Saturday, October 18, 2014

Money Mistakes: Outsource Your Accounting Before It’s Too Late

Matthew Toren for Intuit Canada writes: Small business owners like to keep costs as low as possible and are notorious for handling too much of their business themselves to save money. Don’t make this mistake! It makes more sense to your bottom line to hire qualified professionals to handle your finances; a bookkeeper and accountant are essential partners.

Why Both and When?
You should meet your bookkeeper biweekly or monthly to help with day-to-day financial activities. An accountant is an important resource, not only at tax time but also for regular financial planning and forecasting. These should be among the first members you add to your team, even if you don’t hire them as staff. While most small businesses don’t need to hire an accounting professional fulltime, that doesn’t mean you should do it yourself. Outsource these two vital roles and enjoy the benefits. When? Right now.
Here are a few important ways that bookkeepers and accountants work together to your advantage, as well as how they differ.
Keeping You on Track: Your Bookkeeper
Don’t spend the time and endure the frustration of managing your own books. While you should always be overseeing and checking in with your bookkeeper through regular updates and reports, actually doing the work of a bookkeeper is not in your best interest.
What does a bookkeeper do? A good one does more than just input your monthly expenses and income, although that’s certainly an important aspect of the job. Your bookkeeper should be your part-time partner and keep you up to date, providing most if not all of the following:
  • Accounts payable
  • Accounts receivable
  • Bill payment
  • Detailed general ledgers
  • Payroll and check registers
  • Bank reconciliation
  • Financial statements
  • Customized reports
  • Budget preparation
  • Business and workers’ compensation insurance
  • Employee health insurance
  • Payroll services
  • Payroll cheque writing
  • Payroll tax returns
  • Monthly, quarterly and annual payroll reports
  • Federal, provincial and local tax reports and filings
  • Business tax returns and tax planning
  • Income tax returns
  • Tax representation in the event of an audit
Many of these capabilities will overlap with what your accountant does, although the bookkeeper provides your financial foundation. Much of his or her work will feed into a larger, comprehensive accounting function that your accountant will complete – the most important part of which will be your corporate and personal taxes.
Piecing it All Together: Your Accountant
You might think a bookkeeper and an accountant are one and the same; they’re not. You will need an accountant for probably even less time than a bookkeeper, but when you do need one they’re invaluable.
Accountants help you through your quarterly tax requirements and annual tax filing. A bookkeeper isn’t qualified and shouldn’t be doing that for you. In fact, a bookkeeper should be tracking everything in a program like QuickBooks to hand over to your accountant when the time comes. Most of your bookkeeping reports will be crucial information your accountant will use to perform your annual corporate and personal taxes.
Some specific things your accountant should do on your behalf:
  • Examine all financial statements from your bookkeeper to ensure accuracy
  • Ensure financial statements and records comply with local and federal laws and regulations
  • Compute taxes owed and prepare your final tax returns
  • Inspect your account books and accounting systems biannually or more frequently
  • Organize and maintain financial records, in addition to what your bookkeeper does
  • Improve businesses efficiency where money is concerned, such as advising you on large corporate purchases, pointing out shortfalls in your business cycle earnings, and assisting with corporate financial planning
  • Advise you on ways to reduce costs, enhance revenues and improve profits
  • Provide auditing services for your business when necessary
Your accountant will also offer guidance on long-term financial projections and help you with any new tax laws or changes to existing ones. You must have an accountant!
Finding and Qualifying Your Bookkeeper and Accountant
Because you’re handing over your financial data and account information, you want a reliable bookkeeper and accountant. The best way to find them is via a recommendation from someone with a similar-sized business. You want the endorsement of an owner you trust. Ask your referral sources how long they’ve worked with these individuals and about their accountant’s and bookkeeper’s timeliness, cost structure and availability.
A recommendation is essential. Ask entrepreneurs you respect for theirs today.
A few key things to know before contacting a bookkeeper or accountant:
  1. They should be licensed and bonded and current in their certifications
  2. They should be willing and able to provide current and past references
  3. They should discuss their scope of work and pricing with you up front to ensure they offer the services that meet your needs
Finally, if you’re not sure where to get started and you don’t have access to other small business owners in your area, contact the Small Business Association of Canada or the Chartered Professional Accountants of Canada to get references and start finding the right people for you.