Will your business ever need to hire an accountant?
A new business may not have enough paperwork to justify hiring someone to check all the numbers, and there is little legal recourse to spending money. It is pretty simple to do your accounting when the receipts are few, and all spending goes out of a single account. The need for verification does increase with the scope of a business, and creating a small corporation means being responsible with other people’s investment.
The nature of the business strongly affects the need to bring in an accountant. Self-employed people often get away with relatively lax finances because income is personal, and so are expenses. The situation changes whenever securities are sold to investors or whenever an employee is hired. While online websites exist for filing individual taxes, handling receipts for a complex business is often beyond these services. Interested parties need to see an appropriate accounting ledger.
It is easy to end up in trouble when counting receipts and miscellaneous expenditures. It is easy to trouble people who want to know what is going on with their investment. Having an employee is also legal trouble because of all the related fees such as taxes and insurance. Accounting gets real serious when payroll taxes and liability gets involved.
Another point is that an accountant can give excellent advice before starting a business. They have worked with quite a few businesses in the past and understand a wide variety of financial needs. Not only can they balance books but understand a lot of ways to cut expenses or else to prepare for the costs and revenue shocks of attempting to run a business.
A company needs its finances to be documented and handled professionally. This is to reassure people and institutions who have a legal and financial interest in the accounting of a business. Some paperwork can be handled directly by the owner, while others are better handled by an employee or a professional third party. The worker needs to be certified in public accounting.
The first step is to get in contact with a real accountant or consultant who is certified in accounting. Finding someone should be a priority before starting a business if a fair amount of money is at stake. Some financial experts bill themselves as consultants, but most advertised accountants also know a fair bit about the business. Having a good plan for creating a business and allocating capital is important.
These financial experts can help to develop a chart of accounts. This is tailored to the business being built and is apart of the whole business plan. These consultants will tell you what they expect and what you will need to do before they examine your business again. They can recommend accounting software and perhaps other consultants.
The second step is to start running the business and keeping track of receipts in the meantime. Partly this means keeping a tab on electronic accounts and separately it means keeping all hard copies of receipts and immediately recording sales in a ledger. Expenses are important, and income is very important for accounting.
Services such as a bank account and online shopping accounts do allow the spender to review an accurate history, but inserting expenditures into the books as soon as they are made is good practice. One example of different payment methods are writing checks versus using a credit card number for online payments. A lot of customers or vendors still accept checks as a harder solution to running a card scanner.
Making sure that all the numbers are consistent at the end of the month is called bookkeeping and must be maintained regularly for the entire lifetime of the business. Having a neat and updated ledger is key to answering financial questions whenever they arise and are also key to impressing investors and debtors as to the profitability or solvency of a business, and a professional accountant can help with this. Professional experience shows that up to 95 percent of companies get professional assistance for their finances.
The good news is that there are many options. Many people have simple certificates in accounting, and many freelancers are available to do basic bookkeeping. This is possibly the best option for a small business that does not have complicated finances and does not yet need the more expensive services of a seasoned financial expert. The only thing that matters is that all the receipts have been kept and can be counted.
The need for financial services depends on the workload. A startup with just a few customers might at best need an accountant once every few months. With a growing workload, hiring a freelancer accountant might become a biweekly or weekly affair. Freelancers are very convenient because they substitute for employees.
The flip side is that growing businesses have traditionally hired secretaries that were able to both make payments and balance books. Such a traditional role has historically created the opportunity for embezzlement, so it very much pays to hire someone to balance the books and make all purchases in person.
The final step is to turn numbers into financial statements that can be inspected by investors, creditors, and the tax collector. A good idea of a company’s numbers is also essential to strategic planning. While revenue will vary every year, growth can be predictable enough to conclude optimal investment. This might mean increasing inventory or expanding capacity by hiring new workers.