When it comes to living your dreams and starting your own business, chances are you’ve done your research. As any good entrepreneur, you know the industry or you’re starting a new trend. You’ve got your start-up capital and you’re ready to work. However, unless the new startup is accounting services, you may lack key insights that an accountant can provide. While you may hesitate to add the cost of a professional accountant there are many factors to consider. Whether you intend to handle the books yourself or hire an accountant later, consider these facts.
Doing It Yourself
Many people starting their own business have a solid plan and funds to invest in things like accounting software. Some have the experience and capability to handle simple accounting tasks and even create financial statements. For a startup, the first year is critical in managing cash flow. Yet in this initial phase, manpower and time are often spread thin. Entrepreneurs need to realistically weigh the time needed to fully invest and focus on the business. Passion and tenacity will build a successful business but burnout will dry out those resources. Even if you believe you’re capable of 80-hour work weeks you’re about to embark on, the stress of starting a business can affect the health of both the company and you. Taking a realistic assessment. Don’t let your own burnout kill your dream.
The Red Tape
Depending on the type of startup and the industry, setting up the initial accounting can vary greatly. Whether it’s a corporation, small business or non-profit, most business owners don’t regularly navigate the maze of government bureaucracy that accountants regularly do. You can apply for a Federal Tax I.D. number or file corporation papers yourself. However, navigating city, state and federal requirements isn’t as simple.
As you hire employees, the number of filings, requirements, and regulations greatly increases. Filing requirements vary wildly, including whether or not they can be filed electronically. The number of addresses to send the forms and payments can overwhelm most people. If not filed properly and on time, fines and penalties can cost you thousands. While it may be tempting to do a lot of the accounting in house, consider the complexities of an ever-changing tax code and city/state/federal requirements. Accountants keep up with the tax codes and often have experienced your situation with other clients. They can steer you clear of potential costly problems.
Perception of Your Startup
Whether it’s a small business or investor driven startup, how your new business is perceived is crucial. Often, potential investors will pass on your business if you don’t have professional financial statements or financial projections. Likewise, banks may hesitate to provide loans. Renting from commercial property managers may also become troublesome without a solid financial history. Some larger corporations require financials in order to do business with you, even if they want to buy your product. By having an accountant provide high-quality financials, you’re assuring the companies you do business with that you have a professional giving accurate information about your company. This not only creates a relationship of trust between you and your accountant, but you and the companies you’re doing business with.
The Unexpected Benefits
There are often other benefits that come from this relationship. First and foremost, you’re establishing a relationship of trust that you’re hiring someone whose job is to keep you in business. By hiring an accountant, you’re getting financial advice on keeping your business healthy and running. Because they have had the experience with other business, they can often provide insight and advice that can help you increase your growth and potential expansion opportunities. For example, there may be different grant opportunities or tax credits for certain businesses that you may not be aware of but your accountant helped another business file the paperwork. By having an accountant you get the piece of mind that comes from someone keeping your financial affairs in order and looking out for your interest.