When Should Small Businesses Hire an Accountant?

By Guest Author | accounting | May 24, 2021

Accounting is an essential business function that can’t be replaced. Well-managed finances are key to a thriving business. But while freelancers and solopreneurs may be used to handling all the elements of accounting, from preparing taxes to reconciling bank statements, there comes a point in your small business growth that hiring a professional may be the best path for you.


But deciding who to hire isn’t always straightforward as consulting with an agency or interviewing job candidates. There are many different types of accountants, and each can play a unique role in your business.

In this article, we’ll help you understand the types of accounting professionals you may encounter in your search, as well as the many ways in which you can customize your relationship with them.

When Is It Beneficial to DIY?

Handling your own accounting is a great way to save costs if your financial situation isn’t complex. For example, if you’re a single-member LLC with no employees, your business doesn’t need to deal with payroll or business taxes (thanks to pass-through taxation).

However, as your financial situation becomes more complicated, the pros of hiring someone start to outweigh the cons. Accountants can help you maintain key records, find tax deductions you’re eligible for, and spot opportunities for growth. They can keep your tax returns accurate and your finances healthy.

Professional accountants can be key players in your business if:

— Your time spent on accounting is hindering your ability to strategize and lead
— You own a rapidly growing business
— You’re taking on investors
— You’re taking on business loans
— You need advice to improve your company’s financial standing

Types of Accountants

Once you know that you need an accountant, it’s time to figure out what type of accounting professional you need.

Certified Public Accountants (CPAs) and Certified Management Accountants (CMAs) are two common designations you’ll encounter. Accountants with either of these designations must pass extensive exams and meet continuing education requirements. CPAs and CMAs can both offer fairly comprehensive services, but whereas CPAs are more likely to help with taxes or financial analysis, CMAs can help with financial strategy.

Some accounting professionals may offer specialized services, instead of complete year-round help. For example, you can find investment accountants and tax examiners who help with a specific segment of your accounting needs.

Defining Your Business Relationship

If you’re just now considering hiring an accountant, the odds are that you don’t need a full-time, in-house professional. Good accountants typically require at least a $75,000 salary, and many businesses don’t have near the volume of accounting work for a full-timer until they’re pulling in over $1 million revenue.

Hiring part-time can be a great way to reduce in-house accounting costs, while still getting immediate access to a dedicated accountant. Part-timers fully understand your business and can collaborate with other departments (for example, helping HR with payroll).

However, if you don’t have much accounting experience, you may have limited oversight over your in-house professional. It’s also up to you to provide the right resources and training to keep your employee up to par with other professionals.

Outsourcing to a firm or freelancer can help you guarantee the quality of your accountant, thanks to the professional oversight that they have in-house. When you outsource, you can still have an accountant on call by choosing a retainer-based provider. Outsourcing can also be a great option for small businesses that only need a few services per month, as many firms allow you to pay hourly or per service.

A typical accounting firm or freelancer costs $100-$275 per hour.

Common Accounting Services

If you’re not hiring an accountant for all-inclusive services, you’ll need to identify what you need help with versus what you can take care of in-house.

Some accounting functions are simpler than others. For example, you can successfully manage your own bookkeeping without any experience. And if you go cashless, you can automatically input all your transaction data into accounting software like Xero or QuickBooks.

But for other accounting needs, a professional can be a tremendous help. Here are four services that may be worth outsourcing or hiring in-house for:

1. Startup Business Planning

Accountants can be a great resource when you’re looking for advice to start or grow your business. This is especially the case for startups, which are built to fast growth and often require investment. Accountants can help you:

— Choose the best legal structure before you register your business
— Create accurate financial projections on your business plan
— Set up a solid accounting system from the get-go, so you never have to pay someone to clean up your mess

2. Working With the Government

Some types of businesses require a significant amount of government paperwork. Corporations, for example, need to file annual reports that include their financial statements and financial outlook. With a professional’s help, you can submit your paperwork on time and stay up-to-date on important legal requirements.

Accountants can also help with payroll forms, keeping records of stocks, and more.

3. Filing Taxes

One of the most common reasons why small business owners hire accountants is for tax filing purposes. Taxes can be incredibly complex. The average business filer (including freelancers) takes 24 hours to fully file taxes.

Accountants use their expertise to not only complete your tax filing faster but also do so with greater accuracy. This can help you avoid triggering a tax audit — though if you’re called for one, your accountant can help represent your business. If you outsource to a firm that offers audit insurance, you may not even have to pay.

While hiring a professional does cost money, it can also help you save a significant amount, too. As you develop a relationship with your provider, they can easily help you identify deductions and even credits that you can qualify for.

4. Changing Your Business Model

A big change in your business is bound to impact your finances. Whether you’re moving operations online, franchising your business, or changing your legal structure, accountants can help you along the way. This is where having an in-house accountant or a firm on retainer can be helpful, as you can reach out for advice whenever you need it.

Start Delegating

When your tax situation starts getting complex, hiring an accountant can be the best move you make. It gives you more time to focus on business strategy and all that you do best. Plus, a professional can keep your finances well-organized and your tax and government paperwork accurate — all while providing strategic insight. With these tips, you can start deciding what type of accountant and accounting services you need and at what capacity.