10 Signs That You Need an Accountant for Your Small Business

When running a small business there’s a tendency to do as much as you can yourself. After all, hiring people costs money and all businesses are aiming for as much profit as possible.

When it comes to managing the books it’s always worth giving it a shot yourself, but there are also some clear signs when you should probably hire a professional accountant. Here are 10 of the most common:

1) You’re Writing a Business Plan

The first time you should probably seek the expertise of an accountant is before you’ve even launched the business when you’re creating the business plan.

This doesn’t mean you have to retain their services; but if you want to create accurate financial projections and other financial reports, so you can plan ahead realistically and present your findings professionally – then you should definitely get an accountant’s input for this early stage.

In fact, it could even save you money in the long run if you’re forced to reassess your plan due to poor accounting later on.

2) When It’s Become Too Time Consuming

It may be that you’re able to handle your accounts just fine, but the act of doing them is becoming too time-consuming and taking you away from other aspects of the business or even your family life. Nobody likes working all week and then spending Sunday doing the books.

In this scenario, you will have to decide where the line is in terms cost and time. In some cases having more free time might allow you to develop other revenue streams or improve the business in some way.

3) If You Need Legal Guidance About Business Structure

Accountants don’t just do sums, they also have detailed knowledge of different business structures and how they function from a legal standpoint. They, therefore, might be able to advise you on whether operating as a sole trader would be more beneficial than operating as a limited company, both in terms of tax, other financials and your liability.

For example, a sole trader is personally liable for certain business debts, whereas a limited liability company is limited to the assets of the business itself.

4) If You Become Unsure

As your business grows and expands your accounts are likely to become more complicated and you run the risk of making errors if you don’t hire a professional. Not doing your tax properly can have serious repercussions, so if at any time you are unsure, you should always contact an accountant – even if you just need something clarified.

You will end up having to spend more money in the future if something goes wrong now, especially if you’re slapped with fines or just completely mishandled the business’ finances to your own detriment.

5) You’ve Experienced Rapid Growth

Perhaps you’ve ‘caught lightning in a bottle’ and your business is rapidly growing. Even if its core function remains the same, the added revenue, employees, and other growth areas are also going to lead to more paperwork; making your accounts more time-consuming and difficult to manage.

Rapid growth periods also bring an element of risk. Can you keep up with orders? Is everything scalable? Your accounts need to be in professional hands while you carefully monitor and manage all the other areas of your business.

6) Your Profit Has Stagnated

A good accountant will not only crunch numbers but can also help you determine what those numbers mean for your business. For example, maybe your profit has stagnated even though revenue has remained the same or even increased.

They will be able to help you assess which expenses are the problem and where adjustments can be made.

7) You’re Struggling to Pay Creditors

If you’re struggling to pay creditors or you’re in a personal financial situation because of putting your own money into the business, an accountant can help you get a handle on the situation. They might even be able to help you manage your private bills and debts.

8) There Are Investors to Impress

It’s perfectly fine doing your own accounts and scribbling down your projections and plans when you’re the only investor, but what if you’re looking for outside funding?

An accountant can create all the key reports you need to professionally present your business financials to potential investors. Then once you have investors, you will need to keep them updated in a similar manner on a regular basis.

People aren’t going to part with their money if they aren’t given clear and accurate reports.

9) Expansion

Expansion can be an arduous process. Not only is your business itself getting larger and more complicated, but if you’re looking to operate in more states you will have to comply with local tax requirements. Therefore it is highly likely that you will need to hire an accountant to ensure your sales, income and payroll tax-reporting is up to scratch in each region you plan to move to.

10) The IRS Is Auditing You

Being audited by the IRS doesn’t necessarily mean you have done anything wrong or they suspect you of breaking tax laws, but it does mean you have to get everything right from that point onwards.

If you don’t have an accountant already, hiring one will make the process run smoother as they will know what documentation to prepare and how best to comply with the IRS’ requests.

They will also coach you on what to say and do in your interactions with the IRS, as it’s easy to get confused.

You might also consider hiring a tax attorney if you believe legal action might be taken.

Ultimately your accounts are the backbone of your business’ financial status. They can give you a snapshot of today and help you plan into the future. It is also a legal requirement for your accounts to be accurate. With all that in mind; if you can afford to hire an accountant then you definitely should.

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