Running a business is a 24 hour job. You’re also trying to act as a chief financial officer. Then, at the end of the year, you finally call your accountant to have them file your taxes. They review your information and hopefully ask a couple of questions. Then you sign your tax forms and go back to your business. This is wrong. Let me tell you why.
Here are the top 5 reasons a small business owner needs to be in contact with your accountant all year long.
1. GET WHAT YOU PAID FOR
Accountants hear a lot about how much they charge. Enrolled Agents, CPA’s and tax attorney’s are all required to get education updates each year to keep up to date on tax law and expand their overall knowledge and experience. When you sit down with an Enrolled Agent/CPA/tax attorney , you should be getting the rewards of that knowledge when it comes to tax planning for your business. That’s what you are paying for when you pay those fees to file your taxes or do your accounting (or at least you should). For those of you who go to an unlicensed tax preparer or someone who’s only available for the tax season, you miss out on advice when you need it. I know my clients call me all year long (at all times of the day because a small business really is 24/7). I also consult with my clients with large business purchases, small business loans, other financing options, guidance on legal structure, accounting software etc… You don’t have to go at it alone.
2. PROFIT TRACKING
I’m always amazed when I review a client’s books and tell them they had a profit for the month and they look surprised. “Then where’s all that money?” they ask. They feel since there’s nothing in the bank account, surely they are running at a loss. No so. Each business entity type (S-Corp, C Corp, LLC) all handle profits differently. So, your books and monthly financials should reflect this properly. In order to do this, you may need the help of your accountant. The main reason to track your profits correctly is that you may need to pay estimated taxes on that profit in the month that you earned it. That’s when the IRS wants it. This is when your accountant can keep you out of tax trouble.
3. TAX PLANNING
Every business needs to have a plan on how it’s going to save money in taxes (legally that is). Implementing such a plan happens all year long. Not just at the end of the year. If you wait until the year end, you may not be able to implement some of the plan. So, you should be calling your accountant throughout the year for advice on how to proceed with certain business goals. You’re running a business and trying to make money and dealing with your customers. You don’t have the time to learn all the latest tax changes and how they effect your business. When I’m in my tax update education classes each year, I’m always figuring how the tax changes apply to my clients. Each client is different and needs their own tax strategy each year. Your accountant should be mapping this strategy out with you and guide you all year long.
4. ACCOUNTING SOFTWARE GUIDE
Some accountants may disagree with me on this one. But I believe your accountant should know how to use the accounting software their client uses. I have used many differently types of accounting software but mainly I ask my clients to use QuickBooks (I don’t get money for saying that). That being said, QuickBooks can be a large and tedious database that can suck a client’s precious time. When your accountant is up to date on technology, they can assist you in how to use your accounting software properly and cut time. That’s what it was supposed to be for.
I’m not talking the physical backing up of your books to a disk (though that’s what you should be doing). Small business owners always need someone to bounce ideas off of when it comes to making the next financial move. A business is constantly evolving and needs to be in order to continue making money and grow. You may need help in deciding what your next move should be or at least need someone to send you into the right direction. That’s where you look for an accountant who specializes in small businesses. They know most of all the ups and downs that go with running your business and can help guide you through most of the way. Running a business on your own can be rewarding. But there will be times you may need some back up.
I hope I’ve at least opened your eyes to why your accountant should be on your speed dial (and why they should be available). One CFO that I worked for said it best when I asked him if he wanted me to create a report for him or if he wanted to do it himself since we both had access to the same information. He said “I’m busy running the business. That’s what I hired you for.”
If you have any questions, feel free to email or call me. My contact information is at www.christaaiani.com.
Christa Aiani, Enrolled Agent
Christa Aiani, EA – Income Tax & Accounting
Remember, Enrolled agents (EAs) are America’s tax experts. They are the only federally-licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. You can view my contact information at www.christaaiani.com.
IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.