Remember the last time you tried to do repairs on your car engine only to find out halfway through the job you were in way over your head? Those towing fees can really add up, not to mention the ribbing you will take from your mechanic. The same thing can happen if you try to do your own business accounting. We have a saying at the Small Business Development Center that goes “friends don’t let friends do their own business accounting”.
Operating a small business can be like living in a large cardboard box. You are so involved in putting out the fires and the day to day operations that you can’t sneak a peek outside your box. It’s very difficult to stand back and look at your business as an impartial observer. This is where your accountant comes in.
Your accountant is the closest financial advisor for your small business. They do your books each year and know how your business is performing.They see the trends and are invested in your success. After all, if you don’t survive, they just lost a valuable client.
So how do you find an accountant? First, it is important to understand the field of accounting is very broad. Your accountant should have small business accounting experience and expertise and work primarily in this aspect of the industry. Next, find someone who is concerned with your long term success. Ask your banker, attorney, or other small business owners for referrals. This isn’t a task for letting your fingers do the walking through the Yellow Pages. Once you get some referrals, make an appointment with a couple of possibilities and see who fits the best. Are they accessible, friendly, professional, and caring? Do they have the experience and expertise? While the Certified Public Accountant designation isn’t completely mandatory if everything else is in place, I believe it demonstrates excellence in the accounting field and should be carefully considered as a requirement. You may also prefer an accountant that practices as part of a group.
Business activities can often require expertise in auditing or succession planning that could come from another accountant within the group.What should you expect from your accountant in terms of performance? They should provide time each accounting period to meet with you face-to face to discuss the financial activities of your business. Don’t turn in your information and merely pick it up from the receptionist when it is ready. It is completely within reason to expect 15 to 20 minutes to sit down with your accountant to look at the trends, look at problems, and discuss changes. Ask questions. Talk about any upcoming expansions or the purchase of major business assets. A good accountant will provide you with timely and accurate information. It is recommended you turn in your information on a quarterly basis, especially if you have employees. Don’t start a new business and wait a full year to consult with your accountant. If you were operating your business improperly the delay could prove to be a fatal mistake.Be sure you demand a balance sheet and income statement be furnished to you each time your books are serviced by your accountant. A good income statement will have quarter-to-date, year-to-date, and percentages comparing your performance from this year to the figures from last year. Banks need these financial statements in order to qualify your business for a loan. And if you decide to sell your business, any potential buyers will need to have the financial statements and IRS returns to determine the relative worth of your firm.
There are often gray areas when it comes to interpreting the IRS Code. While you don’t want to pay a nickel more taxes than you should,you have to understand some accountants take a very aggressive stance in dealing with gray areas. Can we agree to some moderation? You, the business owner, are ultimately responsible for the information on your tax return and are the one defending the figures in an audit. To be successful in a small business you have to know your numbers. Get professional help by hiring a concerned, experienced accountant for your business. And remember, don’t mess with the IRS. They have a long memory, ultimate power, and no sense of humor.