Welcome to our weekly Buyers Guide series where we share everything you need to know about specific business purchases, the questions to expect, and the questions to ask. Let’s start with how to choose an accountant for your business.
Accounting is no easy task for businesses, and yet, it’s incredibly important. Rarely is it advised to do your own accounting as you grow – most businesses require the support of an accountant or at the very least, intuitive accounting software. Accurate accounting and reporting will help you make smart business decisions and improve overall cash flow – something that all businesses at various stages of growth need.
WHY YOU NEED AN ACCOUNTANT
Accounting needs vary for every business at different stages of growth. However, accountants can take a lot of work off your plate, such as expense tracking, financial planning & forecasting, month-end accounting, payroll, tax preparation, W2 and 1099s, audit support, pricing, cash flow analysis, and creating a budget. Additionally, you’ll need high-quality financial reports for various purposes: tax reporting, as well as when you attempt to raise financing, debt, or equity funds. Investors will look at your financial situation, with standard industry reporting expectations, to understand the health of your business. An accountant can help you maintain and present that level of reporting.
WHY YOU NEED AN ACCOUNTANT NOW
Every business is different, and depending on your level of accounting savvy-ness, when you need third-party support can vary. Generally speaking, there isn’t necessarily a bad time to get accounting help, as it can always help to sort and manage your finances, but there are certain periods of growth where hiring an accountant or robust accounting software is advised. For example, if you raise outside funding ($500k is standard) or your expenses increase with new employees, etc., you’ll want help handling cash flow and understanding burn rate.
IMPORTANT ACCOUNTANT CONSIDERATIONS
If you’re wondering whether your business needs help with accounting, you probably do in some way. Ultimately, you want to be able to focus on your core business such as growing a product and team – let experts handle your finances. We can help you determine the level of accounting needs for your business that match your budget, growth strategy, etc.
Here are top considerations throughout the accounting purchasing decision process:
Questions to ask the accountant:
- Do you have relevant experience?
- What size business do you typically service?
- How responsive are you?
- What are your contract terms & conditions of service?
- What services and reporting are covered under this agreement?
- Do you charge for basic advice?
- Are you equipped to help me with a financial plan or business model down the road (or now)?
- Can they handle tax advice, compliance and/or planning?
- Do they provide auditing support?
- Can you get an estimate on annual costs based on the services you’ll need?
Questions the accountant will ask you:
- Do you have a business plan?
- How do you track transactions?
- Which financial solutions do you currently use? (Stripe, Quickbooks, etc.)
- Do you need help understanding your cashflow?
- What is your legal structure?
- Have you completed and filed all the appropriate legal documents for your business? Be prepared to share or complete all required legal documents, especially for tax season.
- How do you handle payroll?
Again, this depends. Accounting software can be free and up to hundreds of dollars per month, depending on the functionality of the solution. Handling your own bookkeeping & expense tracking will keep costs down. Otherwise, the cost of hiring an accountant can vary based on the hourly or monthly rate of the accountant, as well as your business size and the volume of transactions or financial accounting activities they will be expected to manage. Firms typically charge by the hour with fees ranging in the $100-400 range. However, others work on a monthly retainer. Additionally, CPAs (certified public accountants) will have much higher rates. An accountant with a higher rate is likely for good reason due to their experience, reputation, response rate, and level of attention given to clients.
As mentioned above, this varies. Accountants will charge you based on your returns & statements they’ll need to prepare for you and can charge fees on an hourly or monthly basis. Ensure you have face-to-face time worked into the contract so that you can learn from them the ways to cut costs, go over problems, etc.
Are they available to you when you need them? Some accountants work business hours only, others might be available to you after hours and on the weekends. When speaking with references, inquire about their level of satisfaction with customer support.
Ask for the ability to speak with businesses in similar industries, of similar size, and with similar accounting needs. If possible, try to identify a client that they don’t list as a reference to perhaps learn some of the downfalls with the firm.
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