Does Every Small Business Need an Accountant?
As a business owner, you may not have the time to handle the accounts of your new small business: HR, payroll, taxes... the list is endless. That's why you may want to get sccounting off of your plate while you run your business.
For many small business owners, accounting is intimidating. Without a degree in finance, it can be difficult to understand and the cost of making mistakes is high. After all - the IRS isn’t known for being forgiving!
So we've established you need help with accounting. But what type of accounting, and where would you find help? All the answers are below.
What can an accountant do for your small business?
An accountant’s responsibilities are often confused with those of a bookkeeper or CFO, which can lead to some mismatched expectations between the business owner and accountant. To help clear up who does what, here are the main differences among these three groups:
1. BookkeeperA bookkeeper’s primary responsibility is to ensure that every transaction (income and expenses) is documented and classified properly. They do not usually create financial reports or offer any analysis. Instead, their role is to keep the books organized.
2. AccountantAn accountant will take those organized books and use them to create financial reports. If a business owner is looking for a loan, accountants can provide the potential lender with all the financial information they request. They also often handle tax filings for their clients.
3. CFOThe role of a CFO is mostly analytical. They have the chops to create financial reports themselves, but they will mostly be looking at what those reports show and will use that information to help drive strategy.
Starting with these basic expectations can help business owners decide which route is best for them when it comes to bringing in some accounting help.
5 accounting options for you to choose from
Luckily for small business owners, there are many options for getting the accounting help they need, ranging from an in-house accountant to an automated software solution. Here are the pros and cons to consider for each option.
1. Dedicated Accountant
The more complex your finances, the more important having someone that you can talk with every day and ask questions of may become.
However, be aware that if you’re looking for someone to take on both bookkeeping and accounting work, you’ll need to set clear expectations during the hiring process.
Another factor to consider is cost, which can be prohibitive for many small businesses.
2. Outsourced Accountant
If an in-house accountant falls outside of your budget, outsourcing accounting work may be a viable alternative. Going this route, you’ll work with an accountant on an as-needed basis and will likely pay them an hourly fee.
For business owners who mostly need help come tax time, this solution can be ideal.
The downside, however, is that outsourced accountants have many clients. You can’t pop over to their desk and ask them a question, nor will they have an in-depth understanding of your specific business.
3. Fractional CFO
Like accountants, CFOs can work in-house or as outsourced help, also known as fractional CFOs.
They can help with things like creating forecasting models or building a budget, in addition to helping you review those financial reports.
Because it is a specialized skill, hiring a fractional CFO usually comes at a higher hourly rate than an outsourced accountant. And if you also need help with bookkeeping, it’s unlikely they’ll cover that.
4. Accounting Software
Often the most cost-effective option on the market is accounting software. While software doesn’t allow for human interaction or for someone to bounce ideas off of, it does work 24/7.
So if a question about your finances comes to you at 11:00 pm, you don’t have to wait until 9:00 am the next morning for answers.
Best of all, software speeds up the accounting process. Thanks to automation, your bookkeeping will always be up to date and the month-end close can be wrapped up in a matter of days.
This means that your financial reports will be in your hands sooner and that other important metrics can be tracked throughout the month.
Does your small business need accounting help: Conclusion
Accounting must be handled with care and accuracy, but that doesn’t mean that every business needs a full-time accountant.
Small business owners should first evaluate and understand their specific needs and then find a solution that meets them, exploring all their options from outsourcing to software along the way.