Many small business owners start out doing nearly everything themselves. Running the whole operation, selling and marketing the product, developing strategies and ideas, and even looking after the finances.
As the business grows, this situation quickly becomes untenable. With only so many hours in the day, you’ll quickly run out of time and have to start delegating tasks to others. When and how to get help for different business functions changes from company to company. But one of the most important areas to focus on is your finances and solving the accounting conundrum.
The stresses of managing modern financing
Whether by design or necessity, during the early days of a company, it is typically the owner looking after the finances by themselves. You have a full understanding of the business and are the one ultimately responsible for it. Therefore, you look after the money, and there is a lot of looking after to do:
- Keep track of your bills and don’t miss any payments.
- Send invoices and receive payments
- Produce relevant financial documents and annual statements.
- Manage your cash flow effectively.
- And, of course, pay your taxes.
These are just some of the accounting tasks every business needs to stay on top of, and as your operation grows, so will the complexity of your financial records.
Small operations with relatively simple accounts are often capable of keeping everything in-house. With some research and practice, you can train yourself to understand the accountancy needs of a small business with only a few employees and straightforward books.
But what are the tipping points where it makes more sense to start looking for outside help?
Getting knowledge and advice from financial experts
Dedicated accountants have knowledge built up from years in the industry and often have qualifications to prove their expertise. For example, certified public accountants (CPAs) are required by the state to have an up-to-date understanding of tax codes and any other applicable business legislation.
Given their expertise, there are a number of instances when hiring an accountant is the best solution. Often, these are tasks that have real consequences if something goes wrong, including:
- Dealing with the government: Filing taxes, undergoing an audit, or completing any legal or compliance-related documents.
- Dealing with lenders: Preparing financial documents before lending money from a bank or investors.
- Implementing good accounting practices: Businesses often need the knowledge of a qualified accountant to set up a strong and comprehensive accounting system.
- Growth opportunities and financial decisions: Businesses might consult with financial experts to ensure they are in a suitable position when considering new opportunities.
Eliminating sloppy mistakes
Ultimately, the main goal of seeking expert advice is to eliminate mistakes. Errors during bookkeeping can happen to anyone. Perhaps you’ve spread yourself too thin and miss something going through the accounts. Maybe you’ve grown to the point that your finances are too complicated for your limited accounting skills. Unless you happen to have an accounting background, it’s very likely your DIY approach will hit a wall.
When this happens, it’s better to seek outside help rather than risk inaccurate books and consequential accounting errors. Mistakes lead to incorrect tax calculations, and you either end up paying too much or too little. The first costs you money, and the second can lead to problems with the IRS, especially if you end up getting audited.
Save yourself time and money
Many businesses reach a point where hiring outside help actually ends up saving them money in the long run. Doing it yourself isn’t free. You have to factor in the time spent working on the accounts and the tasks you are prevented from doing.
So, how valuable is your time? What could you get done if you were free from the burden of bookkeeping and weren’t accountable for your accounts?
Say your time is worth $100 per hour, and it will take you 12 hours to go through all the books, understand everything, and file your business’s taxes. That is a total cost of $1200. Is that the best use of your time?
Even an accountant with a higher rate will take less time than you, given their experience. Plus, they will eliminate any mistakes and may find ways to minimize the total tax you’ll need to pay.
This point is even more relevant, given most business owners aren’t accounting specialists. Therefore, time spent on accounting work is inefficient. You must constantly double-check you’re doing things correctly or look up specific terms and processes. In contrast, you could leave the finances to a specialist and focus your efforts where you are most effective:
- Bringing in new customers or clients.
- Developing the product for a better customer experience.
- Managing employees and getting the most out of a team.
- Creating new marketing material and eye-popping visuals for your brand.
Whatever you’re great at, hiring an accountant and freeing up your time to focus on additive, value-generating work often makes the most financial sense.
Solving the accounting conundrum for your business
It can be easy to see hiring an accountant as an unnecessary expense. A job you can do yourself with a bit of extra work and some research. But thinking of an accountant as just a cost center is a narrow way of looking at things.
Consider the opportunity costs that come with the time gained when you don’t need to oversee finances and the cost lost due to a lack of expert knowledge available to the company. Accountants can end up saving you money in the long run. Plus, with a financial expert to bounce ideas off, you can improve decision-making moving forward and put yourself in the best position to improve your business.
This doesn’t mean hiring a full-time accountant is the right idea for every small business. Nowadays, finding high-quality, certified freelance accountants is easy, so you only have to pay for the work you need—a few hours a week to keep the books in check and implement a proper accounting system or someone to help you get through tax season. However, outsourcing your accounting can be a major tool to scaling your business to the next level.
The answer to the accounting conundrum and when to get outside help is often finding a part-time freelancer for the work you need without the expenses you don’t.