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Do I really need an accountant?
What are some reasons to seek out an accountant at the start up of my company? Isn't this just an extra expense?
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4 Answers
An good accountant is one of the most important people you could ever have on your payroll, in my opinion. Not only can they be expert cost cutters, but it is their job to read and prepare the financial documents of a company. They would be the ones to answer how something should be depreciated, amortized, depleted, inventoried. A mistake like failing to depreciate your equipment could cause you to pay more than you have to in taxes.
Assuming you are a small business, find an accountant that will prepare your taxes and answer those questions for you (preferably without charging you). I would advise against a chain. As you are a small business (just starting), find a small, local accountant. A large firm like the Big 4 have more resources, but at a price that I can safely say is too high for what you need. If you find yourself expanding rapidly, an option you may consider is a regional firm, but that is further down the line.
Accountants are much more knowledgeable about tax laws and what has changed (as they change every year) and can help you save money. Yes, at first it may seem counter intuitive that an expense like hiring an accountant saves money, but who else would know that you can expense rent and (a percentage of your) utility bills for using your home as office space, That expense (including paying the accountant) lowers your taxable income allowing you to pay less in taxes.
Please go talk to some accountants and see which one fits you best. Get a good relationship with one and they will take the extra time to find the best deal for you.
Besides, when you have an accountant prepare your documents, you are lowering your liability for error.
I have been an entrepreneur for over 40 years and have done 12 meaningful start ups including branch plants and I do have some advice on this subject. The top priority for a start up is keeping overhead low and doing everything on a small scale until you find the magic combination of sales, operations and finance that can make for long term profitability.
To that end I would advise that you outsource as much as you can including accounting services and to insist on maximum performance at minimum cost from each product vendor and service provider. Everything in a start up project depends on getting to break even before you run out of cash...it really is as simple as that. Once you stop losing money, you have the luxury to build the staffing, systems and facilities that you want, but you have to get to break even as quickly as you can.
Real world example. Lady I know started up a business, did all the accounting herself. Filed the papers to incorporate and filed her own payroll taxes. One year into the venture, she calls me with some general questions about filing her tax returns which she wants to do herself. In the course of conversation, I asked about a few of the other types of returns she would need to do just to make sure she covered all her bases. Turns out she was not aware that when you pay wages to yourself you also have to pay unemployment taxes. She had gone a year without paying her state unemployment tax. She also was not aware that you have to file with the IRS to elect to be an S-Corp. Her state said she was an S-corp so she thought that must be good for the IRS also. It's not.
Not a big deal as the total tax for the year was only $54, except that she had to pay me $250 to go back and file her back taxes for 4 quarters plus another $300 in failure to file penalties to the state. And she missed S-corp status for the first year of operation which may not have been a big deal, but would have been had she gone ahead and sent an S-corp return in.
Had she come to me in the beginning it would have cost about $100 in fees for me to make sure she was set up correctly and show her how to file everything herself.
So my answer is no don't hire an accountant up front, I make more money when you come to me with your problems after the fact.
Yes.
You can try to do some of the work yourself, as most small business owners do, but you should at least have someone looking over your shoulder.
Our firm provides do-it-yourself tools for the small business world, and most of them are free, but we strongly suggest that you have a CPA by your side; especially when your just getting started, especially throughout the year to keep things organized, and especially at tax time.
Thanks,
Tony
Anthony C. Gruber, CPA
President, Viser Business Tools
www.FinancialFirmTemplate.com
www.SmallCompanyTools.com
www.401kTest.com
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