Should you hire an Accountant or dabble with Accounting and Taxes yourself ?
When you start your business, one of your first decisions is to determine who should manage the accounting activities. The three choices are to assign someone on your team to do it, do it yourself, or to outsource to an accountant.
You might find it difficult to hire someone with the right skills to prepare your company’s financial statements, manage bank account operations, analyse economic data, and make the outgoing invoices at an affordable rate, as a result initially you might have been doing all the bookkeeping. As a prudent small business owner, you should reflect whether you have the skills and experience to do this job. It is imperative to do a cost-benefit analysis to determine whether to hire an accounting firm/individual or do the accounting work yourself.
Managing employees, catering to customers, and devising business plans on the top of accounting work, can easily make you feel that you do not have time to focus on your core business strategy or enjoy anything outside of your work life.
For example, let’s say it takes you 250 hours per year to prepare your monthly financial statements, prepare payroll and file income tax returns, and your time is worth $80 an hour. That’s a cost of $20,000 to do the books yourself. Moreover, there’s always the risk you’ve made errors – especially if you’re multi-tasking like most business owners . A professional cloud accounting firm can deliver quality accounting and tax service at a considerably less price of doing the same work .
You should also notice that it is you, the taxpayer, who signs the tax return. Therefore, you are legally responsible for all the statements and claims made on your tax return.
If the CRA finds evidence of errors on the tax returns, the penalties and interest can add up to an enormous sum, moreover, if the CRA finds evidence of fraud or misrepresentation -there is no limit to the number of years the CRA can go back and revisit.
When you look for tax preparers, please be aware that tax preparation business is facing cut-throat competition as some tax preparers only win business based on their ability to help the taxpayer pay less tax and get a larger refund.
CRA’s principal targets are unscrupulous tax preparers and their clients.
These self-styled accountants usually have no formal training and are unlikely to be accredited accounting professionals with Certified Public Accountant credentials. They might counsel you into “grey” or “aggressive” accounting practices, with the offhand reassurance that “the taxman will never notice. And if he does, we’ll say it was a mistake .”
Regardless of whether or not a tax preparer is under investigation, typically the Canada Revenue Agency will look at the tax returns for all his or her clients. All the clients are then at risk of investigation, audit, and reassessment, and will be liable for interest and penalties on unpaid taxes.
Your best protection is to be careful in your choice of tax preparation assistance. Certified Public Accountants are subject to regulatory authorities and are required to follow the code of professional conduct that assures you that their accounting practices are tax compliant and trustworthy, so be wary of all others.
Finding the right accountant can make all the difference for your small business as your accountant will become heavily involved with the operation of your company so this decision should be taken carefully.
You should compile a list of all the things you’d want your accountant to assist you with, after that shop around for the firm/individual that best suits your company’s needs.
Some important considerations to be kept in mind while looking for the accounting service provider are:
What are their qualifications and experience?
Check the qualifications of the service provider, are they certified public accountants or bookkeepers, or something else. It’s desirable if they’ve had multiple clients across diverse industries, inclusive of the industry your small business is in, as this reflects that they’ve had experience with problems which you’re expected to come across.
Have the accounting firm/individual received any recommendations from their clients?
You can check this from online review sites. Just think of it like checking references. Pay attention to what those recommendations say.
How motivated are they about their services?
Are they enthusiastic and passionate about their work, you can check this by asking valid questions such as how they will manage the most complicated aspect of your company’s financials, and reflect on the suggested solutions. Don’t forget to ask yourself if you are comfortable with their style of communication. Multilingual firms usually assign a staff member who can talk in your language, as this can remove communication gaps.
Are they up to date with the latest changes in technology?
A common mistake made by many businesses is that although they might be able to frame an operating budget, they tend to ignore the capital cost of improving technology in-house, which can prove costly. If the accounting firm is well adept with the latest changes in technology, it can offer you the benefit of the newest technology such as cloud computing apart from helping you manage organisational change by providing professional support and guidance.
Does the accounting firm/individual fit your accounting budget?
Consider a variety of scenarios – one fee structure may make sense while your business is small but could become unsuitable as it grows.
It is the best practice that the fees should be discussed upfront as much as possible, so there are no mismatched expectations.Many professional accounting firms which traditionally avoided bookkeeping engagements due to relatively minor contribution per hour are starting to offer bookkeeping services using the latest cloud computing technologies which are faster, reliable and cheaper than the traditional bookkeeping practices. As a result, the professional services of CPAs who stay on top of the current laws and court cases, have become increasingly affordable to small business owners.
If you’re a new small business owner who needs a lot of hand holding, don’t increase your expenses by hiring a large accounting firm right away. Don’t overestimate the needs of your business. If there’s a smaller local firm that can do the things you need while giving your account personal attention it deserves, they’re probably going to be your best choice.
The information provided on this page is intended to contain general information. The data does not take into account your situation and is not designed to be used without consultation from accounting and financial professionals. Cloudiverse CPAs will not be held liable for any problems that arise from the usage of the information provided on this page.