When should I hire an accountant as a small business?

If you’re a new small business owner managing your own finances and bookkeeping, you may be wondering when is the right time to hire an accountant. After all, you’ve got plenty of other jobs to do, including overseeing sales and marketing, dealing with customers, and making plans for how to grow your business. 

In this article, we’ll break down all the points to consider to help you decide when it’s the right time to hire an accountant for your business. 

What small businesses should consider before hiring an accountant

Hiring an accountant for your small business is an exciting milestone that reduces your administrative burden and helps you meet your goals. There are many factors to consider before adding an accountant onto your team, including your budget, your tax situation, the size of your business, and the level of accounting expertise that you or your staff already have. 

While not every small business needs an accountant on the payroll, as your company grows it will likely make sense to bring an accountant onboard or to partner with an accounting firm.

An accountant can help you update your financial statements for annual reporting or for use in a business plan. They can also look at your financial situation to help you determine the best business structure for your company. 

Is there a specific problem in need of solving?

Often business owners hire an accountant because they’re experiencing an event (like a funding round or a company audit) that requires deep accounting expertise or filing their tax returns has gotten more complicated. If a company is looking for additional capital via investors or a business loan, an accountant can ensure that its financial statements are accurate and complete.

Alternatively, business owners may look to hire an accountant when they’ve reached a point where they recognize that they’re spending too much time on accounting tasks. Plus, in outsourcing this hire, they can free up time to focus on more operational duties. Regardless of the reason, an accountant can be a valuable member of the company’s financial team. 

How much can I afford?

If you’re hiring an accountant full-time, you’ll need to factor in the pricing of that person’s salary, benefits, and other compensation.

If pricing is an issue, it makes sense at first to outsource the accounting duties, since working with a third-party firm is likely more cost effective. Another option is to hire a part-time accountant whom you can pay an hourly rate, rather than a full-time staffer who needs a salary and benefits. 

Accountant salaries average about $53,000 per year, according to Indeed.com, not including benefits or other expenses. That salary can vary significantly by region, with accountants in New York and Los Angeles earning the highest average salary, at about $62,000 and $59,000, respectively.

While hiring an accountant can be a significant expense, not hiring an accountant can be costly as well. This includes both the cost of your time spent on accounting activities as well as the potential expense of bookkeeping mistakes that accountants identify and correct before they become a serious problem. 

CPA vs. Accountant

While accountants and certified public accountants (CPAs) both hold accounting degrees and may handle many of the same tasks, it’s important to understand the difference between the two. CPAs are accountants who have completed licensing and certification requirements through their state, completed the rigorous CPA exam, and regularly take continuing education classes that require them to stay abreast of changing tax laws.

An experienced accountant can typically handle tasks such as bookkeeping, payroll, and basic tax returns, but they may or may not be qualified to offer income tax advice. CPAs typically cost more than accountants because of their additional qualifications. CPAs are also able to represent your business if it gets audited by the IRS, while an accountant without a CPA license cannot.

When to hire an accountant as a small business or startup

The right time to hire an accountant depends on the size of your business and its specific needs. Accounting software may be able to find tax deductions to help you with some of your goals, but there are several times when it makes sense to work with a professional accountant. 

After you’ve been funded

Whether you’ve raised money via a traditional funding round or you’re using programmatic funding, an accountant can help you make sure that the influx of capital correctly flows into your financial statements and make sure that you have appropriate reporting practices in place.

The right accountant can also help you make projections and run reports to secure future funding rounds from investors. 

When you need to file taxes

While you may be perfectly capable of filing your business taxes on your own, especially if your finances are relatively straightforward, it can still make sense to hire an accountant so that you can spend your time focusing on other things.

Someone with in-depth knowledge of the tax code may also be able to find you additional savings. An accountant can also help you choose the best financial management strategies for your business, which can reduce your liabilities at tax time. 

For advanced FP&A

While financial planning and analysis (FP&A) is a different function than accounting, FP&A need reliable inputs and financial reports from accounting in order to carry out their role of analyzing and guiding the finances of the company.

A good relationship between accounting and FP&A can lead to more innovative and effective financial management. 

If you’re being audited

No business wants to get the notification that the IRS is taking a closer look at their books. However, if that occurs, having a CPA on staff can help ensure that the process runs smoothly, freeing up other employees to focus on their work of running the company.

What to look for in a CPA or accounting service

When hiring a CPA or accountant, either in-hour or through a third-party firm, here are the factors to consider the qualities to consider:

• Cost: It’s important to understand how much an accountant charges, as well as how they assess their fees. For example, will you pay for services on an hourly basis or via a retainer rate?
• Services provided: Some accountants specialize in specific tasks, such as tax preparation or financial document creation. Make sure that the accountant with whom you’re working offers the types of services your business needs -- and can grow with you over time. 
• Experience: Ideally, you’ll want an accountant that has worked with clients like you, in terms of your industry and the size and maturity of your company.  
• Communication style: Look for an accountant that communicates in a way that works for you, whether that’s weekly phone calls or meetings, or primarily via email. If they work for a CPA firm, ask whether you’ll communicate with your accountant directly or via an assistant.
• Certifications: While it typically costs more to hire an accountant with a CPA license, the designation signifies that they have more training and experience. 

What else a small business might need

Hiring an accountant is just one step in building out a startup’s finance function. You’ll also want to think about which other systems and partners can help you meet your goals and better manage your cash flow. 

Corporate cards for employees

Once your employees start racking up business expenses, you’ll want to make sure they have corporate cards to make managing those expenses as simple as possible – for both you and the employees. You’ll want a card, like Ramp, that provides benefits such as advanced spending controls and automated savings insights.

Expense-management software

While a spreadsheet might work in the earliest days of a business, most startups upgrade to expense-management software fairly quickly. That’s because such software can help solve spend control problems and vastly improve the efficiency of the expense-reporting process.

Hiring a CFO

The CFO is an incredibly important role, but it may not be one that you need to fill immediately. Many companies don’t fill this position until they’ve reached at least $1 million in revenue, and even then it’s common to start with a fractional or outsourced CFO until the company grows further. 

Hiring an accountant is an important step to building out the finance function of a growing business. A good accountant is one important partner that can save you time and money. Ramp is another important partner that can save you money by implementing spending controls, negotiating with vendors on your behalf, and delivering other powerful savings insights. ‍

Find out more about how we can help your business grow.