Successful entrepreneurs know the value of a dollar. They spend deliberately; they don’t let a nickel out the door unless they’re sure it’s going to contribute to the business’ success. When you’re starting a new business, you have to maximize profits as well as efficiency.
It can be tempting, when you’re first starting out, to do certain tasks in-house that you’ll probably outsource later on. For example, if you have a little bit of design background, you might create your own website. If you fancy yourself a decent writer, you might create the copy for your business’ online store.
Accounting is one of those areas where it’s easy to skimp as a new business. You put off hiring an accountant until some future date, loosely defined as “when I need one.” Yet, this isn’t always the best move.
Accounting is one of those areas where it’s easy to skimp as a new business.
Here are some compelling reasons why you might want to hire an accountant from the early days of your business:
An accountant can help with entity formation.
For some businesses, a sole proprietorship is perfect. If you’re an independent consultant whose industry doesn’t allow you any opportunity to grow your business beyond what you alone can handle, chances are you’re fine with a simple DBA certificate.
If you’re like most businesses, however, you want to grow. Moreover, you want the tax and personal property protections that can come from forming an LLC or a corporation.
Having an accountant on hand can help you weed through the pros and cons of entity formation in those early stages. She can tell you what makes sense for your business today, as well as what will make sense six months or six years down the road. Not only that, she will help you make the transition from one company form to another in as painless a manner as possible.
An accountant can provide money-saving tax advice.
You’re not a tax expert. If you were, you’d be running a tax business. Instead, you’re good at what you do. While you’re a smart person and can figure out your taxes with the help of some software, chances are that an accountant can identify tax efficiencies that you might miss.
In fact, having an accountant on hand can help you make smart choices from the tax perspective. Because of the complexity of tax law, there are some purchases, for example, that can actually save you money just by making them at the right time.
Your accountant knows what’s going to save your business money on the tax bill. Moreover, he’ll help make sure you’re meeting your tax obligation and not caught unawares with a surprise bill.
In addition, having an accountant through the year will save you money at tax time. Rather than having to try to scramble to get together all of the important financial information you need, your accountant can simply look back through the records she’s created and file your taxes.
In addition, having an accountant through the year will save you money at tax time.
Hiring an accountant now minimizes future accounting complexities.
By bringing in an accountant from the beginning, you’re certain the books are done right. The last thing your business needs is to discover, three years from now when you do hire an accountant, that you have a huge past due tax payment.
Beyond taxes, though, accountants can save you from a number of complex and sometimes-difficult situations. Your accountant will help you:
- Work through payroll issues to make sure you’re handling everything in accordance with employment practices and tax law. This is especially useful if you have a combination of employees and contractors at your business.
- Handle regulatory audits for certain fields. Some businesses have pretty steep financial reporting requirements, and a competent and dedicated accountant can help you meet those regulatory requirements.
- Know whether your business is truly making money. Many small businesses start up and the owners think they’re doing great. They buy more equipment, more inventory, and more advertising. Six months in, they’re deeper in debt than when they first started and sales have actually dipped. An accountant helps you understand the real numbers behind your business, and know whether you’re truly being successful.
You’re good at what you do. You’ve got a great product or service, and you’re willing to do what it takes to make your business to succeed. In order for that to happen, however, you need a system of competent employees, contractors, and service providers. Bringing in an accountant at the early stages of your business just makes sense. It frees you up to do what you’re really talented at: growing your business.
Dominique Molina is President of the American Institute of Certified Tax Coaches, an organization of tax professionals who are trained to help their clients rescue thousands of dollars in wasted tax. In addition to her blogging and speaking engagements, Dominique provides tax training and CPE for CPAs as a registered educator with the National Association of State Boards of Accountancy (NASBA).