According to the latest Small Business Accounting Report survey by Wasp Barcode Technologies, only 40 percent of small business owners (SBOs) feel they are extremely or very knowledgeable on accounting and finance matters. So, it’s no surprise that accountants are ranked as the most important professional to SBOs over attorneys, bankers, technology firms, and more.
But did you know your accountant can do a lot more for your business than keep the books, file your taxes, and help you out in the event of an audit?
In this installment of our Small Business Guide to Accounting we offer eight fresh takes on what an accountant can do for your small business…and what they can’t.
Don’t Just Get Help with Tax Preparation, Get Help with Tax Planning
The top reason that small businesses turn to an accountant is for tax preparation. 71 percent of SBOs outsource this core accounting service. Yet, only 30 percent turn to an accountant for tax planning advice.
Tax planning can help you review your tax options and determine such things as when, where, and whether to conduct business transactions so that your taxable income is reduced, tax rate is lowered, and some taxes eliminated.
Planning is an ongoing process. Your income and expenses change often and meeting with an accountant regularly can help you take full advantage of tax provisions, credits, deductions, etc.
When You Need Advice About Your Legal Structure
As your business grows, the legal structure that worked for it in the past may not be the best one going forward. For example, 70 percent of U.S. businesses operate as sole proprietors.
Although it’s the easiest to operate, a sole proprietorship doesn’t afford protection for the business owner from any debts, losses, or liabilities incurred by the business. There are tax considerations to your choice of business structure too. An accountant can help you decide which structure is right for your business today and for the future.
When Payroll Preparation and Compliance is Getting You Down
Payroll is another common part of business finance that’s outsourced, 50 percent of SBOs turn to their accountant to help with this important task. And for good reason, payroll taxes are one of the biggest areas of non-compliance among businesses, and the fines can be costly.
An accountant can help you comply with payroll taxes, government paperwork, and insurance requirements, but they can also help monitor payroll so that you can see the ratio of salaries, etc. to total revenue.
If you’re struggling with payroll or your business is growing, it’s time for a chat with your accountant.
Fixing Cash Flow
Cash flow is a delicate balance that depends on the timely influx of cash in and out of the business. However, it rarely goes that way. Late paying clients, unexpected expenses, poor cash management, can all wreak havoc with your cash situation.
An accountant can help you get to know the cash flow trends that your business experiences. They can monitor the ebb and flow and help you predict when a cash flow crisis might be imminent and help you take steps to mitigate.
All SBOs carry debt, but there’s good debt and bad debt and your accountant can help you see the difference and come up with financing and repayment strategies to help you take care of toxic debt.
Developing a Budget that Works
Budgeting is a hit and miss exercise that can be hard to master without proper help. An accountant can help you go beyond assumptions and estimates and establish a solid base of accurate numbers that reflect your business goals and that are easy to work off. They can even help you eliminate unnecessary costs.
Your budget is your springboard to understanding how much you can pay yourself, what you have to invest, and the real cost of doing business—don’t overlook the importance of proper budgeting.
Preparing Your Business for Growth
Growing your business comes with all sorts of financial implications. Can you afford to hire and train new staff? What kind of job function is ripe for a hiring investment? An accountant can help look at the big picture and work out the cost of hiring and advise what you can afford.
Growth doesn’t come without an injection of funds. A good accountant can also help you pull together your books to support a loan application and help position you as a solid, dependable borrower.
Helping with Accounts Receivables/Collections
When surveyed, 51 percent of SBOs said that accounts receivables and collections is the top accounting challenge facing their business. It’s no surprise, our own survey found that 64 percent of small businesses are wait on late payments, with 48 percent of net-30 invoices paid late, 45 percent of net-60, and 35 percent of net-90.
Chasing these payments is a time intensive challenge and many SBOs simply don’t have the time or carry sufficient sway to move the needle on getting clients, particularly big brands, to pay up. If you’re not managing your accounts receivables you face cash flow issues.
Accounting firms can help you deal with unpaid invoices by helping you set up invoice systems and automatic payment alerts for overdue bills. Oftentimes this involves setting you up with cloud accounting software like QuickBooks, FreshBooks, Xero, etc. all of which include dashboard features to help you quickly see what’s delinquent and issue automated reminders to clients.
If you’re still struggling with late payments, consider invoice financing as a way to get the full value of your invoices deposited into your bank account quickly. If trade credit and net terms are hurting your bottom line, Fundbox Pay can help.
What Accountants Can’t Help With
As your business grows, chances are you’ll need more than just an accountant.
If you have stockholders or a board of directors, you may need to hire a controller so that you practice sound finance practices that protect your business and its assets. A controller handles tactical tasks such as managing accounting staff and can be hired on a part-time or consulting basis.
If you need help managing the larger big picture financial issues of the business, you may need the help of a Chief Financial Officer (CFO). An experienced CFO can steer the business towards initiatives that are profitable (such as entering new markets, merging with another company, streamlining operations, etc.), and the risks and costs of doing so. Wondering if you need a CFO? We’ve got you covered.
Stay tuned for the final article in our Small Business Guide to Accounting in which we offer tips on how to select the right accountant or your business.
Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.