One thing that many small business owners misunderstand is the importance of a professional accountant. Especially with free accounting software that makes it seem like you can do it all on your own, business owners tend to think they should save on that expense. Bookkeeping software is not a stand in for a pro, and it won’t help protect your business no matter how tight the budget. There are a number of reasons why almost every business needs the help of an accountant, although the decision about a full time or tax-season-only accountant is much more open for debate, thanks in part to the effectiveness of that same budgeting software.
The reality is that accounting is difficult. Unless your business is incredibly small, you have a lot of numbers to manage. As soon as you have employees, for example, your accounting load increases incredibly. Between being naturally time-consuming and then being more difficult for the novice, thus taking more time, managing your own books requires a significant investment from you, the most important person in the business. A freelance accountant could do all that work more efficiently, and produce more accurate results. There are other benefits as well: more complete tax compliance, better deductions, more productive and useful financial documents, and the peace of mind that comes from knowing your books and tax preparation are already taken care of.
Although many of the smallest can get by with just the right piece of accounting software, most people quickly realize they need to find the cash to pay someone to manage their books. The choice is then about whether you need a full time accountant or can get by with a part-time freelancer, or better yet just hiring an accountant when tax preparation is necessary. One of the first things to understand is that bookkeeping and accounting are not exactly the same thing. A bookkeeper handles day to day data entry necessary to track expenses and income and keep everything organized. If your business is entirely online, some accounting software like Outright can actually automate this to reduce the workload significantly. Accountants do the difficult work – generating profit and loss reports and other financial statements, explaining them, and preparing tax documents.
You can think of each of these different jobs as something that either you or a professional can do. You have to make that decision based on the previously outlined benefits and costs of outsourced each job. For example, many small businesses pay estimated quarterly taxes. If that’s the case, a tax-season-only accountant would still be working for you four times a year, and unless you are good at integrating tax preparation into your everyday bookkeeping efforts, each of those periods will be longer than just a day or so.
There are certainly arguments against spending money on a small business accountant on top of accounting software. However, in the vast majority of cases the most profitable choice will involve figuring out how much to have the accountant do, not whether or not one should be hired at all.
