Numbers are an important part of business. To get a grasp on your small business financials, should you hire a bookkeeper, an accountant, a controller, or a Chief Financial Officer (CFO)? Each professional may be used at some stage of your business lifecycle. When is the best time to hire each type of professional?
The financials of your small business at any stage, provides a performance management tool to aid you in making the right decisions to maximize profitability, handling the cash flow, and providing a competitive benchmark. The world of business finance can be complex and confusing. It’s often easier to put aside the important numbers early in the game and do the more “fun” aspects of business building.
Seasoned entrepreneurs know the impact a financial system has on a company’s success rate. Over 28% of businesses declaring bankruptcy cite problems with the financial structure of the company as the main cause of failure, according to a Small Business Administration study, “Financial Difficulties of Small Businesses and Reasons for Their Failure.”
While there aren’t any clear-cut rules on when to hire or expand your team, consider the following guidelines to help make your decision easier:
When to Hire a Bookkeeper
Company Start-up: A bookkeeper’s services make sense for average start-ups with no plans on building an empire. A bookkeeper on your small business team will help you start off with a good record keeping system, handle financial transactions, and produce financial statements.
Lack of Numbers Understanding: If cash flow planning and balance sheets make your head spin, you need help. Enlisting the services of a bookkeeper can help you gain a basic understanding of the financial aspects of running a business.
One-Person Company: A home-based lifestyle business will have a need to keep expenses low. The cost of a full time professional on a monthly basis can be too much for a small one-person business. Either prepare the books yourself or have a bookkeeper involved in the process. Use the accountant for your year-end tax planning.
When to Hire an Accountant:
Adding Employees: At one point in your business life cycle, you’ll consider growing beyond the one-person operation and building a staff. Hiring a pro for your small business team will help with all financial matters including: advice on payroll, staffing costs, and ideas to improve your profits.
Changing Business Structure: Hiring the services of a pro is helpful when making the decision to change your company ownership structure. They can help guide you through the financial and tax implications changing from a sole-proprietor or partnership to a corporation or a limited liability corporation.
Outside Financing: When your small business is looking for outside capital such as a bank loan, it is advisable to use the services of an auditor. Having your financial statements put in order by a professional can aid in the loan approval process.
Complex Billing: Any business with a complex billing cycle and account management will often require the experience of an accountant over a bookkeeper or the owner. Your accounting professional can aid in the management of cash and billing to keep your company on stable financial ground.
7 Questions to Ask Before You Hire an Accountant
1. How many years have they been in business?
Considering the myriad, ever-changing tax laws and complex accounting rules, a minimum of five years is a good benchmark.
2. How many years experience do they have in your particular industry?
Some businesses have specialized rules, such as restaurants and retail in general. Does the accountant have several clients in your field?
3. What is the company’s average response time?
Accounting questions often weigh heavily on a business owner’s mind, making a speedy response imperative. You should get a return call within a day and an answer in two to three days.
4. What is the firm size?
Even though some large firms handle small business, you may not get the kind of attention you want. “Sometimes in larger firms, you don’t get the same contact person each time you call and there is a higher threshold for imbalances,” says Stevens. “While a $10,000 discrepancy is big for a small business owner, it’s often not seen as that remarkable by a large firm.”
5. What does your banker and/or attorney have to say about the professional that you have chosen?
Bankers and lawyers are aware of effective professionals. Bank personnel regularly review financial statements and recognize good reports.
6. Are they familiar with your computerized accounting system?
The accountant who knows your system can work on your books and quickly ship them back to you.
7. Are you comfortable overall with this professional?
It’s important that you feel at ease with your accountant, believe in his or her ability and know that your business and financial goals are understood.
If you want to get a little more information about tax strategies for your business, and hiring an accountant for your business, go to:
by Sam Leccima and Shani Leccima