Most businesses need an accountant. Not all businesses use one. So should your business use an accountant? It depends on a few things like what stage the business is in, how big the business is and how complex the business is. Let’s take a look at the first one.
1. The Stage of the Business Development
Most start-up businesses can’t afford an accountant. Does it mean they don’t need one? No. It’s just simply the case that a lot can’t afford them. With accounting rates costing into the hundreds of dollars per hour. It’s just unaffordable for start ups. So what is the solution for a new company?
Frankly, some of the responsibility will roll up to the owner until they are in a position to hire an accountant or during tax time. The best thing a new start-up can do is have the owner learn at least the basics of accounting.
Growth stage companies often have an accountant on call. Mature companies often have the luxury of having an accounting firm at their disposal. The further a company is established and profitable, the more it can spend on services like accounting.
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2. Company size
You’ll start to see a company with a lot of moving parts will need an accountant or a firm behind them. As a company gets a lot of employees then things get more complex.
From outsourcing small stuff like payroll to an accounting firm or for tax questions about where employees live, often requires an accountant.
A small company of 1-100 employees can use a solo accountant. As a company grows from 100 employees to over 500 then it can be time to move to a small to the mid-size firm.
Anything larger in terms of employees and companies often reaches out to top-tier accounting firms for help.
3. Business Complexity
An accountant is there to navigate the rules, laws, principles and standards. Complex businesses can be due to size, carrying a lot of inventory, transacting online, having a lot of assets or working across states.
There are a bunch of business scenarios that make business complex from an accounting or tax perspective. This is where accountants come in handy.
If they haven’t seen it then at least they can research it and provide a professional stance. That’s what you are paying them for.
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What are Some Businesses that Need Accountants?
Now that we ran through the three things that can cause a business to use an accountant, let’s look at a few businesses that need accountants.
Service-based businesses: Think lawn care, plumbing, electrical workers and builders. The reason they need accountants is generally due to all the fixed assets they have. On top of that, they often sell services in multiple states which can trigger taxes.
Online businesses: Everyone is getting into the Amazon and e-commerce niches but they don’t know how to account for marketing costs, inventory and prepare taxes at tax time. They don’t even know how to structure their online business to be the most tax efficient.
These businesses need an accountant.
Retail: Clothing and selling goods. All those brick and mortars need accountants. Not only rent, inventory and sales but again during tax time.
Real Estate: Tons of people are getting into rentals but they don’t know they can outsource all their profits and losses to accountants.
Accountants can also manage the depreciation for rental properties and then prepare the tax returns for the rentals when the start of the year rolls around.
For smaller businesses, asking an accountant how to structure a business is one of the most important questions to ask an accountant. Engage an accountant for an hour of billable time and pick their brain.
Go over your business plan and see if you’ll need help with depreciating fixed assets or taxes. It’s always smart to get an accountant lined up prior to tax time.
Does a Business Need an Accountant? Final Thoughts
Almost all businesses should use an accountant. It doesn’t need to be a ton of hours and there doesn’t need to be much time at the start of a business but you should run your business plan and structure by an accountant.
They can coach you on your accounting so you have the best financial records for your business and when tax reporting is due.
