By Jean Kruse / Guest Editorial
There are many responsibilities that come with being a small business owner, and every one is critical to maintaining profitability and promoting growth. You can’t risk letting a deadline slip or overlook an administrative requirement, yet there are only so many hours in the day to get things done.
To ensure you stay focused on the most important tasks for your business, it may be a good idea to hand off your more routine chores. One area that’s ripe for outsourcing is bookkeeping.
Many small business owners rely on accounting software and cloud applications like QuickBooks, Wave or Xero to simplify the process of routine bookkeeping and tax preparation, but someone well-versed in these areas can help spot trends or problems you might miss. In addition, the more complex your needs are – preparing financial reports, invoices, payroll, etc. – the more time-consuming accounting becomes.
It should be added that just because you have accounting software, you have not solved the problem of keeping records. What’s more, even though the accounting software is electronic, it doesn’t make your records accurate.
Unless the business owner has been trained in accounting, chances are high that errors are being made daily. This makes sense, because accountants study their trade for four, and in most cases five, years before getting their degree. Accounting can never be done by an amateur simply because they buy accounting software.
In fact, I challenge you to print a balance sheet from your accounting software as of the last day of each month, and compare each of the account balances on that financial statement with a backup to prove that the account balance agrees exactly with the backup.
For example, a bank reconciliation is the backup to prove that the balance shown on the balance sheet of your bank account is accurate. If the bank reconciliation does not equal the account balance, you will know something is wrong.
An accounting professional will be able to examine your accounting and determine whether or not you are accurately recording your transactions. All small businesses should consider hiring an accounting professional once it becomes financially feasible for them. The payback to your business from the investment will multiply many times. And while it is true that you can get free business advice from business consulting services like SCORE, we recommend that you hire an independent accountant and use your SCORE mentor in addition to the paid advice and guidance they can offer.
So how do you go about finding the right accountant for your business? A good place to start is to ask your business friends and make a list of their recommendations, or consult the CBJ’s list of CPA firms, available at www.corridorbusiness.com.
Call each firm and tell them you want to hire an accountant, and set up a time to meet and interview each one. Ask about their fees and whether they have any experience in your particular type of business or market. Don’t base your hiring decision on price alone – you must have a feeling of compatibility with any service provider.
Fees vary greatly among accountants, depending on location, expertise and services provided. Some firms will provide bundled services for a flat monthly fee, but may charge less for bookkeeping and other tasks that don’t require CPA-level training. If you are considering a larger accounting firm, make sure you meet and get to know the people with whom you will be working. As with any business relationship, a “comfort level” of trust, confidence, and communication with an accountant is a must.
Not sure you need a CPA? If your business is very basic or just getting a started, a professional bookkeeper may be just the resource you need. The free online “Bookkeepers Hiring Test” from the American Institute of Professional Bookkeepers (www.aipb.org) can help you assess candidates’ qualifications.
Another option is to find an Enrolled Agent (EA), which is a professional licensed by the federal government to prepare tax returns. Unlike CPAs, EAs must demonstrate their competence in all areas of taxation, representation and ethics before they are given unlimited representation rights before IRS. More information and assistance in finding an EA is available from the National Association of Enrolled Agents (www.naea.org).
If you need a mentor with whom you can meet to discuss ideas and someone who will just listen and help you sort out your thoughts, sign up for a face-to-face meeting with a SCORE mentor on our website, www.scorecr.org. You can meet with your mentor as often as you like. The discussions are free and confidential.
Jean Kruse is a SCORE counselor and SCORE Iowa district president. She operated her own CPA firm for 13 years and in 1988, joined RSM McGladrey, a national firm, where she provided accounting and tax services to small businesses.