Accounting terminology and jargon can be very confusing when you’re starting a business. Still, you may be tempted to do your own finances in the beginning in order to save capital for other operations.
But this can be a detrimental mistake. If you’re not making sound financial decisions, you may impede the growth of your business.
And, if you don’t have much experience in crunching numbers, it can be hard to tell the difference between effective financial decisions and poor ones. Until you learn that difference, it’s good to have a seasoned accountant by your side.
Setting Up Your Business
If you are not sure what are the implications of choosing a particular company structure, such as LLC (limited liability company), partnership, sole partnership, and corporation, leave it to someone who does.
Of course, you can take the time to learn about it, but it doesn’t seem sensible since you’ll only need to do it once. Your accountant will help you figure out what’s the best structure for your business. They will help you fill out your Articles of Incorporation or Articles of Organization.
They’ll ask you about the nature of your business, how much money you expect to make, and give you advice on whether you should incorporate as a limited company or a sole trader.
If you want to set up a home office or remote company, an accountant can even help you start an online business or move your current business online. They know exactly what you should pay attention to in order to make the process smoother.
Getting All Your Deductions
You don’t want to be frantically thinking about how you can get your deductions when the tax season comes. By then, it will probably be too late to do anything. If you hire an accountant, they will make sure you get all the tax benefits.
First of all, they will help you register for the appropriate taxes when you open your business. They also know what taxes you shouldn’t register for early on. For instance, there are some taxes you don’t need to register for until you reach a certain revenue threshold.
Your accountant will recommend some strategic decisions you can make throughout the year so that you will be able to make the most out of tax breaks.
If this is something you are not experienced with, it’s easy to forget about some tax deductions you can claim, such as those for home office space, out-of-pocket expenses, or depreciation. Why leave money on the table if you don’t have to?
Audits are dreadful, and your chances of getting audited are much higher without an accountant by your side. You don’t want to risk losing your audit exception.
Unfortunately, many business owners think that an accountant is someone whom they can hire to fix their mistakes, after they've made them, but it’s usually too late by then.
There are many reasons your company may get audited, and it’s not just big issues such as excessive write-offs or being too “charitable.” A few simple mistakes on your tax forms can sound an alarm at the IRS. To avoid such problems, your accountant will always make sure that your business is fiscally sound.
Save Time and Energy
Hiring someone to do your accounting is an expense, for sure. But it’s often less expensive than audits, missed tax deadlines, and missed tax breaks. Spending your time and energy on managing your finances will eventually cost you more than outsourcing your accounting.
Instead of having to learn all that you can about accounting and trying to make sense of all the numbers, it’s better to dedicate that time and energy to growing your business. Let your accountant handle your finances while you focus on doing what you do best.
Getting Access to Finance
Capital is key in the early stages of running a startup. But, finding it is often a struggle. There are many different financing options for businesses, including equity finance and conventional loans. But, your chances of getting financing will be much higher if your books are neat, clean, and in order.
Not only will your accountant help you find the best type of financing for your startup, but they can also help you get investors and banks on board.
They can help you put together a business plan that will make it easier for you to get approved for a loan. And, if you hire an experienced accountant, chances are that they will leverage their network in your favor.
By preparing high-quality financial reports and other detailed information, they can help you persuade investors. They will make sure you understand your financial position clearly so that you can make an informed decision when considering whether to partner up with someone.
Improving Your Invoicing and Cash Flow
You won’t get paid quickly if you don’t bill efficiently. Your invoicing system is vital to the health of your startup, and you don’t want to learn that the hard way. This factor can undermine your business, even though it sounds basic.
Let’s take plumbing businesses that service buildings as an example. When they invoice you, you typically have a month to pay them. If you pay on time, the company has to wait for more than a month to receive the money. But, the employees got paid the same week they did the job.
This can be quite a hassle, and you may have to wait even longer for your money if you forget to invoice your customers or clients on time. Instead of doing all of this yourself, your accountant can write clear payment terms and set up an automated invoicing system.
This will help make sure that all invoices are sent out quickly. They can also set up multiple payment options for your customers. Naturally, your accountant will be checking which invoices have been paid and which haven’t.
On top of ensuring good financial hygiene, an accountant can help you grow your businesses. Your accountant will be one of the most valuable allies. By taking care of your finances, they will allow you to focus on what you do best—running your startup.
About the Author
Michael has been working in marketing for almost a decade and has worked with a huge range of clients, which has made him knowledgeable on many different subjects. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael's work at Qeedle.