile and submit your taxes, financial reports and all necessary paperwork to the IRS
During a Business Growth Stage
When you are ready to grow your business, your accountant can be an integral resource who provides advice and helps you manage the process. Here are some examples of what an accountant can do:
15. Help you determine areas for growth by providing insight on cash flow patterns, inventory management, pricing and business financing
16. Provide advice on property and equipment leasing and purchase
17. Help you prevent getting audited by the IRS
18. Prepare you for and guide you through an audit, if necessary
19. Create financial forecasts so you can make better decisions in your business
20. Work with you to create a business budget that will support your business goals
21. Provide advice and resources to assist you with the sale of your business
These are just some of the ways accountants can work with small business owners. You can opt to hire an accountant for all of your financial activity, or you can choose a combined approach that limits his or her hands-on activity, reducing the expense. For example, you can hire an accountant during the start-up phase, and have him/her handle your annual reporting, but work with a bookkeeper to manage your books on a regular basis. In fact, a bookkeeper and an accountant can form a very efficient accounting team for your small business.
The most important thing you can do when it comes to your business finances is recognize when you need to enlist the help of a professional, and then find an accountant who will help maintain the fiscal health of your business.