Canadian Small Business Guide: When to Hire an Accountant

Accountants for Small Business

There are a lot of challenges running a small business; we get it, we’re small business owners too. This article will explain how hiring an accountant can help throughout the life-cycle of your business.

Hire an Accountant Before Starting a Business

If you’re planning to start a business, there is a lot that an accountant can help you with.

An accountant can work with you to create a plan and help you avoid mistakes and problems that are common with new businesses.

You might be surprised at how much money is wasted when entrepreneurs are not aware of the complexities involved in operating a business.  This is where accountants shine!

Business Plan

An accountant can help you create a business plan that is based on realistic information.  Many startups fail because the assumptions used are too optimistic or are not based on the current market conditions.  

Optimism and risk tolerance are helpful ingredients when starting a business.  However, an accountant will help to balance out the plan. He can use real-world experience and knowledge gained by helping many different businesses get off the ground and grow.

Forecasting

Forecasting is a necessary part of creating your business plan.  An accountant can help you understand and forecast for the various costs involved in starting and building a business.

It can often be confusing trying to determine where to start and how to build a forecast.  Your accountant should have a template that you can use to get started. He will also be able to sit with you to go through the numbers and create a balanced and accurate forecast.

For more info on startup funds required, read our article on how much cash you need to start your business.

Business Structure

Should you incorporate your business or run it as a sole proprietor?  This is a very common question and an important topic to understand. An accountant can look at your specific situation and help you make the right choice.

There can be legal and tax advantages to incorporating your business, but there are also a few downsides.  Your accountant will be able to help with this.

You can also read more in our article about whether you should incorporate your business or not.

If you’ve decided that incorporation is right for you, check out our article on how to incorporate your business.

Business Registrations

There are many different programs to register for when starting a new business, and it’s not always easy to tell what is required.  An accountant can help by ensuring your small business is registered for the appropriate programs. Often this advice can save you time and money in the long-run.

Common examples include:

These are just some of the many programs that a new business may need to register for.  An accountant will be able to help make sense of these and make sure registration happens at the right time.

Check out the links on the above topics for more details and also see our post on programs to register your small business for.

Software Setup and Training

When starting a business, it’s important to have the right accounting software for your needs.  You might be able to get away with a basic spreadsheet for a while, or you might need a fully functioning cloud-based accounting system.  Either way, an accountant can help you get off on the right foot.

We’ve tried to provide some of this information through our blog.  We’ve discussed how to make bookkeeping easy and avoid mistakes.  

You can also read more about which accounting system to use.  

If you’ve read the article on which accounting system to use and decided that a cloud-based accounting system is right for you, we’ve provided a comparison of Xero vs Quickbooks Online.

We get excited about this stuff (probably too excited), so we are more than happy to help if you would like a hand with accounting software setup and training.

Buying a Business

If you would rather purchase an existing business than start one from scratch, an accountant can help you find your way through the transaction.

Accountants can help perform due diligence on the business to make sure that the financials and purchase price make sense.  They can also help to structure the purchase in the most tax efficient way.

It is a good idea to also consult a lawyer before purchasing a business. This team of accountant and lawyer can help you to make sure that the purchase is sound so you’re set up for success.

Hire an Accountant After Starting a Business

If you were too busy getting your business off the ground to hire an accountant before, don’t worry it’s not too late.  Along with many of the above mentioned items, there is plenty that an accountant can help with once you’ve started your business.

Bookkeeping

Not all accountants offer bookkeeping services, but it can be beneficial to combine bookkeeping and accounting under one roof.

Bookkeeping for small businesses can quickly become complicated.  It can take up your time that would be better spent working on your business.  

A bookkeeper can also keep on top of who owes the business money which will to keep cash in the bank.

If you’re not sure how a bookkeeper can help, check out our article on what a bookkeeper can do for your business.  And if you’re curious how much it will cost, we’ve also got an article on the costs of bookkeeping and accounting for a small business.

Paying Yourself

Understanding how to pay yourself from your business is important.  This can be fairly simple when running your business as a sole proprietor, but becomes more complex once you have incorporated.

If you’ve incorporated, an accountant can help you determine whether it’s better to pay yourself through salaries or dividends.

An accountant can also help you to determine how much you should pay yourself from your small business.

It might seem like a simple concept, but getting this right is a big component to owning and running a successful business.

Compliance

When we talk about compliance, we’re talking about preparing and filing the necessary returns to keep the government and other regulatory bodies happy.  

This includes things like:

  • Preparing and filing tax returns (corporate or personal)

  • Filing sales tax (GST/HST and PST) returns

  • Ensuring payroll remittances are paid on time and correctly

  • WorkSafe (WCB) filings

Your accountant can keep you stay compliant and out of trouble so that you avoid paying costly late fees and penalties.  It also adds peace of mind knowing that you’re keeping the CRA and other government agencies happy. Nobody wants an auditor knocking at their door.

Government Audits

If you do find that an auditor is knocking on your door, an accountant can be a huge help.  Audits are stressful and time consuming, but with help from an accountant they go much more smoothly. It’s not uncommon for an audit to result in zero additional taxes owing.

Your accountant will communicate with the auditor to make sure that all of the requested information is provided in the right format.

Auditors are also human beings themselves, so mistakes can be made. Your accountant will help catch any mistakes in the audit process to make sure you don’t pay more tax than you should.

You don’t have to go through an audit alone; your accountant can provide guidance and expertise.

Hire an Accountant When Growing your Business

Turn to an accountant for help once you’re at the stage where your business is up and running and you want to focus on growth.  We don’t advocate growth just for growth’s sake, but we understand that it is a major part of building a life changing business.  

Get Your Time Back

Things get busy when you’re trying to take your company from a startup to a vehicle that will support your ideal lifestyle.  

Letting go of tasks that are keeping you from working on your business’ growth is necessary in this stage. Unless you love doing it, let a professional look after your bookkeeping.

Not only will you free up your valuable time to focus on growth, the quality of the bookkeeping and finance tasks will improve.  Costly mistakes can be avoided by hiring a detail oriented professional.

Think of all of those finance tasks that are taking up your time.  Delegate them and take a big step towards your ideal business.

Reporting

Once you have a bookkeeper or accountant looking after your books you can start to expect up-to-date financial reports on a regular basis.

You will start seeing your financial numbers each month and you can use that information to make educated decisions.

Your bookkeeper or accountant should be providing you with:

  • Income Statement (month and year-to-date) - This will help you identify how your business is performing over the months, pinpointing trends and opportunities.

  • Balance Sheet (month over month with change column) - This report shows your financial position and helps you plan how to meet your financial obligations.

  • Accounts Payable (weekly) - In other words, who do you owe money to? Do you have sufficient funds to make those payments?

  • Accounts Receivable (weekly) - Likewise, who owes you money? Do you need to chase someone for payment?

  • Cash Flow (monthly) - Where is your cash coming from? Where is it going? Are there any gaps coming up that you need to fill with external funding?

  • Bank Balance (daily) - What is your current cash situation? Checking in on your bank balance helps you keep your finger on the pulse of your business.

Compare this to the financial information that you currently receive. Consider what mistakes you could avoid or what opportunities you could pursue given this new information.  

Your accountant can also provide commentary on the reports.  Straight-talk that is constructive and not sugar-coated will help keep your finances in line.

Guidance

Accountants can save you time by handling the paperwork and keeping you compliant. But they’re much more valuable to your business than merely existing as an extension of your admin function.

To make the most of your working relationship, you should be meeting with your accountant regularly to discuss:

  • Your goals and how best to achieve them;

  • What funding you might require to meet those goals;

  • When you might run out of cash;

  • When to hire labour or expand into new markets;

  • When to buy equipment;

  • And much, much more.

Your accountant will take an active interest in your business, keeping you accountable in pursuit of your goals.

Get Funding

Growth often requires some additional funding to kick-start things.  Your accountant can help you seek out and obtain a loan or other type of funding.

Your accountant can help determine what is the best type of funding for your current situation.  Whether it’s a bank loan or raising private equity, your accountant can determine what kind of financials you need and then present them to build your business case.

Your accountant will help ensure that you don’t miss out on growth opportunities because the funding wasn’t available.

Hire an Accountant When your Business is Established

You have a successful, established business.  This is the stage that many business owners look to achieve, but it also comes with added complexities.  An accountant can help you make sense of your complicated business environment and make improvements.

Tax Planning and Advice

When people think of accounting advice, they’re often actually thinking about taxes and tax advice.  There is a good reason for this; accountants know this stuff inside and out!

An accountant can make sure that your business is not only compliant with taxes, but also that it is tax efficient. For example, you may want to incorporate a holding company to save taxes or protect your company’s assets.  There are many ways an accounting professional can help your business pay less in tax.

There are also many opportunities for financial support and government grants that an accountant can identify and help obtain for your business.  Who doesn’t like free money?

Speaking of free money, one of the biggest opportunities in Canada that an accountant can help with is Scientific Research and Experimental Development tax credits.  Check out the link to our article to see if your business might qualify.

Improving Processes

Accountants tend to be very logical, process-driven people.  This comes in handy when operating a complex business.

Your accountant can help you build better systems to streamline the company’s financial operations.  If your accountant is tech-savvy, they can help implement new software applications such as Receipt Bank or Expensify.  These programs can help to capture information and save time.

Not sure how your business processes flow from sales and marketing through to operations or completed sale?  Many accountants are trained in business processes and can help develop and improve your systems.

Improve efficiency and save time with help from your accountant.

Accounting Department

Let’s consider cases where an established business needs more than just a bookkeeper but less than a full accounting department.  This is a great opportunity to hire an outsourced accounting department.

We’ve often seen this scenario happen with organizations that have revenue between $1 million and $5 million and employ between 10 and 30 people.  

For these larger organizations, a properly set up accounting firm can act as an outsourced accounting department. This scenario can be run either indefinitely, or until the business grows large enough to hire an internal accountant.  

When the business grows enough to need an internal accountant, the outsourced accounting department is there to help with the transition.  They will be able to help train the new internal accountant on the systems and processes to make sure things go smoothly.

Check out a real-life example of how an outsourced accounting department can work for your business.

Before Selling Your Business

Building your business to the point where you can sell it for a large sum of money is a great achievement.  

It’s unlikely that you would have gone through this whole process without hiring an accountant, so let’s talk about how your accountant can help in this situation.

Your accountant can prepare the necessary financial reporting to show prospective buyers the value of your business.  He can also liaise with the purchaser’s accountant to help answer any questions and move the sale forward.

On top of that, your accountant can help structure the sale so that you retain as much money as possible from selling the business.  

One major way this can be accomplished is by using the lifetime capital gains exemption.  Your accountant can help to make sure this is available to you before completing the sale.

Selling your business is likely to be one of the biggest financial transactions you make. It’s imperative to get the proper advice from a professional before completing the transaction.

Conclusion

Accountants can help you throughout your journey as a small business owner.  Hiring an accountant can save you money, give you back your time and reduce stress to improve your life and mental health!

We have experience helping businesses in each stage and would love the opportunity to help you too.  Please contact us if you’re considering hiring an accountant.  We love helping businesses succeed.