Is my small business ready for an accountant?
Many business owners wait until their bookkeeping, accounting and tax filing duties start to negatively impact their business before seeking the help of a professional accountant. Why? Well the reasons are myriad- sometimes a family member or friend has been lending a helping hand and transitioning out of that relationship can be awkward. Sometimes the “do-it-all” mentality that is so important in entrepreneurship can lead a business owner to keep doing activities that are out of what I call their “zone of genius.” When starting out, this enthusiasm is necessary, but as the business grows- this mindset can get in the way and cost money, time and attention.
I’ll give you the example of one of our clients- let’s call her Diane. Diane, a lawyer, spent several years building up her business. At the beginning she did everything herself, including keeping tack of her books and filing her taxes. As her business started to grow and she started to make more money, she was spending up to 10 hours a week on accounting - trying to keep up and trying to keep track. Instead of focusing on maximizing her billable hours and serving her clients she was burning out doing something outside of her “zone of genius”. Her father in law took a few evening courses and was filing her corporate taxes to help out, but she really couldn't tell if there was anything being missed and this was giving her more and more anxiety. She felt that she needed to save money and could not afford to hire professional help. By the way, her bill-out rate to her own clients is $300/ hr. She came to us reluctantly because she was so used to “saving money” by not engaging a professional. What she found was that she was in fact losing money.
If you are not sure if you are ready to seek the help of a professional accountant, read on.
Instances in which you NEED to engage an accountant:
You are starting a new business: get important structuring and startup advice and help on setting up the books.
Your small business is becoming profitable or is on a high growth trajectory: tax optimization / splitting strategies may be available.
Your business is expanding - outside of province, second location, new line of business.
You are looking to get business financing.
You are thinking of incorporating a sole proprietorship or partnership
You are receiving correspondence from tax authorities about filings done without professional assistance
Your professional body has specific requirements and may perform a review/audit of records
You are running multiple small businesses
You have a business or practice as well as other significant sources of income (e.g., rental property, investment portfolio).
You have family members in significantly-lower tax brackets than yourself
You have family members that help out in the business or contribute in some way.
You have heard of a subsidy, grant, government program but not sure if you or your business would qualify, or are confused about how to apply (e.g, various COVID subsidies, R&D credits, co-op credits and subsidies, etc.)
Your volume and complexity of business transactions is growing rapidly
You are having difficulty distinguishing between and segregating business and personal expenses
You are bringing in a partner or investor into the business
You are starting to hire employees
You are keeping track of business accounts in Excel or paper ledgers
You are getting notices of late-filing or late-payment interest and penalty bills from tax authorities.
You are thinking of retiring from your business, selling it, or transferring it to family members.
You have a business and/or significant other assets and are over 50 but have not discussed estate planning with a financial advisor, tax advisor or accountant.
There are many reasons to hire an accountant. Saving you hassles with the CRA, giving you a clear picture of your business, making sure no deductions are overlooked etc... Yet the most important consideration is your time and focus as an entrepreneur. These resources are irreplaceable - do no squander them!
Lozynsky CPA is a boutique, full service accounting firm proudly serving clients in Southern Ontario. Our specialty is helping business owners and their families achieve their financial goals. At the heart of everything we do is helping you define and achieve success. We believe that business is built at the speed of relationships and that's why we promise to devote the time needed to understand your business and provide a solution that gets you where you need to go.