How do you know when you need a business accountant?

How do you know when you need a business accountant?

November 13, 2021

Half the effort of hiring a business accountant is knowing when you need one.

Unfortunately, there’s no distinct point in time when every small business owner needs to hire an accountant . . . But there are a few warning signs that you need one.

If you find yourself in these scenarios, it might be time to start the search for a business accountant.

1. You’re just starting up and don’t know anything about accounting.

When you’re just starting your business or you’re getting into the weeds of running it, you’ll need to know a little bit about accounting.

If financial statements are confusing, creating reports is impossible, or accounting terms are downright jibberish, you should hire a business accountant from the get-go.

An accountant can help you formulate your financial strategy when you’re drafting your business plan and teach you how to manage your business’s finances right off the bat. You don’t want to make any mistakes or miss any key information early on—those slip-ups can cost you down the road.

So if you’re unfamiliar with accounting basics, a business accountant can help you start off on the right foot.

2. You’re deciding on your company’s legal structure.

There are a few different ways to structure your business. And whether you go for a sole proprietorship, LLC, partnership, or corporation, your choice will matter for your finances.

Deciding your small business’s legal structure is an important decision—one that should be considered closely.

For instance, if you choose to go with a sole proprietorship, you’ll be working on a self-employed basis and invoicing under your name. If you go this route, you might be able to save on your taxes by deducting your living expenses.

Each legal structure has its own complications. You might not be an expert on the topic, but a business accountant is. An accountant can explain all the legal structures out there and help you choose the one that’s right for your business.

3. You don’t know anything about taxes.

Just because you’re a small business owner doesn’t mean you know the best practices for filing your taxes. Or, more likely, you don’t have the time to do it right.

This is a great (and probably the best!) reason to hire a business accountant. An accountant can make sure you’re paying the right taxes for your business type and industry, so you’re not hit with penalties and fines.

A business accountant probably provides the most value during tax season by informing you of your business’s tax credits and deductions you can take. You don’t have time to crunch your numbers and save on your taxes, but that’s literally your accountant’s job. And when a business accountant helps you with tax credits and deductions, you can end up saving hundreds (if not thousands) on your yearly taxes.

4. Your business is growing fast—really fast.

So you’ve experienced some rapid growth and all this money is coming into your small business.

Congrats! Now, how do you manage it?

Small business accounting is complex, but it gets even more overwhelming when you serve more customers, take on more vendors, hire more employees . . . It just adds up. A business accountant can keep track of who you owe and who owes you, making sure your cash flow is smooth and steady.

On top of that, a business accountant can help you manage your money smartly so your business makes it in the long-haul. Maybe you’re great at bringing in the dough, but that means nothing if you can’t manage it.

So if you’re bringing in a lot of revenue but having a hard time holding onto that as profit for your business, an accountant can help. By taking an objective look at your costs, a business accountant can highlight areas where you can cut expenses and better manage your money.

5. The IRS is knocking on your door.

It’s pretty unlikely you’ll be audited—there are just so many small businesses and not that many official government auditors. But if you do happen to get audited, hiring an accountant will save you time, money, and stress.

A business accountant can tell you how to work within the auditing process and give you best practices afterward. The government will definitely be watching when the audit is over, so you don’t want to violate any other tax laws.

It’s best to have an accountant before you’re audited because they’ll be well equipped to guide you through the process. But if you don’t have an accountant and the IRS comes knocking, it’s absolutely time to hire one.

6. You need a small business loan.

Okay, you don’t need a business accountant to successfully apply for a business loan. But an accountant can really help you through your business loan application.

Any lender you work with for small business financing will need detailed and organized financial documents. They’ll use this information to decide whether you’re eligible for a loan.

A good business accountant can help you stay on top of your financials when it comes time to apply for a small business loan.

As added perks, a business accountant can…

Answer lenders’ questions about the current state of your financials and your revenue projections.
Show your lender that you’re serious about your small business and that you’ll have the financial capacity to make your loan repayments.

Advise you on interest rates, terms, and conditions that come attached to your loan offer.

7. You’re about to buy a business . . . Or sell yours.

Acquiring or selling a business is a big deal. Both processes require a significant amount of financial planning.

Say you’re buying a business. An accountant can help you dig into that company’s account in detail—finding any red flags before you buy. You’ll want to know the value and ownership of the company’s assets and whether or not the company has any outstanding debt on their books. A business accountant can help you look closely at this.

And if you’re selling your business, a business accountant can make sure your financial records are on track. They can set up statements of your business’s accountants that show how valuable you are to potential buyers. But most importantly, an accountant can help you get all that you’re owed in the selling process. You’ve worked hard to establish your business, so you wouldn’t want to lose any value in the acquisition process.

What’s Next?

As you can see, there are a lot of situations where a business accountant can really help out. When it comes down to it, having an accountant is useful every step of the way.

If you’re in one of these seven situations, or one of a hundred other where you know a business accountant can help, it’s time to speak to the professionals at Louis Mamo & Company. We are available for all of your accounting needs. Call us today at (954) 942-1120.

(Sources: Nerd Wallet, Accounting.com, QuickBooks)