It's a question asked by many new business owners, along with "Do I need an accountant?" and "What should I look for when choosing an accountant?
Let's start with the obvious. Small business accountants can help you with bookkeeping, closing the books, and other accounting needs.
But what other advice should you get from an accountant?
In addition to standard bookkeeping and accounting work, an accountant can advise you on financial management.
He or she can assist with cash flow requirements and budget forecasts, business borrowing, choosing a legal structure for your business and preparation and advice on tax matters.
Cash Flow Requirements
An accountant can help you work out the amount of cash needed to operate the business during a certain period for example, a three-month, six-month or one-year projection.
The accountant considers how much cash you will need to carry your accounts receivable, to increase inventory, to cover current invoices, to acquire needed equipment and to retire outstanding debts.
Additionally, the accountant can determine how much cash will come from collection of accounts receivable and how much will have to be borrowed or provided from other sources.
In determining cash requirements, the accountant may notice and call attention to danger spots, such as accounts that are in arrears or delinquent areas or areas of excess expenditure.
An accountant can help you choose the type of business organization that best fits your needs.
They can point out the advantages and disadvantages of the various forms of business organization. Ask them, for example, about the pros and cons of these legal structures.
- Proprietorship -- An extension of individual ownership.
- Partnership -- Multiple proprietors.
- Corporation -- A completely separate legal entity.
In addition, they can advise you on immediate plans regarding management, financing, long-range plans to bring others into the business and estate planning, all of which affect the type of legal structure you choose.
This is an area in which an accountant can provide much advice and assistance. Your accountant can suggest methods to record and document the various types of information necessary for taxes. They can also help with tax preparation and tax filings.
Preparing to Sell
Eventually, you will want to sell your business. A good accountant will be familiar with the process and will help you with all the necessary documents for selling a business.
Relationships and Referrals
Your accountant may be able to refer customers to you. Every so often, ask your accountant if they know anybody who might be interested in your goods or services.
How To Use An Accountant
Now, that you understand what accountants are good for, make sure you make the most of your accountant.
The best way to use an accountant is to constantly ask the accountant "What can you do for me?" or explain a challenge you have and ask your accountant for their counsel.
A good accountant will be very proactive in reaching out to you to find out what's going on with your business. But not all accountants will do that, so you may need to be active in seeking your accountant's help.