This time of year, everyone needs an accountant, but what’s the actual difference between utilizing a monthly accountant VS an annual accountant? Well, before we get into all that, let’s do a little thought exercise.
You’re an auto shop owner and your business is doing well. You are profitable, with about a million and a half dollars of revenue coming in this year. Right now, you’re not doing your books monthly, and tax season is here. So what do you do? Well…
You gather up all your files. That means check stubs, receipts, payroll reports, etc and you drop ALL OF IT over at your accountants. They look at the mountainous pile of information you just gave them and uneasily say, “OK, we will let you know.”
You don’t hear anything for a few weeks, and then you get a call on March 14th: “Look, I’ve been looking at your books and you don’t have the deductions you need. You need to make a payment tomorrow for $10k to the IRS.”
Did you feel a pit in your stomach? We sure did. A call like this might not put your business under, but it almost certainly is going to add a lot of stress to your life. It also highlights some of the problems with using an annual accountant.
An annual accountant has a huge job ahead of them
Look, we’re not trying to be hard on annual accountants. They have a really hard job! It’s so much work to go back through a business and sort out a year’s worth of information. So much is happening in a condensed period of time – plus they’re having to deal with… you.
We don’t mean that in a bad way, but oftentimes business owners get caught up in the, well, day-to-day of running a business. This means that if they don’t have a system in place to create a P&L...if that’s not happening…it can cause chaos for an annual accountant (and ultimately lose you deductions).
What are some things that add to the chaos?
Well, some banks will only go back 3 months with their records, so you won’t be able to verify information. Other times, you’ll be able to see a charge, but you won’t remember what it was for. How often do you remember what a random $350 charge from last March was? Or it might be as simple as your accountant not having access to a critical piece of information they need to get you the deductions you deserve.
What it's like working with a monthly accountant
The difference here is maybe best described with an analogy. You know how easy it is to clean a basement a little bit every month? A little bit of consistent work makes it SO much easier. Now think about how hard it is to clean a space that you’ve just let go for an entire winter. Now you’re spending your entire weekend lugging junk, organizing, and generally just getting it back to an OK status.
That’s basically the difference between a monthly accountant and an annual accountant. We’re helping you clean a little every month.
We’ll help you set up your reporting processes and teach you the best ways to log your financial information. We’ll also come up with a long- and short-term plan for your business. What are your goals and how do you get there? From there it’s going to be pretty simple. We’ll have items for you to verify and review. We’ll know what your tax liability is going to be. We’ve planned for this.
All in all, when you have the right framework, it's a very hands-off and stress-free experience for you and allows your accountant to spend more time helping you plan for growth.
Why an annual accountant's job is so hard: time
Look, like we said, an annual accountant’s job is a thankless one. They’re probably doing dozens if not hundreds of returns just like yours – all in the span of a few months. As you’ve probably heard before, “haste makes waste.” When you’re doing that much in that small window of time, you’re bound to have lost deductions here and there. In some cases, you might even have a penalty for missed payments.
In the end, time is the biggest factor – for you AND your accountant. Here’s the dirty secret that accountants don’t want you to know: Accounting and taxes don’t have to be that complex. They can be simple if you know your goals, log your numbers, and find a monthly accountant with a system you can get behind and have a partner that has your back.
The good news? We know right where to find one.