By Meredith Wood, Fundera
If you're a business owner with some knowledge about tax law and you have accounting software on hand, it's possible to run your business without an accountant – up to a point. As you continue to expand, you will need to bring someone on who's dedicated to keeping track of your company's financials and taxes and can provide you with valuable guidance as you focus on growing your business.
We'll take a look below at the seven signs that it may be time for you to turn to outside help in handling your company's finances.
1. Bookkeeping Distracts You from Other Tasks
It may be possible to manage your bookkeeping when you're first starting out with the help of an accounting software program like QuickBooks. However, as you continue to expand, there will come a time when accounting matters are distracting you from your role as leader.
If you're not sure you're ready to hire an accountant, think of it this way: What is your time worth? If you value your own time at $100 an hour, and you're spending 10 hours per week on accounting matters, that's $1,000 spent per week on accounting, plus a loss of your time and attention on big-picture matters.
This sort of simple calculation might be a sign that the cost of hiring an accountant is well worth it.
2. You've Recently Experienced Rapid Growth
Every business owner is looking for this kind of success, but with rapid growth comes a need to quickly meet that new demand. And with that need comes more staff, more inventory, more internal systems and processes, and a leader who's focused on keeping ahead of the expansion. All of that leads to more paperwork and number crunching, too, so it's helpful to have someone on hand whose sole focus is keeping all the financials in line.
3. Your Revenue Is Increasing, but Profit Isn't
Accountants are skilled at taking an objective look at your finances and offering suggestions on how to make changes that will best suit your business. If you're making more money than ever but aren't seeing a leap in profits, there's clearly something that you're missing in your company's financial picture. An accountant will help you diagnose the issue and develop solutions to move the needle in the right direction.
4. You Want to Expand Out-of-State
Even if you have a solid handle on tax laws in your state, once you move beyond your state's borders, there are all new rules and regulations to think about. Whether you want to distribute to a new state, hire employees from out-of-state, or open a new location elsewhere, an accountant can make sure you are compliant with sales, income, or payroll tax-reporting requirements.
5. You're about to Make a Large Purchase
There are all sorts of large purchases or investments a business owner might need to make, such as equipment or real estate. If you're feeling unsure about the best solution for your business –whether to buy or lease, how to finance this big purchase – an accountant can provide a calculated second opinion. They'll assess your business's current financial situation and provide guidance about how much you can afford to spend.
6. You Need Professional Financial Reporting
If your business is at a point where you're looking for loans or investors, your company's financial history will be a key portion of the loan application or investor proposal. You'll want reports that are professional and provide all of the relevant information, and an accountant can ensure you're not missing any critical pieces or parts.
Additionally, if your company has already secured investors, you'll likely need professional financial reports on an ongoing basis to share with those individuals.
7. You're Being Audited
Tax audits are stressful, and they mean a lot of paperwork and communication with the IRS. If you're facing an audit and don't already have an accountant, this is definitely the time to bring one on. An accountant will help you wade through your paperwork, identify and organize the information you need to satisfy the IRS's inquiry, and can even liaise directly with the IRS on your behalf, freeing you up to continue to focus on the day-to-day of running your business.
There are a number of signs that it might be time for you to bring on an accountant for your business. However, if you're at a point where you're not able to hire someone full-time or on retainer, it's still a good idea to find an accountant that will charge on an hourly basis so you can get their valuable advice and avoid financial mistakes that will cost you down the road.
About the Author
Meredith Wood is the head of content and editor-in-chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident finance advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.