When to Hire an Accountant for Your Small Business

When to hire an accountant

Before we start discussing accounting, let’s try a small allegory. Think of a NASCAR sportscar. It’s an advanced piece of engineering; it can yield extreme performance when you need it most—at winning races. Could you use one to commute to work? Technically yes, but that would be a… sub-optimal decision.

Professional accountants can join your team at different stages of your small business lifecycle. They can help not only with day-to-day record keeping but also offer in-depth financial insights by providing advice around tax deductions, handling business audits, and accessing financing. This article will discuss scenarios when hiring an accountant makes the most sense.

When Do You Need an Accountant?

Let’s start with the simplest scenario of not becoming a lunatic driving a NASCAR sportscar to the grocery store. Suppose you’re a solopreneur or run a small business without the ambition of overtaking Bezos on the Forbes list. Or you even might have that ambition, but for now, you’re just starting the business in your garage. If this is you, most probably, all you need finance-wise is to keep your books clean and accurate.

You could certainly delegate this task to an accountant, which would be a bad value/cost ratio. Alternatively, you could manage your accounts yourself. The advent of accounting automation software has made it easier for non-experts to track finances for their businesses. Modern accounting software can take many processes off your shoulders. For instance, you don’t have to bother with double-entry of all transactions, and the reconciliation can happen automatically. You don’t even have to know what reconciliation is!

Accounting for non-accountants

Connects to your bank, automatically tracks and categorizes your business expenses, and matches revenue with invoices.

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Still, there are plenty of more sophisticated business scenarios than just being reluctant to do anything related to finances yourself. So when do you NEED an accountant? Let’s take a look at some signs that it might be time to start thinking about outsourcing your startup accounting.

Your business is growing

When you’re experiencing rapid growth, it comes with a need to meet that new demand quickly. That means more staff, more internal systems, new processes, and more inventory, which leads to more paperwork while managing your accounts. Then it can be helpful to hire an accountant whose sole focus will be keeping all the financials in line.

Your revenue is increasing, but profit isn’t

Are you making more money than ever, but there’s no leap in profit? It’s a common warning sign that you’re struggling with accountancy processes or are missing something in your company’s financial picture. An accountant will help you diagnose the issue and develop efficient solutions to get your business finances back on track.

Getting investment or business loans

Your business’s financial history will be a key part of the loan application or fundraising. You’ll need professional reports that provide all of the relevant information. An accountant can work with you to put together an application and any supporting paperwork and ensure you’re not missing any critical pieces.

Why Do We Need Accountants?

Accounting is not all about counting money as many people think. You can do the accounting yourself for the sake of staying compliant. You may want to hire an expert to help with managing finances rather than keeping records.

An accountant can help you with data management, financial analysis, generation of financial reports, cash flow forecasting, and dealing with your taxes. They can also interpret your financial data to help you make better business decisions and ensure that your company meets regulatory compliance with its accounting practices. Accountants can even provide business consulting and advice to support your business strategy and your company’s financial health.

If your financial management requirements fall in the bucket of invoicing your clients, keeping your expenses under control, and keeping your books updated—hiring an accountant is an overkill. Using a finance management app is a much better choice in this case.

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Invoicing, expense management, accounting, time, and mileage tracking all in one app.

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Why Hire a CPA

Most people use the terms “accountant” and “CPA” interchangeably, but there is a big difference. A Certified Public Accountant (CPA) can deliver a higher degree of accounting expertise than an accountant. CPAs are required to pass exams and meet educational, statutory, and licensing requirements. They are also state-certified to possess up-to-date knowledge of tax codes and processes and applicable legislations.

So why hire a CPA? These professionals perform most of the same duties as accountants—business advisory services, accounting and recordkeeping services, and tax advice. But they can also represent you for tax purposes, so you’ll feel more protected during a tax audit.

Closing thoughts

There’s no such thing as a good and bad business tool. It’s about understanding the business need and finding the optimal solution. If your business is going through the growth turbulence or you’re looking for insights on improving financial performance—hiring an accountant is a sound decision.

Consider using finance automation software to free up your time from doing routine finance tasks like invoicing, managing expenses, and keeping records in the books. You would be surprised with the efficiency of modern solutions coming at a fraction of the cost of hiring an accountant.

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