Small business owners seeking to make the most of every penny often try to save money by doing without hiring an accountant. With software solutions such as QuickBooks or Xero that make bookkeeping easier than ever, this might seem like a wise move.
But even if you’re adept at using accounting software, you could be selling your business short by not hiring an accountant. So how do you make the right choice?
First, there an important thing to note: While bookkeeping involves maintaining financial records, accounting encompasses much more.
A certified public accountant (CPA) can provide a wide range of services, including:
However, hiring an accountant can also be a substantial financial investment. Before making the decision, do a cost-benefit analysis to see if hiring an accountant makes financial sense for your business.
In a cost-benefit analysis, you list and estimate all the costs of an action as well as all the benefits of that action, assign a dollar value to each, add up the two columns, and subtract one from the other to determine whether the action is financially feasible. Generally, you assign a time frame to the costs and benefits—in this case, a three-year period might be reasonable.
Suppose you own an IT consulting firm and handle all the bookkeeping yourself using QuickBooks. You’re so busy that bookkeeping falls to the back burner. As a result, you’re late getting invoices out and cash flow is suffering. Should you hire an accountant?
Before calculating the cost-benefit analysis of hiring an accountant, gather some information.
Think through all of the possible costs and benefits, not just the short-term or obvious ones. Here are some you might itemize:
Monthly cost of accountant’s services
Some costs and benefits are easier to quantify than others; in many cases, you’ll be using estimates or averages. However, by thinking through the costs and benefits in financial terms, you’ll be better able to assess the real value of hiring an accountant.