What are small business accountants?
Small business accountants do a lot, such as:
- Organize, record and interpret financial data, including day-to-day transactions and big-picture plans.
- Prepare taxes, budgets and other financial projects.
Most small business owners initially hire an accountant for challenging tasks like taxes and then hire an accounting firm for additional tasks.
Many small business owners use the terms bookkeeper and accountant interchangeably. But you need to know the difference if you’re hiring for your business.
Accounting is a broad term that includes many financial tasks. Bookkeeping is a subsection of accounting focused on daily financial operations like bills, invoices, payroll, expenses and more.
Accountants can be CPAs, meaning they’re certified by a state board and they’ve completed legal requirements. Being a CPA means that you can legally take on responsibilities and be held liable for professional misconduct.
“For example, a CPA designation allows such professionals to provide tax consulting services, auditing and review and financial planning advice,” says Ines Zemelman, founder and president of TFX. “The CPA label matters and it’s highly recommended that small business owners work with CPAs.”
Small business owners are bookkeeping when they use daily transaction tools like QuickBooks or FreshBooks.
What does an accountant for a small business do?
Michael Nova, the small business owner of Nova Custom Label Printing, says, “As a small business, we can take care of the daily finances through QuickBooks; however, when it comes time for taxes, we outsource to an accountant.”
If they had the additional budget, says Nova, they would increase their accounting services to include bookkeeping.
What you choose for your business will vary based on your budget and needs. These are some examples of tasks you can outsource to an accountant for small business:
But, as John Frank, CEO and founder of Third Road Management, explains, accountants are diverse and fill many needs. It’s not likely you’ll hire one person to fulfill your accounting needs.
“If you hear a business owner say something like, ‘I need to talk to my accountant,’ they are generally referring to their external tax advisor, not their internal controller or staff accountant that runs the books for their business.”
Do I need a small business accountant?
Nova believes that any small business owner can manage daily bookkeeping, but business owners need to recognize when they need help.
“You might already have enough on your plate just running your business and keeping track of everything through software. Taxes are an undertaking that is just too time-consuming for most business owners.”
Nova feels that a small business accountant helps his business. “Hiring an accountant allowed me to focus on my business, save time and ultimately grow my company.”
Zemelman agrees that you should get help with accounting for your small business. She says your first priority should be getting help with small business taxes.
“The U.S. tax code is complicated, and most business owners are not tax experts. Misunderstanding tax regulations may lead to severe legal issues, audits and debts.”
What’s the cost of an accountant for a small business?
Costs vary depending on the role of your accountant, the size of your business and the complexity of the task. Michael Nova pays $1500 a year for an accountant to prepare his small business taxes.
John Frank says that if your business is small (less than $1 million in sales) and you don’t require a lot of tax strategy, it may be worthwhile to be budget-conscious when looking for an accountant.
But he suggests that good accounting services can pay for themselves. “You’ll get what you pay if you hire a strong firm that can provide you with tax strategies that more than compensate for the incremental cost.”
How do you hire an accountant for small business owners?
When you look for an accountant for a small business, you can ask for referrals from other business owners or read reviews to find a service provider online.
“For instance, if you own a retail store, as long as the accountant has experience with any type of retail, that would be helpful. There are many different types of retail shops, so the chance for conflict would be small,” advises Nova.
Then, narrow down accountants by size. John Frank believes you should try to be the small fish in a big pond. “Larger firms generally will have more in-house expertise, better processes and technology, redundancy in the event of turnover, a better commitment to continuing education and more.”
But you shouldn’t settle for bad service. “If you find yourself in a situation where people aren’t paying attention to you, that typically means that you should find a slightly smaller pond where you can get the attention you deserve.”
Accountant Ines Zemelman encourages small business owners to shop around and carefully vet their accountants. “Many tax firms, attorneys and individual professionals offer free discovery calls where you can discuss your needs and get an initial consultation.”
10 questions to ask small business accountants
Here’s what to ask a prospective accountant before hiring their services:
- What will you do daily, weekly, monthly, quarterly and annually for my business?
- What specific accounting services do you offer? Can you handle payroll, tax preparation and bookkeeping needs at the same time?
- Do you provide any tax planning services beyond accounting?
- Do you use accounting software?
- What does communication with your clients look like?
- Can you provide an estimate of the costs for the services we require?
- Do you have any testimonials or case studies demonstrating your success with small businesses?
- What strategies would you suggest to minimize the tax burden in our industry?
- How long is your relationship with clients?
- Do you handle long-term projects?
