5 min read

Why you shouldn’t wait until ‘crisis mode’ to hire an accountant

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Tell us if you’ve heard this one before. It’s February (or maybe even March), and you’re scrambling to get some poor, beleaguered accountant to get all your taxes in order by the filing deadline. You’re having back-and-forth email exchanges, they’re asking you for documents, and while it feels like a generally miserable experience, you DO get it done. Together.

However, you are stuck with whatever the result is, and whatever deductions you could find during crunch time, because there was no planning. Then you don’t think about it until next year, when you’ll repeat this dance all over again. 

Why are you doing your taxes like this? We get that it’s a pain, but - respectfully - it’s also no way to run a business. Not only is it hard on your accountant, but you’re also almost certainly missing out on some pretty major tax deductions. It’s also the best way to get hit with a surprise tax bill. Here’s why you should move to hire an accountant BEFORE everything hits the fan. 

When your books are a mess, the degree of difficulty for finding deductions is much higher.

Your accountant needs to make sure your books are accurate. That means that they are reconciled and all of the data is accurately accounted for. A lot of different things happen with your business during the year. Your accountant is looking for ways to tell that story with the information you give them. What kinds of things will your accountant need from you? Here are just a few that come to mind.

  • Income and expense records
  • Banking records
  • Asset purchases and loan information
  • Inventory totals
  • Credit card records
  • Wage and payroll data
  • Sales tax data
  • Deductible information, like IRAs and health savings contributions

If you wait until the tax year is over, your accountant is sifting through every single piece of information that you’ve had throughout the year. Do you remember everything you did a year ago? Probably not. Just the act of doing this is costing you money. Why? Well, you’ll have to be more conservative with your deductions because you simply have no records of it happening and what you don’t know, you shouldn’t deduct. 

Hiring an accountant creates a baseline for what is 'healthy' — that's a big help when tax season rolls around.

If your books are in rough shape, it’s going to take some time to get them up and running. Complicating this is the fact that they don’t have monthly or quarterly reporting to make sure that all your numbers are making sense. With regular reporting, not only does your accountant now have the numbers to maximize your tax deductions, they’re also able to better advise you on how to optimize your tax position going forward.

Can we use an analogy? If you only go to the doctor once a year, it’s harder for them to diagnose you because they don’t understand your baseline health and what might be symptoms of a disease. The problem is NOT going is only making those symptoms worse. It’s exactly the same with your accountant. While it might feel scary at first, you’ll see that once you’ve set up a process, your reporting, payroll, and, yes, even taxes will be a LOT simpler. 

Speaking of process, let’s talk about it. 

Creating a process for your books is a value creator

We don’t often think about how accuracy of your books is a value creator, but it’s true. It is. When you don’t have a process for reporting financials accurately, you’re leaving things to chance. Here’s the thing: MONEY POURS OUT OF YOUR BUSINESS when you’re not paying attention.

Creating a process takes something that feels overwhelming and busts it up into smaller, easy-to-handle tasks. Talk to an accountant, you’ll see we aren’t scary people – we genuinely want to help you reach your goals. No one is going to shame you because you haven’t done what you’re ‘supposed to do’ but the longer you wait to find someone to help, the harder it will be to get you on the right track. Not only that, it’s going to cost you more money for the stress you’re putting them through. 

Why waiting until the last second costs you money: backwork fees

It might seem like you’re paying for less work if you only see your accountant once per year, but actually the opposite is typically true. Why? Because of something called a backwork fee. Basically, any CPA firm or accountant is going to charge you a fee to do all the things you should have been doing all year. That means you won’t be getting freebies just because you waited until the last second. In many cases, it might end up being a pretty big bill when it’s all said and done. That’s not the only reason it’s costly, though.

Surprise tax fees are much more likely when you wait 

When you don’t have a system in place, you’re much more likely to run into surprise tax bills. Those can absolutely cripple your buying power and any growth plans you had for the immediate future. What kinds of things? Well, let’s take sales tax. Maybe you’ve been collecting sales tax money, but haven’t paid that bill (maybe you didn’t realize or it just slipped your mind). By the end of the year, you’ll be on the hook for that amount. 

Now let’s say you have a monthly meeting with your accountant. They’ve set up a system where you’ve been saving that money for the tax bill for the whole year. Now you’ll be ready and unsurprised when that bill comes around. This goes double for things like payroll taxes – stuff that you’re probably not thinking about when you’re running the day-to-day of your business. 

What an accountant will do for you TODAY

If you don’t work with a monthly accounting team we’d advise setting one up. They're going to walk you through ideas like payroll, sales tax, etc. They’re also going to help you come up with a plan. How? 

First, they’ll ask you about goals for your business, then help you take steps so that you can best utilize your resources to achieve those goals. They could be growth, they could be profitability, or even getting it ready to sell (see our blog on how those different goals can change your plans). 

Then they’ll formulate a plan for your business. Based on your goals, that plan can change. In general though, they’ll help you become more financially literate and create an easy-to-use reporting system so that you can make decisions that align with where you want to go with your business. 

Finally, they’ll help you enact that plan – and change it when you need.  Having a plan doesn’t mean you’re locked in. On the contrary, it means that you’ll be able to be flexible and deviate from the plan when it’s advantageous to do so. You’ll have a big picture view of where you want to go and will be able to look forward. Or, you could choose to keep doing the stressful “pull up every receipt from the shoebox” version of your taxes and reporting. It’s your decision.  

When you have a monthly accountant, you’re choosing the simpler path. Less stress, more time to do the things that will grow your business, and ultimately – more money. It’s really as simple as that. 

If you'd like to see if we're a good fit for you, let's talk

In the meantime, for a peek at what it looks like to work with us, read our article: What does your accounting firm actually do for you every month?

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