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When it comes to hiring an accountant, many freelancers ask the wrong question.

Oftentimes, money is tight for the first few days and you need to watch out for every penny or penny you spend. People often ask, “Can I afford to hire a tax advisor?” 

That’s not the most helpful way to look at it. Really a better question is, “When does an accountant start paying for himself?”

Should You Hire An Accountant For Your Freelance Business?

It is true that for very small businesses with very simple financial mechanisms, hiring an auditor can be an unnecessary expense. However, as your business grows, the financial complexities and number of tax rules you need to comply with can quickly become overwhelming. In this situation, hiring an accountant becomes less of an expense and more of an investment that pays quick dividends.

In this article, I’ll show you how to determine if you need an accountant at this stage of your business and I’ll also go into what small accountants do, what the benefits are, how much an accountant costs, and how you can calculate whether the investment makes sense for your business.

In the end, you will understand what an accountant can do for your small business, and you will understand the simple calculations you can do to decide whether it is worth hiring one.

1. What does a Small Business Accountant do?

What does an accountant mainly do? What tasks can they do for your small business?

We’ll go over some specific examples later, but here’s a quick rundown of what an accountant can do to help your small business:

Control your taxes

This may be the main task that small business owners turn to a tax advisor for. Even if you can do the day-to-day bookkeeping for your business, figuring out your tax bill can be a nightmare.

When you hire a tax advisor, you can simply turn your paper over and have them do all the calculations and fill out your tax return at the end of the year. A good accountant knows all the relevant rules, so you can be sure you won’t miss a thing.

In addition, an accountant can help you with tax issues all year round. For example, they can advise you on the tax implications of various corporate decisions, help you with tax planning or ensure that you comply with the relevant sales tax regulations for every transaction.

Budgeting and planning

An accountant can help you with a lot more than just taxes. They can help you with some of the basic planning tasks you need to do for your business.

As I mentioned in my tutorial on writing a business plan, a key component of effective planning is creating a detailed financial plan and making realistic projections of what your income, cash flow, and balance sheet will be over the next few years when you hit yours Aims.

I’ve provided some advice to put together a basic financial model, both in this tutorial and in an earlier one:

However, the process can be very complex, and if you are unfamiliar with spreadsheets and calculations, an accountant can likely do it faster and more effectively.

Prepare for graduation

Have you ever heard of consolidated financial statements? This is the income statement, balance sheet, and cash flow statement that companies create at the end of each year to summarize their performance. You can learn more in our series on the fundamentals of degrees.

A sole trader or a very small company doesn’t have to produce these initially. However, as you start growing, you may need to have them or it may just be useful to know the bigger picture of the business they are offering. An accountant can help you prepare these instructions. They can also help you get your day-to-day accounting systems set up properly:

Give business advice

An accountant can also give you more general business advice. If you are considering expanding into a new market or buying another business, they can help you rethink the financial implications of the investment and decide if this is right for your business.

A few hours of an accountant’s time can really pay off here by avoiding costly mistakes or identifying exciting opportunities.

2. How much does a Small Business Accountant cost?

Of course, the cost of hiring an auditor for your small business will depend a lot on your location, the size of your business, and the type of services you want.

But it helps to have a rough idea of ​​what it will cost. Here are a few examples. You can find more detailed information about the costs for your particular situation by contacting auditors in your area and asking for quotes. I’ll share tips on how to find an accountant later in this tutorial.

In the US, you can expect to pay anywhere from $150 to $400 an hour for the time of a small accountant, according to CostHelper. This sounds like a lot, but if your needs are fairly simple, you might not need too many hours. The website says:

“ The owner of an established Northern California retail store with 12 employees creates her own monthly financial statements using QuickBooks software, but these are budgeted approximately  $ 300 to $ 400 annually for two hours of consultation with her tax advisor. “

In the UK, some accountants charge fixed fees for defined services. For example, SJD Accountancy, which specializes in contractor bookkeeping, charges £120 per month plus VAT for a fully inclusive service, including unlimited personal advice. KPMG Small Business charges £145 per month plus VAT for the basic package.

If you only want a certain service, for example a tax return, this should be cheaper. For example, Ainsworth & Co gives an estimate of 100 to 200 euros plus VAT for completing a simple self-assessment tax return. A basic set of accounts starts at £600 plus VAT to create and submit.

3. How do you calculate whether it is worth hiring an accountant?

So how do you know if hiring an accountant pays for itself?

In the previous section, I gave you some rough estimates of the cost of hiring an accountant. This varies, of course, so I recommend contacting some accountants in your area and asking for quotes based on your own situation and needs. 

As with any other service, put together a few different offers and compare the prices and level of service.

The next step is to calculate how much time you or an employee are currently spending on accounting tasks. Keep track of the time you’ve spent in the past year with everything you think about outsourcing to a tax advisor.

Then decide how much your time is worth – usually based on how much you could make or how much value you could add to your business in doing something else.

For example, let’s say you invested a total of 15 hours preparing your annual tax return and estimate your time to be $50 an hour. The total cost of preparing your tax return would then be:

Cost of preparing the return = 50 x 15 = $ 750

Then, the equation is simple. If it takes less than $750 to hire a tax advisor, it will save you money. However, if the accountant costs more than $750, it won’t.

Even if the accountant costs more than doing it yourself, you can still choose to hire a tax accountant for some of the other services that we will look at in the next section.

4. How can you benefit from hiring an accountant?

In addition to the simple financial equation of whether it is cheaper to outsource than to do your accounting duties in-house, there are several benefits to hiring an accountant who can help tilt the scales more towards outsourcing.

Identify tax savings

In addition to making a tax return difficult to prepare, a good accountant can sometimes save money on your tax bill.

After all, tax law is complex and there may be special deductions or allowances that you are unaware of. Or, if you structure your business or transactions differently, you can make your business more tax efficient.

Avoid penalties

Small businesses can easily face painful penalties for failing to comply with relevant tax rules, making mistakes in their tax returns, or meeting deadlines. With a qualified tax advisor, you should definitely avoid these penalties.

to save time

Do you remember all of the hours you calculated in the previous section? When you share them, you can apply them to other business activities that can be of great benefit to your company. You can also have more mental freedom and focus without all of these billing problems swirling around in your head.

Help you grow

As I mentioned earlier, accountants can provide more general business advice. You will often work with the same tax advisor for years so that they can get to know your company and offer an informed perspective for your decisions. They can help you take the right steps and drive growth and profitability.

Make you more effective in other situations

Accountants can help you with many other important roles in your company. When writing a business plan, they can help you get it right and make realistic financial projections. 

Once you decide on the right legal structure, they can advise you on the pros and cons of each law and help you set it up. If you’re buying or selling a business, or making major investments, or trying to secure funding, these can help you with any of those big projects.

6. How to Find a Good Small Business Accountant

Once you’ve made a decision to hire a tax advisor, you want to make sure you’re hiring the right one.

A good place to start when looking for an accountant is the local accounting association in your country. Many of them have online search tools and you have the added benefit of the fact that the accountant you have found is properly qualified and a member of this association.

For example, in the United States, you can visit the American Institute of CPAs website, which has links to your country’s association. If you want to verify a specific provider’s credentials, visit CPA Verify.

In the UK, the Institute of Chartered Accountants in England and Wales offers a simple online search facility where you can find a member firm near you by entering your zip code.

Once you’ve found a few potential accountants, received offers, and settled on potential candidates, don’t forget to ask them a few questions to make sure they are right for you.

 Accountant Greg Atkinson makes some great suggestions, and you can always add your own questions based on your specific needs and concerns. You may have worked with your accountant for many years so make sure it’s a relationship that works for you from the start.

Next Steps

Hope you found this guide helpful. If I’ve done my job correctly, by now you should know what an accountant does and you should be familiar with certain situations where an accountant can be helpful for your freelance business.

You should also have a rough idea of ​​what an accountant will cost and be ready to start searching. Most importantly, you will be able to make the decision to hire an accountant based on calculations, not guesswork.

If you have any questions or want to share additional information with other readers, please leave a comment and share.

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