Last Updated on September 12, 2023 by
Owning your own small business requires a weekly time investment that outstrips more normal full-time day jobs. Small business owners clock anywhere from 50 to over 60 hours per week. Some of those hours prove an avoidable price of business ownership.
However, not all of those hours are spent wisely by every business owner. More than a few burn hours every week dealing with their finances. Ironically, financial tasks like accounting routinely top the list of things business owners should outsource.
Of course, that leaves the challenge of hiring an accountant? Keep reading to learn what you should look for and ask when hiring an accountant 401k for small business. We’ll start with things you should look for in an accountant.
Table of Contents
Time in Business
It might feel like an odd place to start with things to look for, but you should make a point to see how long an accounting firm or accountant has been in business. Why? It’s a hard truth that just under half of new businesses fail by their fifth year.
If your business is in a stable position, the last thing you want is an accounting firm that opened its doors six months ago. After all, do you see yourself enjoying the process of picking an accountant so much that you’ll want to do it again in 2 to 5 years?
Odds are good that you don’t see yourself wanting a rerun of that process.
There is an exception for the time-in-business rule. Sometimes, the business itself may have opened last year, but the owner has been an accountant for 15 or 20 years. In a case like that, you might hire them based on experience and the benefits of hiring an accountant with that much experience.
Staffing
When people talk about hiring an accountant, they often have a mental image of a lone person in an office crunching numbers and filling out forms. The reality is often more a case of hiring an accounting firm that employs multiple accountants. If your business has a lot of accounting needs or especially complex accounting, you may not want a one-man-band accountant.
You may want a firm with strong staffing to ensure that your taxes will get processed and submitted on schedule, regardless of whether someone on staff gets sick or into a car accident. It’s a way of future and bad luck-proofing your accounting processes.
If you have relatively simple or light accounting needs, a smaller operation may suit your needs or budget better.
Good Communication Skills
Business finances and taxes are complicated topics at the best of times. If your business starts investing, launches a 401k program for employees, or offers stock, those will only make financial discussions more complicated. Since many small business owners don’t get business or accounting degrees, your baseline understanding of finances may prove shaky.
The best accountant is one who can walk you through complex financial discussions and leave you with a clear picture of what’s happening with your money. If you walk away from a conversation with an accountant and do not understand everything you talked about, that’s a problem.
It is on you to ask questions when you don’t understand something. If you ask those questions and the answers still don’t make sense, it probably means your accountant did a bad job of explaining things. Given that those conversations bear on the long-term financial health of your business, you can’t afford an accountant with bad communication skills.
Recommendations and Reviews
While you might not take a recommendation from the guy across the street who runs a competitor business, you should still ask around about accountants with other business owners your know. Everyone understands the importance of getting your accounting done right, so most business owners won’t sugarcoat their experiences.
They’ll generally tell you straight up that this accountant is great or that accountant can’t add to save his life. You shouldn’t necessarily hire based solely on those recommendations, but that can give you a functional list of potential accountants you can research.
You can also fall back on the modern standby of semi-stalking local accountants on review sites. Just remember that many accountants will work with individual tax filers and not just businesses. That means you can spend a lot of time wading through reviews from individuals to find reviews from other businesses.
Taking that time can make a big difference in your decision, since it may expose problems you’d rather not deal with as a business owner.
Your Gut Reaction
Hiring an accountant isn’t like hiring a personal assistant. It’s very important that you get a get personality fit with a personal assistant because that person will be all over your life, every single day.
When you hire an accountant, you probably won’t see them in person all that often. You’ll likely do most of your business over the phone or by email with occasional in-person meetings.
That means you don’t necessarily need an accountant that you like a lot as a person. Since money is on the line, though, you should pick someone that you trust.
If you get a bad vibe off of an accountant you’re considering, move on. There are other accountants out there who will happily take your business and do a good job.
With the general “things to look for” out of the way, we’ll move on to the questions you should ask.
Questions to Ask When Hiring an Accountant
When looking for someone to do your personal taxes, the things listed above will usually prove sufficient to find someone reliable to do the numbers and file your taxes. With business accounting, there are some more specific questions you ask before you hire them.
Do You Work with Clients in My Industry?
General tax regulations apply across the board. There are a lot of industry-specific exceptions, exemptions, and even loopholes that open and close based on what Congress has done in recent years. The same frequently applies to state tax codes based on state legislature activities as well.
For example, the rules around farming and agriculture change all of the time. That means that you’ll want an accountant with some and, preferably, a lot of AG accounting experience. They’ll know what rules and exemptions apply for your agricultural concern far better than an accountant who usually works with tech startups or medical businesses.
If you’re in an industry that relies heavily on machinery, you want an accountant who deals with depreciation schedules for that type of machinery on a regular basis. It can drive your timing for replacements.
While any good accountant can do an adequate job for you, someone with industry experience will provide insider insights that you can’t capture without direct experience.
Do You Work with Clients Like Me?
This may seem like asking the industry question again, but it’s really not. Let’s use farming as an example again.
The average American farm runs a little over 440 acres. Of course, like most averages, it’s a little deceptive. There are corporate farms with thousands of acres of land. There are family farms with a lot less acreage.
If an accountant typically deals with large, corporate farms, they probably aren’t as up to speed on the regs for small, family farms. By the same token, an accountant that normally deals with moderately-sized dairy farms may stumble a bit when dealing with a large farm that deals only in cash crops or a single cash crop.
In general, you want an accountant who deals with businesses that are similar in size and composition to your own.
Are You a CPA?
This one isn’t necessarily a make-or-break question, but it may affect your decision. Accountants differ from CPAs in a few crucial ways.
One of the big differences is that CPAs must pass a legendarily difficult exam for licensing. That’s after racking specific kinds of college coursework and a year or so of supervised work under a licensed CPA.
The other big difference is that CPAs have a legal obligation to act as fiduciaries. In essence, that means that they must act in your business’s best interests when working for you. So, for example, they can’t talk you into services they know you don’t need to pad their bills.
While it’s not true in all cases, many CPAs possess superior knowledge of accounting, business practices, and the tax code. That can make them more effective at handling your accounting needs.
Do You Provide Secondary Services?
While most businesses look for an accountant because they want taxes or bookkeeping done, those aren’t the only services that accountants offer that you might want. Some of the other services that an accountant might offer include:
- Tax planning
- Accounts receivable/payable
- Cash flow management
- Business plan development
- Business valuations
- Financial statement audits
Even if you don’t think that you want or need additional services right now, you should always ask what secondary services they do offer. Odds are good that you have at last some idea of what extra services you may want in a year or two. Knowing what services each accountant or accounting firm offers may sway you toward one that has those service offerings in place.
Who Will Do the Actual Work?
Accountants operate like any other business. They often hire people who may not have the same qualifications as the owner or even outsource some of what they perceive as simpler work. This is particularly common in firms.
If they get cagey about who will do the work on your account, you may want to give them a pass. If they outsource the work or delegate the lion’s share of the work to someone who isn’t an accountant, the same may hold true. After all, you can prepare someone’s taxes without actually becoming a CPA or even an accountant.
This is a situation where you must decide how important it is to you that an accountant handles your taxes. If it matters a lot to you, pin them down on this question.
How Do You Handle Billing?
Businesses often need or want ongoing services throughout the year. That means you need a clear picture of how they bill and what you get for that money.
As a general rule, you should expect hourly billing for any work. This applies to whatever work the accountant does for you.
Some accountants or firms will also offer some kind of monthly rate. These monthly rates typically apply to a bundle of specific tasks. They may also put a hard cap on the hours per month for those services, after which you go back onto the hourly rate.
Make sure you get a complete explanation of how they handle their billing so you can make an informed choice.
Do You Represent Me in an Audit?
It’s not that common an event, but people and businesses do still get audited from time to time. Of course, most people hire an accountant specifically to avoid that exact outcome. They want a professionally prepared return to make sure mistakes don’t make the IRS come knocking.
If the IRS does come around to audit you, though, you want someone there representing you. CPAs can do it, as can enrolled agents, and tax lawyers. Accountants who are not CPAs or enrolled agents cannot represent you.
If an accountant can’t or won’t represent you, looking for an accountant who will represent you may take on a higher priority.
Hiring an Accountant for Your Small Business
There are things you should look for and questions you should ask when hiring an accountant for your small business. Things you should look for include an accountant’s time in business, recommendations, and good communication skills.
Trust your gut reaction. You don’t need an accountant you adore personally, but you need one you trust.
When it comes to questions, focus on things that matter to you or your business. Think in terms of industry experience, business size, and if the accountant is a CPA.
Looking for more accounting tips and advice? Check out the Finance posts in our Business section.
