This tax season, accountants should be making the case to their small business clients that it is crucial to their survival to outsource more of their finances. A recent survey by AccountantsWorld found that more than 50 percent of small business owners spend less than 10 hours a month on accounting work.
While 10 hours a month may be all a small business owner has time for, it may not be enough to sustain their business. According to the U.S. Bureau of Labor Statistics, only about half of small businesses survive through their first five years. With nearly half of the small businesses spending less than 10 hours on accounting per month, devoting more attention to accounting could be a prudent allocation of resources to increase the chances of success.
Many business owners don’t necessarily understand the meaning of the numbers that are fueling their companies. Having a better understanding of accounting can help small business owners better manage their businesses.
Here are some tips for how smaller business owners can best work with accountants to maximize their chances of success.
Tip 1: Work with an accountant who delivers timely strategic advice, not just tax returns
Small business owners should seek an accountant who uses cloud-based accounting software. Cloud-based systems are critical because those are the only systems that allow accountants and their clients to share data in real time. Accountants provide advice on financial opportunities and risks for the business in a timely way.
Small business owners should ask prospective accountants how much they charge for strategic services. If an accountant only includes write-up work and tax preparation on their price list, chances are that’s all they’ll provide.
Tip 2: Work with an accountant regularly throughout the year
Small business owners can greatly benefit from working with an accountant year-round and not just in March and April for tax time. Relying on an accountant for help with all financial aspects of a company, and not just taxes, ensures a knowledgeable eye is always watching the books.
Accountants can help small business owners make and keep more money, and offer actionable insight on topics such as tax deductions, deferred compensation, cash flow, revenue projections and budgeting to better manage the financial health of a company.
Tip 3: Create a plan
A business plan set up with assistance from an accountant can help a small business owner manage cash flow and plan for possible problems. Accountants can help a small business owner identify new revenue streams and other ways to make money that the small business owner may not have considered.
Tip 4: Follow best practices for managing your business finances
Working with an accountant can help a small business owner establish good habits, such as consistently checking receivables and scanning expense receipts into their financial software and regularly entering information into the accounting system.
Another good practice accountants recommend is to keep personal and businesses bank and credit card accounts separate.
Smaller businesses that work with an accountant who utilizes cloud-based solutions are more likely to have a better understanding of the numbers behind their company. By having a clear picture of the health of their company easily accessible, managing day-to-day operations becomes easier and achieving growth and profitability becomes less daunting.
Choosing the right accountant, relying on an accountant for year-round, strategic insight enhanced by cloud-based programs and following best practices can be the difference between the success and failure of a small business.
Chandra Bhansali, Ph.D., is co-founder and CEO of AccountantsWorld, and is recognized throughout the accounting industry for developing cloud technology for accountants. Consistently named one of the “Top 100 Most Influential People in Accounting” by Accounting Today magazine for the past decade, he is a member of the American Management Association, IEEE, ACM and CEO Club. He holds a Ph.D. from University at Buffalo, New York.