Small business owners start out handling a lot of tough jobs on their own, with up to 70% of them even managing their own finances. If you’re muddling through this challenge without feeling quite up to the task, you’re in good company. At least 60% of your fellow entrepreneurs admit they aren’t knowledgeable when it comes to accounting. Let’s talk about whether it’s time to call for reinforcements–like an accountant.
Manage your own business finances
Before diving into why and when you might want to hire an accountant, let’s discuss what you can do yourself. First, separate your business and personal finances. If you’re running expenses through your personal bank account, it’s time to draw the line. Opening a dedicated business account ensures clear boundaries and makes tracking business finances much simpler.
Make it a habit to track your finances religiously. Even if it feels tedious, tracking every dollar will create a crystal-clear picture of where your money goes. Some of today’s apps make recording expenses as simple as snapping photos of your receipts.
Be sure to budget for your major expenses in advance. If you set a clear budget, you’ll never be caught off guard when big expenses arise.
Remember to set aside money for taxes when creating your budget. To avoid being caught off guard by a large tax bill, set aside between 20% and 35% of your profits for taxes.
When and why small businesses need accountants
When managing your finances begins to feel like running a second business, you will hit a turning point. Are you poring over spreadsheets and still unsure if you’ve done everything correctly? Are you scrambling to gather receipts and decipher confusing forms during tax season? That’s time you could be using to grow your business.
Growth is actually a good problem to have in the area of finance. Every small business owner wants to scale, but the key is to be ready for that growth before it happens. As your revenue increases, so do the complexities of managing payroll, cash flow, inventory, and vendor relationships. An accountant can help you analyze your numbers and develop long-term strategies to sustain growth successfully.
You will also want to seek advice from an accountant as you begin to do more financial forecasting or planning for the future. Without an expert, you might feel like you’re making guesses in the dark. An accountant creates projections and assesses risks to help you make informed decisions.
Using debt as a growth tool
Taking on debt can be a scary prospect for many small businesses, but with expert guidance, you shouldn’t rule this strategy out. When used thoughtfully, debt can be your ticket to accelerated growth. The key is understanding how to use it wisely.
An expert can help you use your debt to invest in revenue-generating resources. Good debt leads to higher profits. For example, you could take out a loan to purchase machinery that increases production capacity, expand your marketing efforts to attract more customers, or hire key staff to manage increasing workloads.
If your business experiences predictable highs and lows, a carefully planned line of credit can help stabilize cash flow and cover operating expenses during slow months. Matching your debt with your revenue cycles enables you to avoid cash crunches and ensures your operations run smoothly.
You can also discover exciting ways to capitalize on low-interest opportunities. An expert can steer you toward the best SBA loans or small business credit cards. These low-interest options can save you a good amount of money.
Being ready for an accountant is less about reaching a specific revenue milestone and more about recognizing when you need help to get to the next level. An accountant is an investment. They’ll take you from feeling overwhelmed to being confident and ready to scale.
Jay Jung is the president and founder of Embarc Advisors.
Photo courtesy Getty Images for Unsplash+
