These steps will help you find a professional small business accountant to help navigate the maze of tax issues facing your small business.
For most small businesses things tend to change so rapidly and every rand counts, so if you don’t know where you stand on a monthly basis, you may not be around at the end of the year. And while using do-it-yourself accounting software can help monitor costs, the benefits of hiring good small business accountants extend far beyond crunching numbers. Potentially, they can be your company’s financial partner for life, with intimate knowledge of not only how you’re going to finance your new office space, for instance, but also how you’re going to finance your daughter’s education.
Before you hire one though, make sure you understand the four basic areas of expertise that accountants practice:
- Business advisory services.Since a small business accountant should be knowledgeable about your business environment, your tax situation and your financial statements, it makes sense to ask them to pull all the pieces together and help you come up with a business plan and personal financial plan. Accountants can offer advice on everything from insurance to expansion (how will additional capacity affect operating costs?). Accountants can bring a new level of insight, simply by virtue of their perspective.
- Accounting and record-keeping.These are perhaps the most basic of accounting disciplines. While it makes sense for many business owners to manage their day-to-day records, an accountant can help set up bookkeeping and accounting systems and show you how to use them. A good system allows you to evaluate profitability and modify prices. It also lets you monitor expenses, track a budget, spot trends and reduce accounting fees required to produce financial statements and tax returns.
- Tax advice. Small business accountants that provide assistance with tax-related issues usually can do so in two areas: tax compliance and tax planning. Planning refers to reducing your overall tax burden. Compliance refers to obeying the tax laws.
- Auditing. These services are most commonly required by banks as a condition of a loan. There are many levels of auditing, ranging from simply preparing financial statements to an actual audit, where the accountant or other third party provides assurance that a company’s financial information is accurate.
Choosing a Small Business Accountant
The best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague.
While accountants usually work for large companies, SAIPA members (Professional Accountants) work for a variety of large and small businesses. Don’t underestimate the importance of a Professional Accountant. This title is only awarded to people who have passed a rigorous nationally standardized test and also require 3 years’ post-graduate work.
Once you have come up with some good candidates, it is important to determine how much of the work your company will do and how much will be done by the accountant.
Accounting services can be divided into three broad categories: recording transactions, assembling them, and generating returns and financial statements. Although the first two categories require a lower skill level than the latter, many firms charge the same hourly rate for all three. This is why it’s important to determine exactly what work you want an accountant to handle.
The next step is to interview your referrals. For each, plan on two meetings before making your decision. One meeting should be at your site. The other should be at theirs. During the interviews, your principal goal is to find out about three things: services, personality and fees. Here’s what to ask in each area.
- Services:Most accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Estate planning? Will the accountant help you design and implement financial information systems? A Professional Accountant may offer services that include analyzing transactions for loans and financing; preparing, auditing, reviewing and compiling financial statements; managing investments; and representing you when dealing with SARS.Although smaller accounting firms are generally a better bet for entrepreneurs, they may not offer all these services. Make sure the firm has what you need. If it can’t offer specialized services, it may have relationships with other firms to which it can refer you to handle these matters. In addition to services, make sure the firm has experience with small business and your specific industry.
- Personality:Is the accountant’s style compatible with yours? Be sure the people you are meeting are the same ones who will be handling your business. At many accounting firms, some partners handle sales and new business, then pass the actual account work on to others.When evaluating competency and compatibility, ask candidates how they would handle situations relevant to you. For example: How would you handle a SARS audit seeking verification of VAT input tax expenses? Listen to the answers and decide if that’s how you would like your affairs to be handled.Realize, too, that having an accountant who takes a different approach can be a good thing. Just be sure that the accountant doesn’t pressure you into doing things you aren’t comfortable with.
- Fees:Ask about this upfront. Most accounting firms charge by the hour. However, others work on a monthly retainer. Get a range of quotes from different accountants. Also try to get an estimate of the total annual charges based on the services you have discussed.
[Click here to see how our fees are structured]Don’t base your decision solely on cost, however, as an accountant who charges higher hourly rate is likely to be more experienced and able to work faster than a novice who charges less.Also be sure to ask for references – particularly from clients in your industry. Call them to find out how satisfied they were with the accountant’s services, fees and availability.
Make the Most of the Relationship
After you make a choice, spell out the terms of the agreement in an engagement letter. The document should detail the returns and statements to be prepared and the fees to be charged. This ensures that you and your accountant have the same expectations.
Also, hold up your end of the agreement. Don’t hand your accountant a shoe box full of receipts. Write down details of all the checks in your check register, whether they are for utilities, supplies and so on. Likewise, identify sources of income on your bank deposit slips. The better you maintain your records, the less time your accountant has to spend and the lower your fees will be.
You might want to read: “Effortless bookkeeping for Small Business“
It’s a good idea to meet or at least speak with your accountant every month. Review financial statements and go over problems so you know where your money is going. Your small business accountant should go beyond number-crunching to suggest alternative ways of cutting costs and act as a sounding board.