Many new small business owners take on the role of accountant during their startup efforts. As there are already numerous demands on the owner’s time, this may or may not be a smart move.
An accountant can be an important member of your business team. Not all accountants are created equally, however.
A capable accountant focuses on the relationship. Find an accountant who is interested in your success and in building long-term clients, and he or she will be even more advantageous to your team. Your accountant should be interested in both your personal and professional financial success. Unfortunately, some accountants aren’t interested in this kind of relationship, and their clients are simply numbers in their practice.
Moreover, some accountants have little or no hands-on business experience and, therefore, lack a broad knowledge base. They may be excellent at crunching numbers but very weak in practical application. Even high-priced firms can make the mistake of choosing an accountant with little input toward the success of the business. For example, they may take profit and loss numbers and produce tax returns with no questions asked. There could be glaring mistakes, but someone who doesn’t care about the well-being of your company may plug them in without any thought.
What role do you need your accountant to play in determining the success of your business? Ask yourself the following questions:
* Do you need assistance determining your business structure — sole proprietorship, partnership, or corporation?
* Do you need guidance in establishing your accounting systems for quarterly and year-end reports?
* Would you like to use a software program for accounting and year-end reports?
* Are you clear about which taxes you need to pay and when you need to pay them?
* Do you need assistance with payroll?
* Will your business require year-end paperwork completed, such as Annual Tax Return Forms?
* Do you understand tax laws well enough to represent yourself if you are audited?
* Do you know how to depreciate your startup costs?
* Do you know how to roll personal property into business property for taxation purposes?
* Will you use your personal home or automobile for business purposes?
* Do you know what expenses are tax deductible?
* Do you know how to keep personal and business expenses separate for tax purposes?
* Will you require assistance in determining how best to equip your new business, whether it be purchasing or leasing?
* Do you truly understand financial statements?
* How will you handle retirement for both you and your employees?
* What health insurance is best for you and your employees?
It’s vital to have not only an accountant on your team but the right accountant. If you are a small business owner who wants to do it on his own, without the involvement of a tax or financial specialist, you may wonder how difficult it is to stay abreast of tax law changes. Moreover, what’s the real cost to the small business owner to do this work on his own?
The longer you’re in business, the easier this gets. However, when a business owner is just beginning, many of the accounting details seem like a foreign language. If you would eventually like to perform accounting functions on your own, find an accountant who’ll teach as he or she smoothes out the financial details.
The better informed client has a much higher success rate. Tax laws do change, but the basic principles of keeping business records remain the same.
If effective recordkeeping is put in place from the beginning, tax law changes are easier to accommodate. Many small business publications, such as the Kiplinger Report, cover tax law changes that pertain to the small business person.
Carol Parenzan Smalley is an educator, innovator, and entrepreneur. She is the creator of and instructor for Creating a Successful Business Plan an online course offered by colleges and universities around the world.