Do I Need an Accountant for My Small Business?

So, do you need a small business accountant? It depends.

If you understand the basics of accounting, use accounting software, avoid common accounting errors, are diligent about reconciling your accounts, and close your books monthly, you may not need an accountant for your small business.

But the definitive answer to whether you should hire an accountant for your business hinges on multiple factors:

• Tax laws in your industry or state
• The size of your business or operation
• Your budget and whether you can afford an accountant
• How much you want to reduce your tax liability
• Your inventory management techniques
• How often you generate financial reports
• How your business is set up (sole proprietorship vs. S corp, for example)

Small business owners often reach a juncture where the time saved and the financial information gained from working with an accountant far outweigh the cost of their services. The clarity and strategic alignment an accountant provides can be a critical asset for sustainable growth and profitability.

Can a bookkeeper do small business accounting?

Although many refer to bookkeepers and accountants interchangeably, the two have very different responsibilities and scopes of work. A bookkeeper is primarily responsible for recording daily financial transactions, maintaining accurate ledgers, and reconciling bank statements.

An accountant has a broader scope of work. Their responsibilities include auditing, analyzing financial data, offering insights for decision-making, and preparing tax returns.

Think of it this way: All accountants are bookkeepers, but not all bookkeepers are accountants. Although you may hire a bookkeeper to help you manage everyday transactions, you might also hire an accountant to dive deeper into performance, taxes, and profitability.

Understanding these key distinctions can help business owners make informed decisions about the expertise they require for their financial management needs.

4 benefits of hiring an accountant for your small business

1. You have an expert at tax time

Navigating the maze of tax laws can be daunting. An accountant well-versed in tax codes can organize business expenses for tax deductions and discover exemptions and credits to minimize your tax liability within permissible legal boundaries.

2. You save time and improve efficiency

Accounting is a time-consuming task. Outsourcing it to a professional allows you to focus on growing your business, expanding product lines, and answering customer queries, knowing your finances are in capable hands.

3. You gain financial analysis and strategic planning

An accountant can whip your financial statements into shape, presenting a clear picture of your business's health. This data is invaluable for making informed strategic decisions that drive growth.

4. You maintain compliance and risk management

Maintaining compliance with ever-changing financial regulations is a full-time job. A trusted accountant can ensure that your business isn't wading into murky waters that can lead to legal issues.

What happens if I don't have an accountant?

You may find it challenging to track financial transactions accurately without expert guidance. This challenge can cascade into impaired decision-making, where skewing prices or misjudging profits can dull your competitive edge.

Further, tax compliance becomes treacherous when missing critical deadlines or failing to adhere to regulations can result in costly penalties. Additionally, the lack of professional financial oversight can often mean missed opportunities for tax savings and deductions, ultimately impacting your profitability.

Overall, foregoing the services of an accountant can be a gamble with serious repercussions for the sustainability and expansion of your venture.

Can I afford an accountant? Questions to ask before hiring an accountant

The Bureau of Labor Statistics (BLS) suggests the median pay for accountants and auditors is around $78,000 per year or $37.50 per hour.

However, your location and the complexity of your business may affect the total cost. If you're more concerned about practicality than price, answer the following questions:

• Are you reconciling accounts regularly?
• Could you spend your time on more value-add business tasks?
• Are you considering changing your business structure?
• Do you want to itemize more deductions or minimize your tax liability?
• Do you want to start selling internationally?
• Do you want to hire employees or apply for more funding?
• Do you need income tax advice or someone to help you file your taxes?

If you answered yes to at least half of those questions, it might be time to outsource accounting to meet your financial goals. Overall, logic suggests that if you even have to ask if you need an accountant, it might be time to find one. 

Tips for choosing a small business accountant

Use these tips to choose an accountant who ticks all the boxes regarding expertise, services, and alignment with your business's culture and growth trajectory.

1. Ask for a referral

People do business with people they know and trust. Ask for a referral from a friend or business owner in your niche. Dig into their accountant's communication style, expertise, and reliability to determine whether they're a good fit.

If you like what you hear, reaching out to that accountant with a "so-and-so referred me to you" makes your friend or partner look good and is more likely to stand out in a crowded inbox.

2. Research and verify online

If you want to avoid going the person-to-person route, take your search online. LinkedIn, for example, has a "Find an expert" feature that can help you draft a post, searching for help in areas like accounting, coaching, and marketing.

Unfortunately, the AICPA's "Find a CPA" tool is under construction as of this writing, but resources like CPAverify can help you verify the credentials of an accountant in your area.

Otherwise, search for professionals associated with or certified in certain products, like QuickBooks ProAdvisors, for example. You'll be hard-pressed to find a major ecommerce tool that doesn't have a partner directory.

3. Look for someone in your niche

In business, there's no such thing as "one size fits all." As you start talking to potential accounting partners, ask them about the niche or industry they serve most often.

Ecommerce businesses face unique challenges like multi-state or cross-border taxes, emerging payment methods, and international transactions. Your accountant must know how to address ecommerce and industry nuances.

4. Ask about their tech stack

A professional is only as good as their tools. Be bold and ask questions about the technology they use to manage their clients' books or offer a list of your tech tools. You'll both face learning curves if you use a software or tool the other isn't familiar with.

5. Keep up with their CPE credits

In many states, certified public accountants (CPAs) need to earn a certain number of continuing professional education (CPE) credits to retain their license.

For example, CPAs in Idaho need to complete 30 hours of approved education every calendar year. CPAs in Texas have a 20-year annual requirement with a three-year requirement of 120 hours.

Here's where talking about niche, technology, and other aspects of your business can come in handy. Meeting your business's needs may help an accountant expand their knowledge, making you an appealing potential client.

6. Ask about their services or areas of expertise

Clarify what services you need and whether the accountant offers them. Beyond basic bookkeeping, you may hire an accountant to help conduct financial analysis, engage in tax strategy, or offer consulting on scaling your business.

No short- or long-term goal is off the table. If your goal is to sell your business, for example, ask your potential accountant about their experience in that area.

7. Verify their communication style

If your ideal accountant is responsive and available when you need them, make that clear. Dig into their communication frequency and style, including their working hours and preferred ways of getting in touch. The right accounting partner should be approachable and comfortable drawing boundaries.

8. Discuss budgets early on

Discuss fees early on to avoid surprises. Some accountants charge an hourly rate, while others may offer flat-fee packages. Decide which structure best aligns with your business needs and budget. Some accounting firms may be willing to work with you on a smaller basis if it means cultivating a long-term client relationship.

9. Share your vision

The right accountant should manage your finances and help you achieve long-term goals. During initial discussions, articulate your vision and growth objectives to ensure they support your aspirations.

10. Consider the size of the accounting practice

Some accountants may be more responsive than others, depending on the size of their operation — same as you. A smaller firm may offer more personalized or niche services, while a larger accounting firm might provide a wider range of services and deeper expertise.

Ask yourself what you're comfortable with. If having someone dedicated to your business around the clock is valuable to you, consider hiring someone in-house.

Do I need an accountant for my LLC?

Even though Limited Liability Companies (LLCs) offer a simplified tax structure and reduced formalities compared to corporations, hiring an accountant can be extremely beneficial.

An accountant's expertise is vital in navigating the nuances of LLC tax regulations, which can differ significantly depending on whether your LLC is taxed as a sole proprietorship, partnership, or corporation.

Moreover, accountants can optimize tax deductions, prepare accurate financial statements, and ensure annual state filings are compliant.

For LLC owners, consulting with an accountant can clarify financial decision-making. This clarity allows for a stronger focus on growth and operational excellence while minimizing fiscal risks and liabilities.

If I use accounting software, do I need an accountant?

Accounting solutions are powerful tools that offer robust features for financial management. However, they alone won't replace the expertise of a professional accountant.

Accountants interpret data and advise on financial planning beyond the scope of software capabilities. They provide personalized guidance tailored to your business's unique challenges and goals.

Legislation and tax laws are complex and fluid. Accountants stay abreast of these changes, ensuring that your business remains compliant and leverages any new tax advantages.