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Does Every Small Business Need an Accountant?

This post is also available in: Singapore

Being a small business owner is tough as it is.

It gets especially difficult to handle the day-to-day operations with a small workforce, where resources are spread thin to start with.

Thus, it’s always important to ask for help before your business reaches its breaking point.

One of the best ways that small business owners can run a well-oiled organisation? Hiring an accountant, of course!

Now, the thought of hiring an accountant for a small business of 10-15 people might seem unnecessary.

But don’t dismiss it right off the bat.

If you’re a business owner that’s well-versed in bookkeeping and basic accounting knowledge, you might feel up to managing the overall finances of your company.

That’s totally understandable, but in many growing organisations – extremely risky.

As your business starts to grow, it becomes much more likely that you’ll have to devote your time and effort into other big-picture strategies.

You take a huge risk trying to manage everything by yourself – especially if it leads to small oversights on your end, financial tracking problems, missed invoices, etc.

With this in mind, outsourcing accounting might be your best bet to still reach your financial goals.

What does a business accountant do?

Business accounting is responsible for all financial record keeping with respect to monitoring the overall financial health of the business.

In essence, this includes several functions such as collecting, monitoring, analysing, and presenting financial data to a business.

Of course, every business accountant will have responsibilities varied according to the industry or size of the business.

This is depending on whether a business needs general bookkeeping or more extensive financial controlling – but it becomes an accountant’s job to navigate the financial terrain for businesses as a whole.

What are some financial challenges for SMEs?

Even before taking on vast world of entrepreneurship – many SMEs already understand the challenging road ahead of them.

According to the US Bureau of Labor Statistics (BLS), an estimate of 20% of businesses fail within the first 2 years.

The statistics get more unfortunate as the years go along – with 45% shutting down during the first 5 years, and 65% in the first 10 years.

In research conducted by CBInsights, 42% of small businesses fail because of a lack of demand for their services or products.

Following close behind – 29% of businesses fail because they run out of cash and 23% fail because their team lacks the correct skills to run the business.

Some common reasons for a business’ failure in the financial aspect include:

  • Lack of funding.

A good portion of small business owners relies on outside capital and investors to get their operations off the ground. Failing businesses, on the other hand, will spend much more than they’re profiting – which won’t reflect well on their financial statements at the end of the day, ultimately costing those forms of investments to dry out. Improper financial management also threatens funding; as investors will stray away from a business that has unkempt records, unstable financial data, and lack of transparency with their financial goals.

  • Improper product and services pricing.

To boost visibility, many business owners price their products and services significantly low compared to the rest of the competition. Whilst that might or might not get them noticed in their industry – this strategy is often impossible to carry out in the long-term. Expenses such as rent, marketing budgets, salary, production and more will outweigh profit and income – leading businesses no choice but to close their doors to the public.

  • Expensive human capital resources.

Every startup or small business needs an adept team behind the scenes to help them stand out in a saturated market. But of course, this doesn’t come cheap. Not every business will have access to angel investors or big capital funds to start off with – which mean that at the very start owners will have to pay for their team out of pocket, or even incur losses on behalf of the company to pay fixed salaries. With the lack of solid business advice, some owners might be completely in the dark when it comes to how long their business can sustain themselves paying fixed salaries and finding new hires without shutting down.

How will an accountant help SMEs?

Business accounting is a key element to growing your small busines.

Outsourcing accounting will positively impact better-informed financial decisions in your company.

Some benefits of hiring an accountant are:

1. To minimise business expenses.

Improper bookkeeping will hit you where it hurts, by incrementally increasing your expenses.

This is because small business owners and startup founders are often unaware of hidden, unnecessary fees and irrelevant costs that are draining their budget.

A good accountant will help your business zero down on these costs, and either eliminate them altogether; or find a better alternative.

For instance, once a good accountant has arranged the books (transactions, expenses, sales, profit and loss statements, etc.) they will be able to notice right away an expensive monthly cost – like outdated accounting hardware maintenance fees.

If they’re able to switch to a much more affordable alternative cloud-based software, this could save your business thousands of dollars yearly.

Other ways that an accountant’s good business advice might help would be to:

  • Implement stricter financial controls amidst your team’s spending.
  • Correct imbalanced accounting sheets or amend errors in profit and loss statements.
  • Advise you on the best ways to find savings with vendors (if there’s a discount to paying your vendors on time, etc.

2. Carrying out compliance duties.

It might be straightforward to do your own tax filing, but it’s a whole other ball game for businesses.

On many instances, doing your business taxes with the help of an accountant can increase your qualified relief and reduce deductions.

Of course, this is because accountants have a keen understanding of the legal framework – and can navigate this much faster.

While you may have the basic foundation of filing taxes – accountants can go beyond that and advise you on the proper regulations to follow, what to list as expenses and communicate with the relevant revenue organisations to make sure that you’re never getting short-changed.

3. Managing all business assets.

Given that accountants are the financial controllers of a small business – they’re also able to directly oversee your assets.

This includes the rent and maintenance fees of your property, equipment, and other items.

If you ever need to be away from your business, connect your outsourced accountant to your team of managers.

This ensures that even without your close monitoring, you’ll still be able to receive comprehensive profit and loss statements and other reports indicating your business’ operations while you’re gone.

For you, this is an excellent lesson on delegation.

With the world on their shoulders, business owners might be prone to stress and overworking.

When you delegate your company’s asset management to your accountants – you move towards more effective day-to-day operations that will improve your financial health in the long run.

4. Smoother loan applications.

COVID-19 hit small businesses hard, and there’s no shame with applying for a loan to keep your doors open.

Of course, banks are much more cautious about who they lend out money to now.

What better way to make a good case for a loan than having a solid business plan and extensive bookkeeping data to present when the time comes?

These financial records (compiled properly and regulated) will avoid roadblocks or further delays down the road when trying to get your application approved.

Equipped with a smooth, high-performance business accounting software by your side – your accountant will even be able to back your case up with solid data.

Of course, they’ll also be able to narrow down what loans to look at based on their interest rates, repayment periods and other benefits that come with them.

5. To create a future-proof business plan.

Thriving businesses make informed decisions and avoid guesswork or personal feelings.

An accountant will be able to advise you on the best paths to take.

Whether or not you need to figure out a budget-friendly supplier strategy or how to attract angel investors – your accountant will be able to present these routes for you.

They do this by analysing the data from all your past reports and coming up with a proper financial strategy or budget to get you closer to your goals.

Here are some questions that they might be able to answer for you when your business grows.

  • How will X number of additions to the team affect operating costs?
  • What kind of insurance will I need to secure my assets?
  • Can I take out another loan to grow my business?
  • Should I expand to other countries to seek growth? Can I afford to?

How do you find a good accountant for SMEs?

Accountants differ in terms of specializations, so it’s important that you understand what you’re searching for.

  • ACCA qualified accountants – Association of Chartered Certified Accountants (ACCA) includes accountants whose skills are more geared towards Audit, Taxations, Compliance and Banking.
  • CPA and CIMA qualified accountants – Certified Public Accountants (CPA) and Chartered Institute of Management Accountants (CIMA) would be your best bet if you’re a small business owner in commercial industries; where their management expertise would help your company thrive.
When is it the right time to hire an accountant?

Businesses usually hire accountants during tax seasons – as it’s required for professional accountants or auditors to do yearly filings for compliance.

It’s also common for companies to seek bookkeeping and accounting advice in the middle of a business expansion.

This presents business owners with the perfect opportunity to measure an accountant’s positive impact on the company’s growth.

Business expansions can include the decision to market to other countries, increase their warehouses across a location, hire more staff for a project and even to attract more potential investors.

From creating financial reports to tax preparation, accountants are the gatekeeper and navigator of all your fiscal goals.

When you have a solid accountant at your back – they’re able to pinpoint the exact areas you’re able to improve sales and revenue; as well as areas to cut back on.

So at the end of the day, hiring an accountant shouldn’t be viewed as a burden – but an investment for your business.

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