What does it take to start a small business? Is it creativity and vision to build from the ground up? The guts to venture out into the unknown? The grit and perseverance needed to take a budding business from infancy to profitability? 

I love hearing stories of business owners starting in their proverbial garage and growing through various milestones, like hiring their first employee or moving out of said garage and into real office space. 

According to the U.S. Small Business Administration Office of Advocacy, 99.9% of businesses in the US are small businesses, 33.2 million in number.  Out of that, 27.1 million are run by a single owner and have no employees, and 5.4 million have 1-19 employees. 

How many of these busy business owners do you think are keeping their own books?

With all that goes along with entrepreneurship, managing the books can be one of the most tedious tasks. Hiring your very own bookkeeper or accountant can be impactful in so many ways, but how do you know when you’re ready? How do you know it’s time to hire an accountant?

I can save some deliberation and give you a simple rule of thumb. If your books were not ready in time for tax season (between January 1^st and April 15^th), it’s time to hire an accountant!

If you are keeping the business’ books up to date on your own and tax season does not bring on an avalanche of back-and-forth phone calls and emails with questions from your CPA, here are some additional points to consider:

1. Is this the highest and best use of your time? Should you be doing this? No matter how productive you are, every day has only so many hours, and you will invariably hit a limit on how much you can pack into any given 24 hour period. Hiring an accountant will free you up to do what you do best – growing your business. 

2. Are you concerned there may be errors in your books? To err is human, but hiring an accountant would mean your books will be as close to impeccable as humanly possible come tax time.

3. Are you paying unnecessary past due fees or fines? These fees and fines can be steep, so a good accountant will pretty much pay for themselves by helping you avoid financial penalties. Moreover, your accountant will be able to point out opportunities to save money for your business.

4. Do you struggle with cash flow gaps because you don’t always get to the billing and invoicing on time? Collecting payment promptly from customers is crucial to healthy cash flow, and it starts with timely billing and follow up when a customer's payment is late. Your accountant can support cashflow by managing your accounts receivable.

5. Are you prepared for your business to be audited by the IRS? If your company gets selected for an audit, your accountant can coordinate the process and provide supporting paperwork for accounts and transactions that are being reviewed. 

Depending on the size of your business, you may want to consider starting with a freelance accountant or outsourcing service to get started. This can be a great alternative to hiring someone part time or full time if you’re not ready for it. These services charge by the hour, and some offer service bundles for the most standard needs. Some will come to your office, and others will do the work remotely. You will save money on employment expenses while still ensuring the job is getting done!  As you grow, you can evolve your finance and accounting needs into a part time or full time department with your own in-house team.Another option is to sign up with an accounting firm – they will thoroughly evaluate your business’ needs and quote an hourly price or a monthly set fee for their services. The cost may be higher, but the advantage is higher reliability and access to broader expertise. An accounting firm would typically have a team assigned to each client, so that if your usual contact is out sick or away on vacation, you can still get the reports you need and get your questions answered without an extended delay. If you get your business tax return prepared by a CPA firm, another great option is to inquire whether they offer accounting services. You will be interviewed in great detail about your business during the onboarding process, and will be offered access to a wide variety of additional services, depending on the CPA firm’s size and specialty. Your accounting costs may be added to your usual tax prep fees at the end of the year, or you may be billed monthly for the accounting services and any additional engagements you may opt for. If your business is on a larger side, you may want to opt for a hybrid – hire an accountant full or part time, and also engage the services of an accounting or CPA firm to do a review and provide advisory. Whichever way you choose to go, it is a good practice to re-evaluate at least once a year, and ideally every six months, if your accounting arrangements are serving the business’ needs. I invite you to connect with me on LinkedIn and reach out with any questions you might have about hiring your first accountant!