If you’re a small business owner, chances are you have been managing your company's finances since its inception. As you grow, you may realize that your finances are continually getting more complex. Soon, you'll find more and more of your day tied up in a spreadsheet when you should be focused on running and growing your company.
There becomes a point in every business owner’s journey where they realize that they need someone to manage their money. This point is where accountants come into play; a good accountant will revolutionize how you do business.
Many people have a conception that accountants are simply money managers that help companies avoid as many taxes as possible. While this is partly the case, accountants are so much more. There are many ways that accountants can improve your company's finances, strategy, and efficiency.
This article is a crash course on what accountants can do for your business and how they can save you money and time.
What Does an Accountant Do?
Accountants construct and maintain financial documents, such as profit and loss statements (P&Ls), balance sheets, cash flows, and income statements. They are responsible for keeping these statements healthy to optimize the business for minimal taxes and losses. Accountants also have a deep knowledge of tax policy and strategy; they are invaluable in their knowledge and skills.
What’s the Difference Between an Accountant, a CPA, and a Bookkeeper?
Many people are unaware of the difference between these three common titles. In fact, these are three distinct roles:
Bookkeepers record day-to-day transactions of the business. They collect and document receipts, checks, bills, and payments. An accountant does not usually perform these tasks. Bookkeepers do not necessarily need formal education, they just need basic math and data entry skills. Every small business needs a bookkeeper of sorts, a duty that often falls on the owner. In fact, only 33% of small businesses have an officially titled bookkeeper.
Accountants create financial statements and reports out of recorded transactions. They prepare, analyze, and advise you on the best financial paths for your company based on the results of their analyses. Accountants typically have a four-year degree in accountancy. Accountants can be in-house or outsourced, depending on the company's complexity.
CPAs are accountants that have passed their state’s Certified Public Accountant exam. This allows them to create tax returns for other individuals and represent companies during audits.
How do Accountants Save a Company Money?
Accountants save companies money in a multitude of ways. The primary ones are taxes, financial strategy, and time.
Accountants Know the Ins and Outs of Taxes
An obvious application for an accountant is their ability to help a company avoid unnecessary taxes. Let’s face it, taxes are a complex and often opaque concept. There are many ways you could be led astray, especially as a small business owner managing your own money.
Many people opt to use tax software to streamline this process but miss out on the benefits of an accountant. Accountants can advise you on the many aspects of taxes that you may not be aware of:
Many people are unaware of numerous deductions and write-offs, both business and personal. To name a few:
- Reinvested dividends
- Out-of-pocket charitable contributions
- Self-employed Social Security benefits
- Mortgage insurance premiums
There are dozens of other deductions out there; an accountant can instantly tell you which ones you and your business qualify for.
Industry-Specific Tax Benefits
Depending on which industry you operate your business in, there are many benefits that an accountant could highlight for you. For example, if you have traveling salespeople, there are many work-related deductions that you can take advantage of. If you are doing research, You can deduct up to 20% of your R&D expenses. If you have a machinery-heavy business model, you can utilize accelerated depreciation schemes to deduct your taxes.
There are many other examples of this, but no one is better suited to illuminate these to you than an accountant.
Accountants Can Advise on Financial Strategy
Accountants can give you critical advice if you want to expand further or optimize your business activities. They can guide you towards maximizing your revenues while minimizing your expenses.
Business expansion is always a complicated endeavor. It is common for business owners to overextend, which could implode the company. Luckily, accountants are excellent at optimizing cash allocation towards expansion activities. There are several methods that accountants use to achieve this:
- Financial projections are a great way to understand how expanding your services or distribution can affect your finances. Don’t get caught off-guard when an unforeseen expense pops up over the course of your expansion. Accountants have keen insight into where money will come and go, even if it doesn’t exist yet.
- KPI evaluations are a great way to see the key competencies your business needs to stay afloat. Accountants can provide numbers concerning your costing, turnover rates, and other vital metrics.
- Break-even analyses are the simplest way to see if a project is worth pursuing or not. For example, If you are opening a new office location, it is valuable to know how long it will take to overcome the upfront and overhead costs. An accountant will show how you can break even faster and more efficiently.
- New product analyses are another area accountants can assist in. Like cash flow and break-even projections, accountants can show how your finances will be improved by your latest product release.
Accountants Save you Time
According to an NSBA study of small business owners, the average owner spends 120 hours per year on activities that an accountant could remedy. That's equivalent to 5.7% of a standard working year! Depending on how you value your time, you are flushing many thousands of dollars down the drain.
While some companies could benefit from an in-house accountant or CPA, it is simple to task an accountancy agency to streamline your finances. For simple small businesses, it should only take you a few hours to aggregate the information and documents that an outsourced accountant will need.
What are the Types of Accountants?
There are dozens of accounting specialties, but this list shows the most common. Small business accountants often wear many of these hats, but sometimes you’ll need someone who has specific expertise in one of these areas.
- Tax accountants specialize in the rules and regulations regarding taxes. These accountants can be specific to either federal or state.
- Staff accountants are familiar with the industry your business operates in. They can create budgets, manage receivables and payables, and advise you on industry regulations.
- Investment accountants typically operate within the financial industry itself. They identify market opportunities and manage investment activities of businesses.
- Forensic accountants analyze existing financial records and statements to identify errors. These accountants typically consult companies to ensure that their practices are sound and legal.
- Audit accountants perform their services within the scope of an audit. They are very similar to forensic accountants but focus on the legal side.
- Payroll accountants manage the intricacies of hiring and paying employees of the company. They are also responsible for overseeing onboarding and pay-raising implementation.
How much does an Accountant Cost?
Outsourcing an Accountant
This breakdown of a 2015 study conducted by SCORE shows what small business owners paid to outsource their accounting work.
The average cost for a small business owner to outsource an accountant is $7,300. If you are small scale, this may seem like a lot of money. Remember that accountants will save you immeasurable amounts of money through time, taxes, and knowledge; they will be worth it.
Hiring an In-house Accountant
You may need an accountant who is a little more involved in the day-to-day operations of your business. You may want to explore hiring a part or full-time in-house accountant to assist you. There are many benefits to bringing someone onto your team, but the cost may be high.
According to Glassdoor, the average salary for an in-house accountant in America is $74,956. This number is lower for Montana ($66,170) and higher for Colorado ($82,930).
As with any employee, onboarding costs are another factor to consider. In 2022, the average onboarding cost for a new hire is $4100.
Now, you need to do some math. As we showed earlier, there are many ways that an accountant can benefit you and your company. Remember, an accountant can save you money with taxes, save hundreds of hours of your precious time, and offer financial advice. Calculate how much your time is worth, and estimate how long you spend each year performing financial tasks. Then, estimate how much an accountant could save you in taxes. An excellent place to start is by roughly examining the effect that zero-based budgeting would have on the finances of your business. A good accountant can quickly restructure your company to follow this.
If you find that an accountant will save you more money than they will cost over the next one to five years, hiring an in-house accountant is a no-brainer.
If you run a more significant, more complex business that already has bookkeepers or accountants, you may also consider hiring for a management position. Many mid-sized companies utilize controllers and CFOs to guide them to financial success.
What’s the Difference Between Accountants, Controllers, and CFOs?
If you’re looking to hire someone to manage your finances, you may be curious about what position you need to create. Depending on the size and complexity of your business, you may be able to get away with a singular accountant or bookkeeper. However, if you are expanding rapidly and plan to go big, you may need a controller or CFO.
How Will a Controller Benefit My Company?
You can think of a controller as a senior accountant that takes a managerial role. If you already have a team of accountants and bookkeepers, you may want to look into hiring a controller to focus and lead them. As we mentioned earlier, some accountants can give you strategic financial advice. A controller is specifically tailored to this task and can help you with much of the following:
- Contract reviews
- Policy writing and implementation
- Financial system installation
- Financial management reporting
Should I Hire a CFO?
CFOs operate in the broader sense of business finance. Unlike accountants, bookkeepers, or controllers, they don’t spend much time in the weeds. A CFO can assist you in general growth operations; they will shape your company's future more than anyone else. Some specific activities that a CFO will perform are:
- Raising capital
- Investor relations
- Annual financial operation planning
- Contract negotiations
Hiring the right accountant, controller, or CFO is tough, but J2T can help! We recruit excellent financial candidates for a wide variety of positions. Please contact us today to find out how we can fill your position with the perfect candidate.
Accountants Will Save Your Company Money
After examining the ins and outs of accountants and your company, it is crucial to consider your options. No matter which path you go down, hiring people to manage your company's finances is a great move. It will save you so much money in the long run; you will reap the benefits in droves.
While it may seem like a big step to begin working with an accountant in favor of using financial software, don’t fret. After all, accountants are experts, and they will make your life so much easier in many ways.
One final benefit of accountants that we haven’t mentioned yet is stress reduction. Nothing is more important than your well-being as a human being. As a business owner, you should take every opportunity to take the weight off your shoulders. Running a company is one of the most stressful occupations out there. An accountant can help you alleviate some of this stress, and that alone makes them worth it.
Written by Jordan Gibbs
Jordan Gibbs is a content writer and growth manager for The Work Spot MT, a Montana-based job posting website. He has a Master of Innovation Management degree and a Bachelor of Mechanical Engineering. Jordan loves to be creative and spend time outdoors. He is passionate about nature; he’s happiest when he’s in the mountains.