How to Tell If Your Small Business Needs to Engage an Accountant
Up until a certain point, small businesses can often operate and file their taxes on their own before there is a need to bring in an expert. Today, with the abundance of accounting software available you may even be able to manage it for longer on your own, even if you don’t have a lot of financial knowledge.
However, as your business and your revenue grow, you may not have the time, or you may find that you require better systems to help you continue to increase your business and manage your money successfully.
Knowing when to hire someone externally is often a difficult decision. Here are some of the ways an accountant can help.
1. Unfamiliar with Accounting Practices
If you’re not familiar with accounting practices, then you may want help from the beginning. Accountants can help advise you on the best structure for your company, such as whether a sole proprietorship, partnership or incorporating would be the most beneficial to you. Each has different tax implications and the decision to choose one over another will depend on the nature, size, income and maturity of your business.
2. Running Your Business & Making Informed Decisions
Depending on what type of business you start, you may need a financial or managerial accountant. Most small-business owners will need a managerial accountant to help with salaries, profits and the cost of goods produced. The goal is to help owners and managers make sound financial decisions based on your cash flows and business activities. In addition, they can help your business avoid potential pitfalls and help you account for things like inflation, interest rate fluctuations or changes to tax laws.
3. You Require Professional Financial Reports
Financial accounting deals with providing information to the public, such as stockholders, customers, creditors and regulatory bodies. Even if you’re not legally required to submit them, professional financial reports may be required by your current investors or required to apply for a loan to present to potential investors as part of a business plan.
4. Rapid Growth
Even if you have a working knowledge of accounting, you may find that you simply do not have the time or that accounting is taking you away from more important tasks that could allow you to directly grow your business. Expanding often means more customers, hiring more employees, additional vendors, and more, which require more paperwork, record-keeping and number crunching.
5. Expanding Your Business
Growing your business through an acquisition or expanding into another province or another country requires carefully planning and thorough analysis. An accountant can walk you through the process and help you structure the growth to help set you up for success.
The most obvious role of an accountant is tax management and planning. This means not just making sure you pay the right amount of tax, but also avoiding any potential penalties from the Canada Revenue Agency (CRA). A good accountant often pays for themselves very quickly, by ensuring you’re not missing out on any tax breaks or expense claims that you’re entitled to. In taxes, it’s often what you don’t know that can help or hinder your business the most.
7. Selling Your Business
When you’re ready to sell your business (or parts of your business), an accountant can help you value your business through investigation, analysis, projections and professional judgement. When done properly, it can ensure a seamless transition and the continued success of your business. They can also help you structure your deal to minimize any tax implications.