A question I often get, is when should I hire hire an accountant to manage the books of my small or growing company? This should provide some answers. Reposted with permission from the author..article first appeared in the Nation.
Accountants help out in the growth of your business. They handle more than just tax and payroll. This question has become all too familiar. “When should I consider hiring an accountant?” It depends on your immediate needs. Out of your needs, you will either get a full-time accountant, part-time one or contract one.
A good reason for hiring an accountant however is to create a business plan, form a company, apply for loan, during tax audit or simply in order to delegate some duties. However, since we have a number of rogue ones out there, recruit your accountant carefully.
Here are some moments when an accountant would be a smart hire.
- Say you need to write down some financial projections, a business plan or the usual business finance management and reporting. An accountant can help you use an accounting software to generate reports.
- The earlier you hire one, the better. This way, you benefit from sound financial knowledge. It saves you a lot of money and helps you mitigate risks associated with poor financial management.
- An accountant can also advise you on the best legal structure for your business. For example, it is a fact that you will have business liabilities. When you operate as a sole trader, you could be held personally liable for business deals whereas in a limited liability company, the burden of the enterprise is limited to its assets.
- SME accounting can easily become complex when you do it yourself, and can get overwhelming since you are stretched across many control points. An accountant can help you fix your cashflow by computing key business metrics that help you ensure that the outfit is on track. Say ratio of salaries and other employee payments to total revenue, cashflow analysis, your gross margins and net margins. These are reports that help you understand your business’ financial standing at a glance. It is even better if you are using an accounting software that is online as this can allow even an external accountant to review your financial records for regular reporting. These kind of reports help you monitor the pulse of your business. With the reports, an accountant is able to offer input on how to improve your business model, pricing or even inventory.
- Generally, you need an accountant to prepare and file tax returns. Although we have software that simplifies this, it is always safe to get a seasoned hand to deal with the taxman. A good accountant should help you complete and file all legal and compliance company returns, prepare regular annual statements of accounts, handle your payroll, ensure all individual taxes and payments are recorded and bank reconciliation is done monthly. A good accountant will help you meet tax obligations. If external auditors are coming, your accountant should ensure that all necessary reports are ready.
- You might need an accountant when applying for a loan, overdraft or securing a fresh investment. An accountant will help you develop the financial statements your bank will need. Your accountant can help you know if the loan interest, terms and conditions are favourable.
Overall, at some point, you will need to hire an accountant, so recruit wisely!
@DorcasMuthoni is the founder of OpenWorld.