Every small business owner needs an accountant to support the financial activities of the business. From the first year of start-up, you must set-up your financial records to provide the right financial information to comply with all tax laws and use that information to run the business. Accountants have the education and experience to support these activities:
- Legal Structure: for a table of options with liability/tax factors - see Business Brief 02.03
- Worker Classification: employee or independent contractor? - see Business Brief 10.06
- Tax Returns: prepare and file federal, state and local taxes - see Business Brief 10.07
- Taxpayer Advocate: represent your position to the IRS if you are audited
- Tax Planning: suggest tax saving ideas, considering both business and individual factors
- Bookkeeping System: select, set up, train users
- Financial Statements: compile periodic reports, review variances from expected results
- Financial Projections: prepare and present to lenders or investors who provide capital
- Financial Analysis: of significant leases, purchases or new ventures
- Business Valuation: determine a business’ fair value to price buy-sell transactions
Decide which accounting services you need now and may need in the future. Then, decide how much you are willing to pay for those services by asking yourself these questions:
- What do you want the accountant to do?
- How much do you want to do yourself or with one of your internal staff?
- How will you provide financial data to the accountant - written records or computer files?
- How frequently will the accountant update this data - monthly, quarterly, annually?
- What bookkeeping software will you use? - Excel, Quick Books, or an industry package?
- Will you do your payroll internally, use a payroll service, or have the accountant do it?
- What reports will the accountant provide, in what form, how often?
Ask your SCORE counselor, people in your business network, and family/friends for names of several accounting firms who work with small businesses - these firms will have the right fee structure and professional staff. Inquire about the firm’s Quick Books capabilities as this is the primary software used by both small businesses and small business accountants. Find an accountant with experience in your business area (retailing, construction, franchising, etc.)
Schedule an initial meeting with several of these firms. Ask to meet both the manager and the staff person who will handle your work. Discuss your business needs and goals, look for the personal chemistry and sense of trust that can form the basis of a long-term relationship.
Ask for an engagement letter outlining the services they propose to provide and the related fees. Find out when you will need to provide periodic data to them and set a reasonable expectation of how long it will take the accountant to compile financial reports, tax returns and respond to your specific accounting questions.
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