Image: Boston Public Library
Updated May 2021
If you're running a small business, you gotta have a solid accountant. Having someone you can trust and call on for advice and counsel will help save you time, money, and energy otherwise spent stressing out. So what are the top things you need to look for when hiring an accountant?
Qualifications
Fun fact โ The IRS doesn't have any laws requiring that an accountant file your taxes. Anyone can file your taxes. Maybe you've filed taxes yourself, or you've had a friend who loves to nerd out on accounting to help you file? If your taxes are straightforward, i.e., you have one W2 form, you're single, and don't own a home, it might be appropriate for a non-accountant to file your taxes.
But as a freelancer, and especially a small business owner, having someone who understands the ever-changing tax code can be helpful.A CPA (certified public accountant) or EA (enrolled agent) could save you time and money. If you ever have the unfortunate experience of being audited, a CPA or EA can help you navigate this. They'll prepare your tax returns to ensure that your return doesn't raise any red flags that put you at risk of being audited, to begin with.
Location
Your accountantโs physical location doesnโt matter. What does matter is that your accountant understands the tax laws that apply to your business? There are different layers to taxes: there are income taxes at the federal, state, city, and county levels, sales tax, and payroll taxes, just to name a few major ones. Your business location determines the tax laws that apply to your company.
Industry Expertise
It's helpful to find someone who understands and serves your industry. If you're an artist or actor, you should work with an accountant who is well-versed in that area of the tax code. Maybe you license creative work or receive royalty payments from publishers? Even if you havenโt achieved the deals youโre hoping to, an accountant versed in your niche will help prepare and position you for certain success. That person will already have accumulated expertise and will be keeping up with the changes.
Services
Accountants and accounting firms offer different services, like:
Preparing and filing state and federal taxes
Monthly, quarterly or annual bookkeeping
Preparing and filing sales tax
Payroll; setting it up and managing it;
Payroll tax returns
Tax counsel and strategy
Financial analysis
Fees
Accounting firms invoice for services differently. Some firms bill a flat rate based on the type of tax return you'll be filing. For example, a personal tax return that is relatively simple and straightforward could be billed at a flat rate of $300 - $600. Solo accountants and small firms often operate in this way. Bigger accounting firms might charge an hourly rate or charge a quarterly retainer. Meaning each time you reach out for tax advice or your accountant prepares filings for you, you'll be billed their hourly rate. If thereโs a retainer agreement, those hours are subtracted from that quota.
Workflow
Some firms will work entirely through email, sending you your returns in PDF format and requesting documents be uploaded to a client portal. Others ask you to sit in their fancy office twice a year. When finding accountants, understanding their workflow is important and how it fits with yours.
Are they going to ask you to send printed bank statements or a google sheet? Will they send you paper returns, or can you file electronically? Will they review your bookkeeping? Are they comfortable using the bookkeeping program you want to use or you currently use? Asking direct questions about their workflow with clients will eliminate the mystery; I always ask, โIf we were to work together, what would the process look like specifically?โ
Interview Your Options
Speak with different accountants and understand how their business works. At a minimum, I recommend asking three basic questions: what experience they have in your industry, what their fee structure is, and what their work process with clients is like? Pay attention to how they answer your questions, not only what the answers are. You should feel comfortable with the firm and person you're working with, comfortable to ask questions about your money and taxes.
A good accountant will help you grow your company, work with you to help you understand how your finances are impacting your business, and play a vital role in managing the complex financial work. Having an experienced, trusted, and motivated accountant in your corner will, without a doubt, save you time and money in the long run. The best ones will play a vital role in the growth of your company.