Owning a small business is rewarding, but it comes with many responsibilities. For example, you need to stay on top of your business’s finances to make sure you are paying your bills, paying your employees, and keeping accurate and up-to-date financial records. If you fall behind with your accounting responsibilities or do not manage them properly, you might run into problems in the immediate future, not to mention when it comes time to file your business taxes. To keep track of your expenses, income, gross margin, cash flow, and debt, it is a good idea to seek outside help from a business accounting professional if you do not currently employ one at your business.
A certified public accountant (CPA) can handle the full spectrum of tasks, and they typically charge an hourly fee. The average monthly accounting fees will increase as your business grows, or as you add more tasks. That said, a CPA can help you save lots of time and money, and help you stay out of trouble with Uncle Sam. This Balboa Capital blog post explains why you need a business accountant.
You cannot do it yourself.
You can fly solo with lots of business-related tasks, but accounting is one task that might prove to be too challenging and time-consuming. Sure, there are lots of accounting software programs available, but they can be difficult to understand. Moreover, not every software program is equipped with customizable options, data import and export capabilities, and bank reconciliation features, to name just a few. The affordability of accounting software is no doubt appealing, but do not forget that time is money.
If you are spending too many hours each week managing your accounting tasks with a software program, it might not be worth it in the long run. Instead of paying bills, inputting data, and balancing your books, you could be focusing your time on other important responsibilities like managing employees, generating new business, or working on new products or services. Lastly, using accounting software is not the same as hiring an accountant. Accounting software becomes outdated quickly, especially when tax laws change, or when new ones are introduced. An accountant stays current with all of the latest tax laws.
Your books will be accurate.
Hiring an accountant gives you the peace of mind that comes with knowing that your business’s financial data management and financial reporting will be properly updated and managed. Your accountant can track your income and expenses, keep your financials accurate, and provide you with a complete picture of your financial position on any given day. Maintaining accurate financial books is necessary to keep your business moving forward, and to ensure that you are compliant with the current accounting systems and tax laws.
The IRS audits one in every 100 small businesses each year. Failing to report the correct amount of income or claiming too many deductions will increase your chances of being audited. Your accountant will have the knowledge and expertise needed to make sure that everything related to your business’s finances is up-to-date and accurate, and that you have no issues with the IRS. A financial audit can end up being very expensive, but a CPA can help you avoid one. If you hire a CPA and still get audited, they can represent you and provide the auditors with accurate books and records. This enables the auditors to review everything quickly and easily and, hopefully, leads to a decision in your favor.
You can save on your taxes.
Tax season sends shivers down the spines of business owners who are ill-prepared and need to round up a year’s worth of financial documents at the last minute. This almost always results in tax form errors, filing delays, or extension requests. When you have an accountant taking care of your books throughout the year, you will not need to deal with these common scenarios. On top of that, your accountant might be able to help you save money when it comes time to file your taxes.
You are a business owner, not an accountant. So, there is no way for you to know the full list of exemptions you are entitled to, such as Section 179, or understand what you can do differently to keep more of your hard-earned money. This is the job of your accountant. Since your accountant sees the full financial picture, they can recommend strategies to help maximize your deductions based on the most recent tax code changes.
Close to 65% of small businesses in the United States hire outside accountants to manage some, or all of their financial bookkeeping and reporting tasks. If you are tired of wearing the “accounting hat” at your small business because it takes too much time, or if your business is growing and needs the help of an accounting professional, it is time to look at your options. Start by asking around for referrals, which is a great way to find someone who has an excellent reputation.
The information in this blog post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, investment, or accounting advice. You should consult with your accountant, lawyer, or tax advisor before making any business decisions.