Most small business founders start by wearing too many hats. At some point, they realize they cannot do everything themselves and start delegating. Accounting and finance management is one of the crucial pillars of any business, so it’s hard to overestimate the importance of choosing an accountant. But where do you even start? Right here😊 Let this article guide you.
The role of the accountant
In a business, accountants have three roles: advisory, strategic, and operational. Operational is the daily financial transactions of the company. No matter what type of business you are in, you will need to keep track of cash flow, manage cash and handle the revenue.
Strategic services include long-term planning: developing business plans, financial models, raising capital, and other activities related to long-term business decisions. Advisory services can include tax advice and even merger and acquisition activities.
How to choose the right accountant: outside or in-house accountant
Entrepreneurs who start their own businesses often begin by being an accountant. You will also have to do your taxes and almost everything else. Professional yet easy-to-use software like Fiskl makes it easier to keep track of the finances of a business without a financial background. There comes the point in any growing business when it is sensible to delegate the accounting and tax responsibilities to experts.
Before you can choose the right accountant for you, it is important to decide if you require an accounting firm or an in-house specialist.
Typically the duties of a third-party accountant include:
- Preparation of tax returns
- Preparation of financial statements, including the balance sheet and income statement, as well as the cash flow reporting.
- Analysis or problem-solving advice
Each company is unique. Although a business owner might expand the scope of work to include the recording of transactions, this is usually the responsibility of an “inside” accountant. It is not profitable for an accounting company to do this job. Moreover, modern accounting software facilitates data entry by sourcing bank feeds and matching them with the correct accounts.
An accounting firm will provide an hourly rate schedule. Different accounting functions may have different rates depending on their complexity and the composition of the team working for you.
If the company grows in revenue and transactions become more complex, it may be time to hire an inside accountant. The owner might save money by having some work done in-house, as the fee for an outside accountant increases with the company’s size.
The responsibilities and duties of an accountant in-house include:
- Maintenance of general ledger/charts of accounts
- Responsibility for daily transactions
- Analysis and preparation of financial statements
- Analysis of variance and cost accounting
- Treasury and cash management, including bank reconciliations
- Fixed asset and payroll accounting
Tips for choosing an accountant
Talk to colleagues and professionals about the compensation requirements for different sizes of companies, responsibilities, and industry types. You are adding expertise to the company, so it is important that you identify the best candidate first and address compensation issues later. Performance-based compensation is a better option than a salary that is fixed upfront.
Look for small business experience
Avoid big accounting firms. It is important to find an accountant who can work with small businesses. This could be a bonus if they have experience working with companies in your industry. Some accountants can understand the challenges associated with working with clients in a particular industry over time. An accountant who has worked with many clients similar to you can help you make the best financial decisions for your company’s growth.
Find out which software is used by the accountant
Many accountants have their preferred accounting software. Chances are, they will have been in business for a long time and have developed a preference for one software brand.
This could be a problem. Sharing data may be a problem if your company uses another type of software. It is possible to import and export data in the right format. However, this can lead to delays and errors. You also face the risk of unauthorized access to your financial information when you send data back and forth. Email is as secure as a postcard.
Try to find an accountant who uses the same software. If that fails, find someone willing to learn to use the same software. They don’t have to use the same accounting software for all clients. This is especially true if the software’s interface is simple.
It is best to agree to use cloud-based accounting software with built-in encryption. You won’t need to worry about data exchanging back and forth and will decide on the level of access for every employee.
Select a chartered or certified accountant
Many countries have professional bodies that regulate accountants. These professional bodies oversee accounting qualifications and maintain professional standards. Chartered Accountants and Certified Public Accountants are two possible names for professional accountants, depending on where you live. The highly-qualified professionals, known as Chartered Accountants (CAs), have completed a degree in accounting and have work experience.
A chartered or certified accountant will be able to add value to your company right away because of their greater experience and knowledge. It’s better to have a professional accountant in place early on if your company is going to grow.
It is possible to hire accountants that aren’t chartered, certified, or registered. However, this could be a risky business move. A chartered or certified accountant might not be required for tasks such as tax preparation, bookkeeping, and general financial management. If your business grows or you are audited, you will most likely need one.
Ask the right questions
Many people think that an accountant will only be responsible for tax compliance and annual accounts. But that’s just a fraction of the work an accountant can do for you.
They can help raise capital by helping you find grants, government funding pots, and tax relief programs. They can help you sell shares of the business, crowdfund or locate angel investors. Many people ask, “Can you balance my books?” They should ask themselves: What am I entitled to that I don’t know?
Before you sign the dotted line, it is important to speak with some clients of your prospective accountant. You can find professional services that will help you, but if your accountant is honest, they’ll likely be willing to provide references.
It will confirm the information that the accountant provided. This will allow you to see firsthand the relationship between the accountant and their clients.
When you reach out to referees, be sensible. Do not overwhelm them with too many questions. A telephone conversation lasting ten minutes will tell you a lot more about your potential accountant than a lengthy three-page questionnaire with bland written answers.
Does the accountant’s style match yours? During the recruitment, make sure you meet with people who will actually work with you. Many accounting firms have partners who handle new business and sales, while others take care of the actual account work.
When evaluating their competence and compatibility, ask candidates how they would handle situations relevant to your situation. For example, ask how they would handle an IRS audit to verify automobile expenses. You can listen to these answers and decide if this is how you want your affairs to be managed. It is possible to have an accountant that takes a different approach. Still, you must be sure the accountant will not pressure you into doing something you don’t like.
You will need to have different qualifications depending on the type of accountant that you are looking for. Accounting clerks must hold a minimum of a high school diploma. They also need to have on-the job training. A bachelor’s degree is required for an accountant. CPAs must hold an accounting degree with additional certifications.
An accountant should have a solid understanding of accounting software, tax laws, and core business processes. Pay attention to how an accountant communicates when interviewing them. An accountant may need to interpret documents for you. While it is important to crunch numbers, the ability to suggest cost-cutting strategies and articulate them in a jargon-free way is also valuable.
The digital age opened up new possibilities for faster and easier information handling, but it also introduced new threats and risks.
Look for someone who takes proactive steps to ensure that clients’ sensitive information is kept safe. Are they able to use encryption software to protect your personal information? What is their data security and integrity policy? Your CPA must ensure that security is guaranteed to be “airtight” with very low risks of breaches. Fiskl, an encrypted cloud accounting system, will meet all security requirements.
Determine how accounting work will be split
Accountants might take care of all aspects of bookkeeping and accounting operations. In most cases, you can simply bundle your invoices and bills together and hand them over to the accountant. Would it be the best of your money and their time?
Accounting firms often charge hourly, and asking a CPA to do the data entry is an overkill. If you can, take more control and be involved in the accounting process. This will allow you to have a better understanding of your expenses and revenues and give you an early warning about potential problems.
You might decide to do the basics in-house and then give the work to your accountant. They can then handle more complex tasks like bank reconciliation, tax return forms filling, payroll, and capital depreciation calculations.
You will find it easier to use accounting software. Your authorized employees will be able to record their expenses, and the system will automatically match the income with the corresponding account using bank feeds. All these inputs will be included in accounting reports in real-time, and your accountant will only need to analyze and interpret the data.
Work with your accountant
Your accountant should be a trusted partner. Engage them during the initial stages of business planning and when you are facing a major setback. A sector-specific accountant is especially valuable for identifying risks and making recommendations about where your business could improve its margins or secure financing.
A good accountant can spot mistakes in your business plan and help create new financial scenarios. A good accountant can be a sounding board for you when you’re considering new developments or changes.