Last week, we talked about lawyers and, as promised, this week we’re talking about accountants for small business and entrepreneurs. It’s a bad idea to start out in the business world without knowing who your business accountant is going to be. I’m not talking about your bookkeeper (since you can very easily be your own bookkeeper with help from any basic bookkeeping software program). I’m talking about a bona fide chartered accountant.
Set aside all those preconceived notions about what an accountant does for his client. An accountant’s job isn’t to help you defraud the government of monies owed to the government … unless that’s the kind of business you want to run, in which case this blog isn’t your kind of place.
Accountants Cost Money
Yes, they do. So do lawyers. So do printers and editors and sidemen and any other professional you hire to help you grow your business. But while you might be able to work around whether you hire this professional or that professional on the basis of current revenues generated, you should always pay for the best lawyer and accountant you can afford. In the long run, it could spell the difference between having a successful business and losing your business completely.
An accountant is not the same thing as a bookkeeper. It’s alarming how many small businesses and entrepreneurs don’t understand that the difference exists.
I’m not saying that one is better than the other, because every profession brings with it important aspects that will help a business grow. To sum things up in an easy to understand package, accountants generate reports and make suggestions that will help create a strong business. Those reports and suggestions are based on information and data collected and recorded by bookkeepers.
In other words, accountants rely on bookkeepers to provide accurate information and record data correctly, and business owners make business decisions based on reports and suggestions provided to them by accountants. It’s an important chain of command. If the accountant you’re considering marginalizes the importance of bookkeeping, chances are things will not end well in terms of serving your business well.
Knowing Your Business Is Key
As with finding the right lawyer for your business, when it comes to choosing the right accountant, it doesn’t matter how highly recommended the accountant is if he’s not the right accountant for you or your business. Contact professional associations in your line of work and see if any of the recommendations from your colleagues cross-reference recommendations from any professional associations. Find an accountant who knows and understands your market and your business.
Efficiency Meets Ability
You want to know that every time your accountant throws open your books, that he or she is going to get the job done in a reasonable time. Years ago, I had an online acquaintance bemoan the fact that her accountant had been doing her books for six months already, they still weren’t done, and the bank that held her business loan and mortgage was breathing down her neck to provide them with a copy of her business books to them.
Provided that the bookkeeping part of the equation was done correctly and accurately, there’s no reason an accountant cannot review a business’s books and return them in a timely fashion with a completed report and suggestions. Six months isn’t in a timely fashion. Mind you, waiting six months for an accountant to get back to a business speaks loudly to the business owner … very little of which is complimentary.
Communication v Location
Where the work gets done is not nearly as important as whether your accountant can communicate concepts, tax strategies and financial statements so you, the head honcho, can understand what’s being suggested. You want someone who can step away from the industry jargon and use terms you understand. After all, an accountant should expand your understanding of how your business operates, rather excise that part of your responsibilities from the title of business owner. If you can’t understand what’s going on with your finances and your books, you won’t be able to explain your finances or your books to anyone else, including a bank or investors.
Your Risk Tolerance
Whether your company has a high-speed, medium-speed or low-speed tolerance, a good accountant is able to suggest appropriate and legal tax deferment strategies, outlining the potential danger for each suggested strategy, and the safest way to carry out those strategies. A good accountant, like a good lawyer, will make suggestions based on what’s in his client’s best interests. Why? Because word gets around quickly when that’s not part of the equation.
A Waste Of Money
While some entrepreneurs and small business owners may think hiring an accountant is spending money frivolously, the fact of the matter is that a poor financial decision, a downturn in the economy, or an audit can bring a business to a grinding halt with countless negative repercussions in the short-term and long-term. So while you may be skimping on hiring an administrative assistant to help sort through files or asking friends’ teens to work with you at a reasonable wage, hiring and paying for the best accountant you can afford is worth the expenditure.
Just because you’ve hired a competent accountant with whom you can work doesn’t let you off the hook. Keep yourself in the loop on all financial matters and decisions. Ask questions. Be informed. Take the initiative and educate yourself on accounting and bookkeeping matters. The more involved you are, the more likely it will be that your business will run like a well-oiled machine.