Choosing a Small Business Accountant Rated:

A smoothly running financial system is at the heart of a small firm's success. You may have already grasped the importance of selecting the right business finances software for your company. Choosing the right accountant is a task that requires a similar level of care. Ideally, you and your accountant will enjoy a long-term professional relationship, so it's best to pick the right person from the outset.

What type of services do you need?

There are a lot of options to explore, from large national firms to sole practitioners, from those who do a bit of everything to others who specialize. Begin by assessing your firm's needs. Make a list of the different services you require. Do you want a professional to handle receipts and invoices? Produce financial reports and a budget? Manage payroll? Or do you want someone who will delve a little deeper and give strategic advice? Whether one individual handles everything or the responsibilities are divided up between members of a firm, make sure your particular requirements are well defined.

Bookkeepers vs. accountants

Perhaps your needs are simple. For example, if you are a one-person start-up that has no immediate plans to expand, the services of a bookkeeper may be sufficient - and this approach will also keep expenses low.

Bookkeepers handle day-to-day cash flow management by recording transactions such as purchases, payments, sales and receipts using bookkeeping software. If keeping track of this information is not your idea of a good time - but you do not need any further financial services - a bookkeeper would fit the bill. After all, you can always hire an accountant for specific tasks such as end-of-the-year tax planning and preparation.

Or, perhaps you have discovered that your needs are not so simple. Firms that employ staff or have a complicated invoice system are likely to benefit from a bit more help. For example, many small business owners are finding that an accountant can help them navigate the increasingly intricate payroll accounting and reporting system, with may be organized using business finances software. Others may be changing their company's ownership structure and need an accountant's advice. Meanwhile, if your firm is looking for additional funding in the form of a bank loan, it is essential that you get your books in immaculate order to convince lenders of your success. Cue the accountant.

Just taxes or full-service?

If it is clear that you need a comprehensive financial professional, there are still further options to consider. For a business that requires tax services in particular, a no-frills option is to use an enrolled agent (EA), who has passed the IRS' taxation test and may represent taxpayers before the IRS. Matters handled by an EA include preparation and filing of documents, communicating with the IRS and client representation at meetings.

However, if your original list of required services includes tasks such as budget analysis, financial planning or consulting, a certified public accountant (CPA) may be the right choice. Unlike an EA, a CPA has passed additional state examinations and fulfilled continuing education requirements. They are proficient with business finances software and can handle a wider variety of services. For example, audits and loan application necessitate the services of a CPA. In addition, these professionals can benefit a small firm by acting in an advisory role. Depending on a company's priorities, this level of expertise may be viewed as indispensable or as an expensive indulgence.

Finding the right person

Once you have decided on the type of financial professional you would like to hire, where do you go to find the right individual? You can start by asking other small business owners to recommend someone they trust - or you can consult with your banker, insurance agent or the local small business center for referrals.

Make sure you are targeting individuals and firms that have an understanding of your type of business and would also be able to dedicate the necessary time to helping you succeed. Some questions to keep in mind during your search include: Have they worked with firms like yours in the past? Do they have other small business clients? Have they used your business finances software package before? Do they have strong relationships with banks and potential investors in the community? How much do they charge?

Narrowing the field

After narrowing your list down to a small number of candidates, arrange to meet them for an initial chat. Particularly if you are hiring someone for their advisory capabilities, treat your initial conversation as an interview. For example, you might ask them to give examples of situations in which they have helped existing clients save money or grow their business.

Finally, the most practical question: how will you be charged? Most professionals vary their fees based on the service they are performing and may charge by the hour for certain things - such as tax returns - and a fixed amount for others, such as preparing regular financial statements. Can the accountant guarantee that the rates you have agreed to will not be exceeded?

In the end, hiring a financial professional who is competent and trustworthy is one of the most valuable investments you can make in your business. As time passes and you achieve your financial goals, you will never need to look back.