As a small business owner, you do it all. But when it comes to your finances, it’s a good idea to hire an accountant for their expert help. An accountant can assist with tracking, analyzing, and keeping your accounting records secure. Keep the following questions to ask your accountant in mind the next time you meet.
Questions to ask your accountant
When working with an accountant, it’s important to find someone who specializes in small business. Caron Beesley, a contributor for the Small Business Administration, said:
Small businesses have dynamic and sometimes complex accounting needs and few resources to manage them. An accountant who understands these dynamics and has a solid small business client base will likely serve your needs better in the long run.
Whether you’ve worked with one for years or it’s your first meeting, make sure you know the answers to these questions for your accountant.
#1: What kinds of records should I keep?
You need to keep track of business records to file taxes, measure profitability, and secure outside funds. An accountant can show you which records your business needs.
Some records might include:
- Operating expenses
- Tax remittances
- Employee wages
- The purchase and sale of assets
One question to ask your accountant is if they require you to use a specific software program or recordkeeping method.
#2: How should I structure my business?
There are four common types of business structures to consider: sole proprietorship, partnership, corporation, or LLC. Each structure has a unique set of rules. Your tax liability varies for each business structure.
Sole proprietorships have one owner. The owner and the business are the same legal entity, so if the business can’t pay its debts, the owner is liable.
Partnerships are owned by two or more people. Like sole proprietors, owners assume responsibility for company debts when the business can’t pay.
Corporations are separate entities from the owner. The owner’s personal assets are protected in case the business can’t pay its debts.
LLCs combine aspects of a corporation and partnership. Like corporations, the owners’ assets are not at risk if the business can’t pay debts. And, like a partnership, the owners have shared tax responsibilities.
An accountant will talk about the legal structures in depth to help you decide. Also, an accountant will help you fill out the correct documents for the legal structure.
#3: How should I prepare for tax season?
Your accountant can file and remit your business taxes. But, there are steps you can take to organize your records and make the tax-filing process easier. Talk to your accountant about specific ways to organize your records.
Organizing small business financial documents is especially beneficial if your accountant charges per hour. The more organized your records, the less time it will take your accountant to prepare the tax forms. Handing your accountant a disorganized shoebox full of last year’s receipts could end up costing you a lot of money.
#4: What business expenses can I deduct?
You can deduct business expenses on your tax return. For example, you can deduct costs associated with the business use of your vehicle. Other deductions include operating from a home office, business travel expenses, and charitable donations.
You must be careful when claiming small business tax deductions. Each deduction has a specific set of rules you must follow. Also, you cannot deduct personal purchases. An accountant can help you iron out which deductions your business is eligible for and how to claim them.
#5: When should I pay estimated taxes?
Estimated taxes are imposed when taxes are not withheld from your income. Instead of an employer withholding taxes from your paychecks, you have to remit employment taxes.
Your accountant should know the tax schedule for the current year. They can also explain the amount to remit and forms to file. An accountant can file and remit the estimated taxes for you as well.
#6: Are the people who work for me employees or independent contractors?
There are major differences between hiring an employee and an independent contractor. With an employee, you are responsible for withholding, paying, and remitting payroll taxes. But, you do not withhold or pay payroll taxes for an independent contractor.
If you misclassify a worker, you might pay taxes incorrectly and get penalized by the IRS. But, it can be difficult to tell the difference between an employee and a contractor. An accountant can help you sift through the gray areas of classifying employees and independent contractors.
#7: What is my break-even point?
The break-even point occurs when your total income equals your total expenses. Your accountant can use measurements to figure out your business’s break-even point. By knowing this figure, you can see if your company is profitable or losing money.
The break-even point is essential for pricing your products and services. It helps you decide how many items you need to sell to cover your costs. An accountant can show you your break-even point after reviewing your financial records.
#8: How can the accountant help me grow my business?
An accountant can help you pinpoint which opportunities best promote growth. An accountant can track your progress and see where spending brings your business down.
Also, an accountant can help you project cash flow. Understanding your cash flow makes planning for future expenses much easier and safer for your business’s finances.
#9: What are my financing options?
You may need additional money to expand your business location or take on a larger project. An accountant can help you sort out the best financing option for your small business.
An accountant can help you choose between seeking funds from an investor or a bank. They can also refer you to lenders through their network of people.
An accountant can also assist you through the loan process. For example, you will need a business plan to apply for a loan, which an accountant can help you write. Your accountant can also compile financial statements for you such as balance sheets and profit and loss statements. Also, an accountant can advise you about what to look for in a loan.
#10: How should I manage inventory?
If you sell products, an accountant can help you make decisions about your inventory. How you manage inventory can affect your taxes. For example, the way you value inventory affects your after-tax earnings and losses. An accountant can assist you with valuing your inventory.
Also, an accountant can help you figure out the best time to buy more inventory. Using cash flow projections, an accountant can determine when ordering inventory will best impact cash flow. This list of questions to ask your accountant may only be a starting point, as your accounting needs will vary depending on your size, industry, and location.
Do you need an easy way to track your business’s transactions? Patriot’s small business accounting software uses a simple cash-in, cash-out system. We offer free, U.S.-based support. Try it for free today.