This week I’m featuring a reader’s questions about when to get an accountant, and what that process might look like.
Today’s question comes from a reader who runs their own virtual assistant company. They’ve recently started their business, and want to make sure they’re making all the right choices:
Thanks for your help. As I mentioned, I’m just starting out and I think I’ll need an accountant but I’m not sure what they do/what they’ll help me with and why I should have one (I mean, I *know* I need one, but I’ve been filing my own taxes for years so I don’t see why I need to bring one in now), what those first steps for getting an accountant would be, and what the ongoing relationship would look like. I’m nervous about paying a lot of money for someone who won’t be able to do more than I’m already doing. Is it worth it?
Alright, let’s dig right in.
What will an accountant do, and why it’s good to get one:
An accountant will help you choose the right business structure for your business (S-Corp, LLC, sole proprietorship, etc.), and set up the framework for all of your accounting. A good accountant will take the time to explain why this framework is important, and what all of the basics mean, which helps you become a smarter business owner. The accountant should also cover how to appropriately track all of your expenses, and what is and is not considered deductible. And of course, they’ll also file your taxes (which may include quarterly estimated tax payments), remind you of all of the important deadlines, help analyze your financial information, and more. (I’d also like to add that it’s very important to open a separate checkings account for your business and make sure that your business and personal expenses are separated. This is especially important in case of an audit.)
About Money has a great list of what an accountant can help you with as your business gets off the ground and continues to grow:
- Help ensure that your independent contractors are classified as such (and not employees) by the IRS
- Explain your financial statements so you can understand the ins and outs of your business
- Oversee company payroll and payment processes
- Provide advice on estimated tax payments you should make during the year
- Determine when, and to whom, you should send W2 and 1099 forms
- Close out your books and create financial reports at the end of the year
- Compile and submit your taxes, financial reports and all necessary paperwork to the IRS
What are the first steps to hiring an accountant?
The first step is to find someone you feel comfortable with and want to work with. It doesn’t help you or your business if you don’t feel comfortable reaching out to your accountant to ask a question, especially if you don’t feel confident in their skills. Ideally, they will be familiar with your type of business (if not virtual assistant work, then someone who is familiar with companies that solely exist/run their business online). Ask other small business owners you know who their accountant is and if they like working with them. Do some Googling/Yelp-ing, look at the accountant’s testimonials and reviews, and reach out to them to see if you can meet either by phone or in person.
What does an ongoing relationship with an accountant look like?
It varies. Typically people will reach out to their accountant if something comes up in their business and they’re not sure how to process it within their accounting system. Most people only connect with their accountant on a quarterly or bi-annual basis. It’s good to review your business and financial goals with your accountant every year, as they’ll be able to help you set up a plan for that and help you achieve your goals through your business.
Is it worth it?
YES, ABSOLUTELY! Not only can accountants help you in the case of an audit, but they also know what to look for and what is out of the ordinary. They can make sure that you’re paying the least amount of tax possible within the bounds of the law (I feel this is where I really get the bang for my buck). With their analysis, they can also suggest areas for growth or improvement within your business (like cash flow management, or helping to prepare for a business loan). If you’re concerned about spending too much money, consider this closing thought from About Money:
You can opt to hire an accountant for all of your financial activity, or you can choose a combined approach that limits his or her hands-on activity, reducing the expense. For example, you can hire an accountant during the start-up phase, and have him/her handle your annual reporting, but work with a bookkeeper to manage your books on a regular basis. In fact, a bookkeeper and an accountant can form a very efficient accounting team for your small business.
I hope this helps answer your questions and inspires you to find a great accounting partner for your business.
Do you have a burning accounting or bookkeeping question that you’d like answered, or featured on the blog? Submit your questions to firstname.lastname@example.org!