The "A" Word - Part 1 of 3
Welcome to the first of my three specialty expert blogs!!
No one likes to talk about it, think about it, let alone do it. No one that is except people like me. I’m talking about accounting, also known as the “A” word. It’s the single most overlooked aspect of new businesses and can literally make or break your company’s future success. Accounting is a specialized skill and is not something you become proficient in after reading “Accounting for Dummies.” All too often, new business owner’s compare accounting to balancing a checkbook. We already know that most people cannot balance their checkbook. This is one of the many reasons why successful businesses invest both monetary and human capital into an accounting infrastructure. There are three important points to keep in mind when creating your accounting/financial reporting infrastructure. The first and most important is WHO you choose to handle the accounting for your company.
Here are some qualities/questions you should consider before hiring an accountant:
• What is their highest level of education and are they a licensed CPA?
• Do they have good communication skills? If they are going to “do” the numbers, then they need to be able to explain the numbers to you in basic terms. Think back to the last time you had a conversation with an accountant. Don’t remember? Trying to forget? Did you feel like you were talking to an alien speaking an entirely different language? I’m not surprised. Translating complex numbers into meaningful information for your business and your owners is a critical skill wanted by many, but achieved by few.
• Are they a financial accountant or a tax accountant? Most CPAs do not practice in both areas. Financial CPAs handle the bookkeeping, financial reporting, P&L analysis, financing arrangements, treasury management, etc. Tax CPAs can assist with how to structure your business (LLC, S Corp, etc) in order to ensure that it aligns with your business/personal tax strategy. Tax CPAs also handle the preparation of your tax returns by starting with the information prepared by the financial CPAs. Your business will end up having two sets of books, one for the preparation of financial statement s and one for the preparation of tax returns.
Hiring a CPA to ensure your business is initially set up properly helps avoid future unpleasant surprises. This is one investment guaranteed to pay out dividends in the long-term. In my next entry, we will get into part 2 of the “A” word….
Terri Thomas, CPA
Terri Thomas Accounting