Studies show that entrepreneurs spend 40% of their working hours on tasks which don’t generate profit. In efforts to cut down their costs, they often manage finances themselves, failing to acknowledge the importance of timely and adequate financial expertise. Such a practice often leads to negative consequences, including poor cash flow management which is one of the most common reasons startups fail.
Recognizing the need for a CPA early on can prevent a number of potential issues.
This is what you should look for when you consider hiring an accountant.
Outsource or Hire?
The first important decision you need to make when thinking about handing over your financial tasks to an expert is whether you need to hire an inside accountant or you can outsource them to an accounting firm.
Hiring a CPA company might be a great step towards strengthening the financial function of a growing small business, as such a firm can handle all your tax-related issues, prepare financial statements and provide you with professional analytics and advice.
As your business grows, your transactions will become more frequent and complicated – you’ll serve more customers, hire more employees, and take on more vendors. A number of hours, as well as hourly fees of CPA firms, will increase too, depending on the level of complexity of outsourced tasks, leading to the moment when an inside accountant becomes a cost-effective choice.
A full- or part-time inside accountant can take over the responsibility for managing the financial side of your business. They can maintain your chart of accounts, handle your daily transactions, prepare financial statements, do payroll and fixed assets accounting, etc.
Education and Certificates
A decision on the type of qualifications your accountant needs to have will depend mostly on the needs of your company. If you need someone to handle your businesses’ bookkeeping, financial statements, and analytics, a non-certificated accountant may successfully cover all these tasks.
But, if your accountant is supposed to handle tax-related issues, such as tax return preparation and tax advice, you should opt for a certified and licensed accountant.
GAAP and Ethical Knowledge
Along with qualifications, a good accountant needs to be well-versed when it comes to some practical skills. Accounting practice is regulated and closely monitored by the government, to ensure that companies are properly reporting and disclosing financial information.
One of the main concerns when looking for an accountant is how proficient they are in generally accepted accounting principles – GAAP and whether they can understand and satisfy all the legal and ethical requirements of their profession.
An accountant who is familiar with these practices won’t pose a risk for your company, as their activities will be honest and accurate, and they’ll be more productive when compared to their less experienced colleagues.
Ask about their previous experience and clients, as well as for referrals and recommendations from their former employers. You’ll need someone who has the experience of working with companies of a similar size or sector as yours.
Most accounting software nowadays comes with plenty useful features, such as built-in balances, checks and ethical enforcement procedures, and if they want to keep their competitive edge and stay up-to-date with current processes, which is why accountants must be technologically apt.
Some accountants have their preferred accounting software, and if they are in business for a longer time, this can be a problem as they may find it hard to adapt to the one that you’ve been using.
The problems may arise when you need to share your data, as you will need to look for ways to import and export data in a suitable format, leading to possible data loss.
Be sure to check whether your prospective accountant uses the same software as you, or try to agree on an easy-to-use common and reliable software.
That way the odds of hiring a proficient and reliable accountant would be higher.
Collaboration and Business Skills
Apart from having professional and technical skills, an accountant you’re looking for needs to have certain personality traits too.
This is an expert you will be confiding your most sensitive information to, so they must be credible and trustworthy.
Furthermore, as they will support your business through its ups and downs, it’s favourable that they have relevant previous experience in business themselves so that they have a deeper understanding of all the challenges and pitfalls.
Your accountant also needs to be approachable, and willing to explain the jargon and analysis they use in a manner which is easy for an amateur to understand, which is why soft skills also play an important role.
If you are confused after the first meeting with a CPA candidate, it’s best to keep on searching for another one, as you can’t head over your financial matters to someone who you simply don’t understand.
Having a good accountant by your side will save you a lot of your energy, money and time so that you focus on high-value tasks which bring you profit and help your business thrive.