How to Hire a Small Business Accountant

How to Hire a Small Business Accountant

If you are starting up a small business or you have already been running one for a couple of years, you are probably quite aware of the many accounting and finances related tasks that are involved. A number of business owners, especially those who are just starting out, make the mistake of assuming that accounting software can take the place of accountants for their business.

Yes, we do understand that keeping costs under control are really, really important for every business owner. However, you definitely don’t want to be doing your budgeting at the cost of your business, do you? If you do not have the expertise or knowledge to handle accounting tasks and you think that an accounting software can take care of it all for you, you are actually making a rather costly, potentially fatal mistake. The question of how to hire a small business accountant should definitely warrant your attention on a priority basis.

Why accounting software cannot substitute for an accountant?

It is very important for you to understand that accounting software only helps apply knowledge, simplify and automate processes and crunch numbers with ease; it does not have the skills or knowledge that only an accountant can bring to the table for your business. In fact, you should hire an accountant right from the beginning stage of your business because he is one professional who can make a big difference to your firm right from day 1, helping you make some crucial decisions regarding business structure.

Yes, if you have the expertise, you can do your own tax, you can handle your payroll, manage your receivables and debts and ensure that your books are all maintained the way the law requires. However, all of these tasks require the investment of a lot of time and effort. Plus, the smallest error in any of these areas can have a far reaching impact (sometimes translating into irrecoverable financial losses) on your business.

Factor in the number of hours you will be spending on your accounts related tasks and also the risk of errors which will be on the high side if you are not experienced and skilled in this arena. Do you still think that hiring a qualified, knowledgeable and experienced accountant is an unnecessary expenditure that your business can do without? On the contrary, a trustworthy, reliable and skilled accountant may be the most valuable investment you ever make for your business.

What should you look for in your accountant?

Knowing the various aspects in which your accountant can help, gives you better insight into the question of how to hire a small business accountant who is right for your business and who has the right credentials. So, take a look at the various functions that you should expect your accountant to perform for your business:

At the startup stage

At this early stage, the accountant performs a really key role. He gives you guidance on different types of company formations, what are the implications of each type, the benefits you enjoy and taxation rules that apply to various types. He helps you determine which type to opt for, given the nature of business, its size, your future plans and your capital source and division.

Making the business plan

Your accountant also helps you make up a detailed business plan that has all the relevant information for potential investors, your bankers or partners to understand how you intend to make your business financially successful over the immediate future and in the long term. Remember that funding may play a critical role in helping your business achieve its goals, especially in the initial stage and your business plan is a key document that shows third parties how geared you are to take your business forward. Getting a professional to help with your business plan is a smart move indeed if you really want to impress potential financial backers.

Helps maintain the distinction between your personal and business finances

For the small business owner who has a substantial personal stake in his company, keeping personal savings separate and safeguarded from the business finances is a challenging task. The tax implications of mixing up both, the personal financial liability of the owner with respect to business debts- these are just two of the many aspects that are quite confusing to any business owner who is not finance savvy.

Handling financial aspects during operations

Starting from the day to day transactions, to determining the most cost effective third party relationships to tax preparation, payroll management and year-end accounts, a competent accountant can take over many key responsibilities that allow the business to operate without disruption. In addition, the accountant can also help the business owner financially prepare for contingencies, future expansion or capital investment. He can make accurate financial predictions that let the business owner make appropriate decisions for the business’ growth.

Optimally using financial resources

Whether it is investing the available capital in the right business activities or identifying when the business needs additional funds or assessing whether loans can be a viable source of funds, the accountant has the in- depth awareness of the business’ financial strength to give objective advice. By providing updated financial details to the business owner, the accountant also helps in ensuring that the right opportunities are always leveraged to the fullest and all available financial resources used fully to gain the maximum possible benefit from such situations.

Pre-empting and addressing financial problems

A skilled accountant can identify areas where financial issues are likely to arise, well before problems begin to surface. By outlining the right pre-emptive action to take in these situations, the accountant can avert potential disasters for the business.

For a business that is in the midst of a financial crisis, the accountant helps identify problem areas and address them effectively, minimizing the damage. He can tweak the business’s financial plan to address these problems and bring the situation under control. Negotiating with banks or creditors, the accountant can reduce debt burden or tweak the terms of financial contracts with third parties so that the business is empowered to emerge from the crises with minimal impact.

Full time and part time accountants- Which to choose?

The next decision you should make when thinking about how to hire a small business accountant is whether you want to hire a part- time or a full- time accountant. Business owners have good reasons to opt for either.

The part- time professional is the cheaper option because you do not have to pay him a regular salary. You can hire a part timer right when you have special financial needs that you cannot handle on your own (say, at tax time). Also, you can switch accountants until you find the right one for your business since you have no long term obligation to a part time professional.

However, a full time accountant brings a host of benefits to the table that needs to be factored in too. To begin with, the full time accountant has a bigger stake in your business success because his growth hinges on your business success. This means he takes a deeper and more personal interest in giving you the best financial solutions.

Also, he grows alongside the business which means he is fully aware of every aspect of it, which gives him a sound grasp of the business’s inherent strengths and weaknesses. Since he is part of the business over a long term, he can identify potential pitfalls well in advance and take measures to avert problems, thus safeguarding the business effectively. Over time, the full time accountant becomes more of a trusted advisor to the business owners, helping manage the cash flow, maintain the books in complete compliance with the law and evaluating risk objectively.

Tips on how to hire a small business accountant

Your accountant is a key member of your business, an individual who will be playing a critical role in taking your business towards its goals. It is very important to hire a person with the right qualifications and skills and these tips on how to hire a small business accountant to help you do just that:

Ask for referrals

A simple way to ensure that your new accountant really has what it takes to deliver, is to ask trusted friends, colleagues or peers to refer accounting professionals who have given them great service. You can also ask your banker to refer good accountants with sound knowledge. If these are not viable options, you may be able to get referrals from your local society of Certified Public Accountants.

Make a shortlist

Shortlist around five candidates from the referrals you have received and list out their qualifications and other credentials. Match these to your list of requirements and identify the accountants who make the best choices for your business. The fee charged also needs to be a part of your calculations so ask each shortlisted candidate (or accounting service provider) for their pricing and use this to further trim down your shortlist.

If you are looking for an accounting services provider, check if they have the means to address your needs in the future, as well. For instance, if you have plans to acquire another business, check if they have handled such deals before.

Experience with small business accounting

Small businesses have some unique challenges that can make the accountant’s job more complex, the primary one being limited resources both in terms of finances and manpower. Accountants who have worked extensively with such business before are aware of the limitations and have learned to work around them. This can be a valuable asset to you, which is why hiring a professional who has a number of small business clients is a good idea.

Similarly, experience in your specific industry is another advantage for your business. There are two aspects to consider here: One, familiarity with the compliance issues, legalities, special taxation rules gives the experienced accountant greater command over what is happening and what needs to be done.

Two, industry knowledge allows him to understand the dynamics of the business environment and plan ahead accordingly. For example, in an industry where there is seasonal demand the need for capital may keep changing throughout the year. An accountant who is aware of the ebbs and flows because of his familiarity with the industry, is better geared to position the business correctly to take advantage of increased demand at the right time.

Common mistakes to avoid when hiring an accountant

When you are doing the groundwork before hiring your accountant, there are some common mistakes that you should take care to avoid:

• Exemplary qualifications are not enough. The accountant should understand the nature of your business and he should have the ability to communicate easily with you and to help you understand what he needs to express. Open, non- ambiguous communication between business owner and accountant is key to business success.

• Outline your needs first and then look for an accountant who can fulfill those. Doing the process in reverse may leave you with an accountant who can address only part of your requirements.

• Your accountant should be able to give you a suite of services that enable comprehensive financial evaluation of your business. You want him to be able to keep track of how your business is doing financially, where it needs to improve and how. He should proactively identify problem areas and come up with solutions. An accountant who can only respond to situations may not be much of an ally in your long term growth.

• A thorough understanding of the prevailing laws with respect to financial reporting, taxation and all other matters financial is absolutely essential in your accountant. An accountant who only follows orders but fails to take responsibility in ensuring that your business is compliant with rules may become a liability for your business.

Giving due thought to the question of how to hire a small business accountant will serve you well in the future, particularly if you engage a qualified and experienced professional who has managed the financial data of your industry peers. This is not a decision to be made in haste because your business’ liquidity position, financial stability and credibility are all at stake here.

7 thoughts on “How to Hire a Small Business Accountant”

  1. I really liked reading your advice about how accounting software only helps apply knowledge and automate the process, not teach you how to do the accounting yourself. I am sure that for someone transitioning from only managing the finances of a family to managing the finances of a business an accountant would be incredibly useful. Even some citizens who are not business owners could probably benefit from their services.

  2. I agree that, if you don’t have the expertise and knowledge for it, you should find a professional to handle your accounting for your business. It’s important that you have the right information on your finances so you can make wise financial decisions for the business. Plus, a professional accountant can keep your finances in order so that you can take the right steps and risks to help your business grow in the future.

  3. You have some great tips for hiring an accountant. I like how you pointed out that accounting software is not as good as an actual person. Personally, I would rather work with a person, and let them take the heavy lifting.

  4. You made a good point about how accounting software only helps apply knowledge, not actually provide that knowledge to the user. I imagine that especially where business expenses are concerned it would probably be easy for most people to get in way over your heads. If you don’t feel like you have the money to hire an accountant, or that you are still too small scale to justify it, an online service could be a good option for you.

  5. Thank you for you advice about hiring an accountant. I used to believe that accounting software would be good enough, but your article changed my mind. I need a human being there that can help me make important financial decisions about my business.

  6. Thank you for the great blog. I particularly liked what you said about how a small business accountant can actually identify areas where financial issues might occur before they actually happen. This could save a business a lot of money and time. And with how important it is for a business to stay constantly profitable to succeed, having an accountant sounds like an absolute necessity.

  7. My wife and I have looked into starting our own small business, and wanted to look at what options and steps we would need to take if we did start one. I like that you talked about hiring a small business accounting service to help keep your personal money separate from the business money to help with tax implications and other legal issues. I’m going to have to look into what our options would be for small business accounting so we know what the options would be in the future! Thanks for the info!

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