Businesses have different accounting needs. Yours will vary based on the size of your business, whether you have employees, and whether you expect to scale up. When you first get started, you can likely manage your books yourself. As you grow, however, the tasks become more complicated, and you also have to consider compliance and regulation issues. So, what's right for your business? The DIY route or hiring a pro? Here are a few items to think over to help you decide.
The Size of the Job
If you're a sole proprietor or a freelancer working on your own, you probably don't need an accountant. Keep track of your business expenses and your income, and pay your quarterly taxes. If you're barely making enough to get by, you might even just have to file once a year and be done. It's simple. But as your business grows, so does the complexity, which may call for an expert to keep track of your profits and losses.
As you become more successful, you may hire an assistant or an employee to train and take on easier tasks. With employees come payroll, larger revenues, losses, and investments. This is where it will make sense to work with accounting software that will allow you to reconcile bank statements, run payroll, and send and receive invoices. As it becomes too much for you to take on yourself, it might be time to hire an expert.
What Your Budget Will Allow
At the same time, you have to consider your budget. Sometimes, regardless of how busy you are, you might not be able to afford an accountant. They can be pricey, after all. An accountant's fees can run from $37 per hour to $400 per hour, depending on their workload. This rate might still be out of your budget range. You could also opt to hire a bookkeeper, which can be much more cost-effective as a bookkeeper typically has fewer credentials than an accountant.
Still, accounting software can run you as little as $15 per month, which can save you a ton of money. Depending on your business, you might want to pick up a how-to book on bookkeeping and accounting and learn to do it yourself. At least for the first couple of years, while you're building your business, it might make sense to understand your finances and your business. That way, when you do have the budget to hire someone, you'll have a better idea of who you can trust.
Whether You Have the Time
Of course, there's always that tricky balance to strike between money and time. You might think you don't have the money to hire an accountant, so you'll do it yourself. Then, you find yourself spending hours scouring the internet, reading the IRS website, and browsing DIY books for answers. All that time you're spending figuring out how to do your books could be spent bringing in more paying clients. And you could spend a fraction of that money hiring an expert.
This part of the decision is perhaps the toughest. If you're already in finance, if you're learning about business, and accounting is another aspect you're interested in understanding, taking the time to do it yourself is practical. It will take time in the beginning, but it will get easier as time goes on. At the same time, if you're overwhelmed with tasks and learning this aspect of your business feels impossible, it's probably worth it just to hire an expert.
Your In-House Resources
There's also the option to hire someone in-house to manage your books. If you're taking on employees, consider hiring an HR person who can manage your books, your payroll, your taxes, and all accounting issues. The benefit here is that you can bring on a trusted employee who can become invested in seeing your business do well. You can also assign other tasks that an outside contractor may not take on.
To begin, you might have an existing employee take on accounting tasks, acting as a kind of Jack or Jane of all trades in your office. This approach can save you money in the long run and establish a long-term relationship with this employee, whom you may want to take on as a partner. You can pay for this person to take accounting classes, work with a mentor, and gain expertise. It's a beneficial choice for both the employee, who gains skills, and you, who gains a vested partner.
If a Hybrid Situation Makes Sense
In the end, you might also want to consider a hybrid situation. It doesn't have to be all or nothing. You can do your books yourself, use an accounting software that works for you, and hire an accountant to review your books once a quarter and help you file taxes once a year. You can take this same approach with an in-house employee. You can also start small and add in more options, like employees and accountants, as you grow, scaling back as necessary.
Accounting is something you'll have to deal with as long as you're in business, and it will probably pay off to know a little (or a lot) about your books. But don't let it become something that consumes your days and nights. Your goal as a business owner is to get more clients and do a great job for them. The better you get at that, the more you'll be able to let go of repetitive tasks like bookkeeping that you can leave to employees or contractors.
