In the early start-up years, many small business owners rely on a contract bookkeeper to handle the accounting. Some even deal with it themselves.
However, as the business grows, a full-time accountant may become necessary to keep the finances on track. Judging when to make this change can be difficult.
According to Keith Marshall, Managing Director of Accounting for Small Business, there are two types of accountants – those who focus on tax and those who specialise in financial management.
“It’s hard to find someone with both skill sets,” he says. He advises people starting out in a small-to-medium enterprise to first consult with a tax accountant or lawyer that specialises in business structure advice. That will ensure you set up the best tax position and that your assets are protected from your business risks.
You should engage a management accountant to set up your chart of accounts, so that your business reports are meaningful and to assist you to set up your KPI’s. A good management accountant will also be able to assist you with cash flow planning and give you advice on managing growth.
Once you your accounts are set up, the decision to employ a bookkeeper or accountant becomes a matter of the size of your business and the skills you have in-house.
It’s important that an accountant understands your industry.
Marshall says that if you’re managing insurance premiums within a specialised system, your day-to-day bookkeeping requirements might be quite small.
“A lot of people might use MYOB or QuickBooks to manage the back end, while invoices and income are done through the main broker system,” he says. “But there’s no point having a great insurance person enter accounts into QuickBooks. If it’s not their strength, it can take twice as long.”
In that case, a professional bookkeeper couldbe the answer. You may need to pay them a higher hourly rate, but they’ll probably get the job done faster because it’s their core passion.
Marshall says the mistake many small businesses make is expecting their bookkeeper can handle accounting tasks, like business reporting or calculating KPIs for your business. For that you really need a management accountant.
While it’s important that an accountant understands your industry, you should also ask whether they’ve actually worked in a small business themselves.
“Many have only ever worked inside an accounting practice and having small business experience is important,” says Marshall.
You should also find out if your tax accountant is a registered tax agent, if their business is a registered public practice, and if they provide training and support for the accounting software you’re using.
Finally, ask if they work in a team or if they’re a sole practitioner.
“If you want someone at the end of the phone to support you and a sole practitioner becomes ill or goes on holidays, you might wait a month or more for an answer,” says Marshall.
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