Hiring an accounting firm is one of the smartest things you can do for your business. At least that’s what people say, but is it true? What do those folks do for you that you can’t do yourself? We can’t speak for every accounting firm, but we can talk about what we do for our clients on a monthly basis and what we feel you should expect from an accounting firm.
To do that, first we’re going to have to talk about what we do BEFORE you’re a monthly client. Then, let’s talk about the review stage and what we do for our clients to help them achieve their specific goals. OK, let’s start at the beginning: onboarding.
The first thing any good accounting firm will do is listen — and learn about your business. That’s what the onboarding phase is all about. They’ll ask you about your goals, what you’ve already done for tax planning, and create a framework to regularly generate the financial blueprint of your business, called a financial statement.
What are your goals?
Everyone wants to make money with their business, but that can take a lot of forms. Are you a new business looking to grow? Or, do you want more stability and to maintain where you are currently? Are you looking to sell? Or, perhaps you want to develop an exit strategy for later? Once the accounting team understands where you are and where you want to go, they can help build a roadmap to get you there.
On a practical level, this is going to include looking at your accounting inputs and outputs.
From there, they’ll put all that info together into a financial statement, typically using QuickBooks. They’ll share that information with you and show you how it tells your business’s story. They'll manage fixed assets, purchases, and sales; record all your data; then go to the review stage.
The review stage has a couple of goals in mind. The first goal of this state is to make sure that the financial statement is prepared accurately. Without accurate data, it is difficult to make good decisions. So the first line of review is filled with quality control checks. For example, maybe some expenses need reclassing, or we need additional information on a transaction the business had. The second goal of the review process is to find data that can help you achieve YOUR goals. They’ll look at trends, tax opportunities, and the overall financial health of your business. Let’s look a little closer at three different goals and how the review and implementation stages might play out differently.
First, they’ll start with your financial statement and try to forecast by looking at some trends for you. From there, they’ll take a look at your revenue trends and cost ratios. Are they good and appropriate for your business type? Are revenues going up, but profits going down? How can they improve them? Are you in a financial position for potential acquisitions right now? If not, they will get you on a schedule and plan to make sure that’s an option in the future. they’ll also make sure that you have good enough financial advancements so that you’re able to find financing if you need it.
Since they know that growth is your biggest goal, they can come up with ways to implement strategies that will promote growth while coming up with tax strategies that can help with these goals.
This is all about not being surprised when it comes to taxes. These business owners will work with an accounting firm to just nail down what needs to be paid, but without paying too much. Estimates for taxes will be paid, your financial team will also go over unexpected purchases that may have come up (or may be coming up soon), or any other oddities or irregularities. This might sound simple, and if you hire a good accounting firm it is, but making sure that you’re set come tax season makes it absolutely VITAL to your business plan.
If you’re getting ready to sell your business, there’s a lot of work that needs to be done. That mainly involves scrubbing up your financials. Are they properly identifying fringe benefit expenses that may not be incurred by the next owner? That can include things as small as an iPad or company phone, or as big as a company car. They'll also look at nonrecurring expenses, having them tracked so that they can show any prospective buyers where (and why) they occurred - since these transactions are not generally factored in the value of your business. Your accounting firm will provide bottom line support and help you come up with a realistic exit price.
Some folks don’t want to pay for back office tasks, or they only want to pay them once a year. While we understand the thinking, we honestly can’t recommend it. When you do that, you’re leaving any potential accounting firm a mountainous job with one hand tied behind their back. If you wait until you drop off your tax papers in February, you’ll be less flexible with taxes, have less options in general, and may even pay taxes on stuff that you wouldn’t have had to if you would have been paying a monthly accountant.
On top of that, the general future of your business will be muddy and your goals will be harder to reach. That’s why we recommend so much that you move to a monthly, ongoing relationship with an experienced accounting firm that will take a comprehensive approach to your business. They’ll give you a clear, focused picture and a monthly game plan of how to create your dream business. Ready to start? Let’s talk!
In the meantime, here's an article we wrote to help you brush up on how to read your financial statements and show you how they tell a story about your business: How to read your financial statements