Small business owners who call upon their accountants only when it's time to prepare taxes are doing themselves a disservice. Sure, accountants can fill out the necessary paperwork to keep your business in compliance with the tax authorities, but that's just one function they perform. Many accountants offer a wide range of overlooked services that can accelerate the progress of your small business.
Small businesses that want to get the most out of their relationship with their accountant can begin by communicating candidly. "People are almost embarrassed to ask questions. They think they're the only one with that question or that it's too silly," says Helena Swyter, owner of Chicago-based SweeterCPA. "But an accountant can be a good helper. It's easier for both of us if the small business owner asks questions going forward."
One issue that Swyter runs into repeatedly is how to categorize funds. Some businesses commingle business and personal funds and do not clearly categorize what is deductible. Others do not keep accurate records about business and personal expenditures—such as cash purchases or cell phone usage—making it hard to know what is fully deductible. A good accountant can set up an efficient bookkeeping system when a business is first starting out or review a system that is already in place. "I tell people that the best bookkeeping system is the one that they're going to use regularly," Swyter says.
Accountants can also offer a much needed perspective before major decisions, such as selling or acquiring a business, taking on a partner, or hiring a first employee. Swyter points out that there is considerable gray area when it comes to hiring an employee versus an independent contractor, and even something as simple as knowing whether to buy a piece of equipment in December or January can be fraught with tax consequences that an accountant can unravel. "I tell all my clients that the best thing they can do for me is to ask me questions whenever they have them," Swyter says.
Leverage their network
Because accountants are exposed to different types of small businesses, they can usually offer general advice on a variety of concerns. But in addition to what they know, accountants can help small business owners by who they know.
"Accountants get to be very well networked with other trustworthy professionals, whether it be bankers or attorneys or insurance agents or financial advisers," says Josh Dubrow, a CPA and senior manager at Nussbaum Yates Berg Klein and Wolpow, a New York-based accounting firm. "So if it's not something in the accountant's area of expertise, they typically know somebody that they can direct a small business owner to."
For example, Dubrow is guiding one of his high tech clients through the maze of proposals to raise capital. He is helping them put together a sound business plan, forecasts, and budget. "This is something that I enjoy doing—actively working with my clients to give them a solid foundation in this situation," Dubrow says.
While most CPAs can service a wide variety of businesses, Dubrow concedes that small business owners should interview accounting firms to see if they have expertise in their particular niche before settling on a firm. "You want to know that your accountant has other clients or experience in your industry or has the knowledge base to navigate you in that industry," Dubrow says.
Like Swyter, Dubrow would like to see more small businesses keep an open line of communication with their accountant throughout the year on key business decisions—including those that are not related to accounting—such as entering into a major contract or buying a new facility. Sometimes the accountant can uncover opportunities in the negotiations that the business owner might overlook. "Far too often you hear about these things after the fact, which eliminates tax planning considerations because the year is over or the transaction is done," Dubrow says. "If these [transactions] were structured slightly differently, maybe there could be some sort of tax efficiency [for the small business owner]."
Keep in touch
Besides these major transactions, accountants can handle smaller, day-to-day functions like bookkeeping in some cases. "We do this for a few companies where we are their accounting department, handling everything from paying bills and invoices all the way up to the financials and preparing tax returns," says Kevin McCoy, a St. Louis, Missouri-based CPA.
Some small business owners are not well versed in the financials of their operation, which can lead to costly problems, McCoy says. For example, after he showed one of his clients that the cost of their workers' compensation coverage was alarmingly high, the client is considering negotiating a new arrangement. Regular communication between an accountant and a small business owner is vital to avoid these kinds of mistakes. "I call or email my clients every quarter and encourage them to call me if they need anything in between," McCoy says. "Any farther out than that and you run into surprises that nobody likes."
Case in point: one of his clients had bought stock in another company without realizing that the company was burdened by heavy tax liabilities that the new owner was obligated to pay. "If they would have come to me up front and told me they were interested in buying this company, we could have advised them about checking them out more thoroughly or going for just an asset purchase and not the whole company," McCoy says. "We like to hear from our clients on anything that's out of the ordinary or different from their day-to-day operations."