In most cases, with a little study and familiarization with your bookkeeping software, you should be able to manage your most basic financial records without the help of an accountant. This includes the daily recording of transactions, maintenance of a general ledger, and maintenance of your cash records. There are some other records you may need to maintain, depending on your business, such as accounts receivable ledgers and accounts payable ledgers.
You may need an accountant to help with less routine tasks, such as preparing periodic adjusting entries, financial statements, closing entries and income tax returns, or helping you prepare a budget. You may also decide to have your accountant set up your books when you first open your business. It helps to find an accountant who's familiar with, and a fan of, the software you prefer.
If you've been in business for a while, your accountant could give your bookkeeping procedures and records a one-time or periodic checkup.
Recordkeeping and Outside Accountant Considerations
If you are using an outside accountant, how often will you need his or her services?
At a minimum, you will need your accountant to help you close the books annually because you have to file an income tax return every year. If you are having financial statements prepared, you will want them done at least annually. However, annual financial statements may not be enough to help you keep tabs on your business. You may want financial statements every quarter, or even monthly.
Depending on the size of your business, you may want to have your accountant close the books every month, particularly if you need to submit monthly sales tax to the state.
Selecting an Accountant and Preparing Records for His or Her Use
If you don't have an accountant, you should shop around for one just as you would for any other service provider. Talk with your peers in the business community about their accountant. Interview several candidates. And ask yourself the following:
- Does he or she specialize in small businesses of my size? Some firms specialize in and look for large clients.
- Does he or she recommend software I like? Can they help me set up my bookkeeping system or optimize my current system?
- Does he or she adequately understand my business and its unique problems?
- Does he or she specialize in income taxes?
- Are other local business people familiar with this accountant?
- Has he or she received positive recommendations from my peers in the business community?
- Did the accountant explain the fee structure to me? Am I comfortable with it?
- Does he or she communicate in the way I like to conduct business (via email, text, phone, etc.)?
- Am I comfortable using this person as a business advisor?
Are Credentials Important?
Some accountants seek a professional designation to set themselves apart from others. Certified Public Accountants have attained the "CPA" title by passing a rigorous examination covering accounting, business law, auditing and taxes.
A CPA is required to have a college degree (or a high level of work experience), and must meet an annual continuing education requirement. The CPA license is administered in every state by some type of state licensing board. A CPA must abide by a code of professional ethics as administered by a state board of accountancy.
Many small business owners are more comfortable choosing a CPA as their accountant because, as a rule, they feel it assures them a high level of professional competence. Some non-CPA professionals may not always have as broad an education as a CPA, but a given individual might have the perfect accounting and tax expertise for your business.
Don't wait for an upcoming deadline to begin looking for an accountant. Try to do it well in advance of your need for his or her services. Also, the worst time to shop for an accountant is during the "busy season" (January through April). Accountants generally don't have time for "interviews" during that time of year.
Getting Your Records Ready
You can save yourself some cash by doing as much of your own bookkeeping as possible. Your accountant would prefer that you not drop a shoe box full of receipts and records in his or her office. Such a strategy will cost you a lot of money in accounting fees; you don't want to pay your accountant for routine clerical work.
You should be able to keep track of the day-to-day transactions, and have a preliminary general ledger ready for your accountant. If you keep good records, your accountant will produce more accurate financial statements and/or tax returns, and will do it faster and cheaper.
Get your records ready and set up an appointment with your accountant as early as you can. Don't wait until you are close to an upcoming deadline. If you get your records to your accountant early, he or she will give you better service for your money. Too many people wait until the last minute—don't be one of them!
Let Software Handle It
We can't stress this enough: Bookkeeping and accounting software is much better than your homemade spreadsheets (or your print notebooks). Shop around. Some options are more sophisticated than others, and some are written specifically for certain industries, such as retail, construction, or service-oriented organizations. But don't be swayed by fancy packaging—many software packages "tailored" to your industry are the same product as any other "tailored" software, just with different packaging and a few minor changes.
Always discuss the selection of computer software with your accountant. Your accountant may want you to use a program that is compatible with the system he or she uses. In many cases, you may be able to keep most of your records on your computer, and simply transfer the files to your accountant, never having to leave your office.