Last week we received an inquiry from a young woman in North Carolina. She told me that she and her husband wanted to start a commercial landscaping business. She said that neither of them had ever worked for themselves, and that they had no idea what to do. She wanted help in starting and running the business “from the ground up.”
I told her that she was actually talking to the wrong guy. I explained that the “go-to” person to speak with about starting a business and running it in a way that would minimize mistakes was a local accountant.
She thanked me for the advice and went along; I hope to find an accountant. This got me to thinking that there are probably many would-be entrepreneurs who have the same question, and thus, the inspiration for this article.
To put some meat on the bones for this piece, I decided I needed to talk to my friend, Craig Satz, a CPA I know in Mesa, AZ, whose clientele is made up mostly of smaller businesses.
After describing the purpose of my call, he explained that the work that accountants do for small businesses falls into two categories: business services and tax services.
And, he mentioned, both of these subjects must be addressed before the business is launched, and thereafter on a regular basis as the business grows and prospers.
Some of the business issues that a small business must consider include:
- New Business Formation– Your accountant can help you get off to a good start with your new business in many ways:
- Select a business structure that best fits your needs by evaluating tax advantages, legal exposure, ease of operation, and portability should you need to relocate.
- Setting up Articles of Incorporation (Corporation) or Articles of Organization (LLC).
- Establishing an Employer ID number.
- Determine your start-up budget and working capital needs.
- Establish billing and collection procedures.
- Set up a home office so you can benefit from certain tax advantages.
- Comply with employment laws so you don’t get fined or have unhappy employees.
- And much more.
- Small Business Accounting – Small business accounting will include helping to reconcile bank statements, preparing monthly or quarterly financial statements, checking your general ledger for accuracy, and helping you determine how much of your accounting you can and should do yourself, and how it should be accomplished. For example, your accountant can help you decide if you are you a candidate for QuickBooks and if so, do you need to be trained to use it properly.
- Payroll – Your accountant can help you decide how to do your payroll. In some instances it might be best for you to do it yourself, or you might decide that you want your accountant to do it for you. Or, depending on your situation, your accountant might recommend a payroll service such as ADP Payroll Services.
- Audits, Reviews, and Compilations – Some companies will be required by lenders or customers to have their books audited by an independent third party. Many accountants will perform audits for their clients. Reviews and Compilations are similar to audits but less expensive and the requirements are not as strict as an audit.
- Internal Controls – At times, you may need a trained outside professional to evaluate your company’s operations to determine if the appropriate controls are in place to ensure proper handling of resources and to protect yourself and the company from problems such as employee theft.
- Cash Flow Management – Everything is better when your incoming cash exceeds your outgoing cash. A cash crisis can be emotionally devastating, and it can even kill your business. If you’ve ever had to beg, borrow, or steal to cover payroll, you know what I mean. Your accountant can help you understand when, where, and how your cash shortfalls will occur and help you determine the best sources for meeting your additional cash needs.
Tax services that accountants provide to small businesses come under three headings:
- Tax Preparation – Tax preparation will include preparation of federal and state income tax returns, as well as sales tax returns for businesses that sell products at retail like a restaurant or a hardware store. A special note: if you are in the construction business where you sell labor and material, or if you are an e-commerce company, sales tax issues can be very complex.
- Tax Planning – Tax planning is the key to successfully and legally reducing your tax liability. A good accountant will proactively recommend tax saving strategies to maximize your income and the value of your business.
- Resolving Tax Problems – Once in a while, almost every business owner or his or her business has a tax problem that will require the help of an accountant. Examples include representation at IRS audits, payroll tax problems, IRS payment plans, and unfortunately, others.
Starting and managing a successful small business is bone-crushing hard work; just ask anyone you know who does it. Simply writing a great business plan isn’t enough. That’s why you need the services of a trusted advisor, your accountant, who can help you make informed business and financial decisions. By the way, if you need help in finding an accountant, you might want to visit GoodAccountants.com, one of many online accounting directories.