You Know You Need An Accountant If…

There is a popular comedian, Jeff Foxworthy, whose signature series of jokes begins, “You know you’re a redneck if…” 

A similar approach could be taken when answering a common question posed by owners of growing businesses about when to hire a true accounting professional. With apologies to Foxworthy, it would go something like this:

“You know you need a real accounting professional if…”

“…the way you know your available cash balance is by calling your bank.”

“…you're getting more calls from unpaid vendors than from customers and prospects.”

“…your accounts receivable figures keep getting larger every month.” 

“…you can’t get a monthly financial picture on your company from existing staff or you rely on your annual tax return.”

“…you don’t know if, as an owner, you are protected against liability.”

All businesses—large and small—understand the need for an accounting system, even if they don’t believe a full-fledged staff accountant is required. Many times, the task is left to the owner, an office manager, or someone designated as bookkeeper. In these scenarios, two problems arise as a business begins to grow: the workload increases, putting a strain on the person handling the financial aspects of the business; and at the same time, the accounting demands become increasingly complex. 

It’s at this point that an outside accounting professional—one with experience in financial statements and taxes—needs to take on a greater role, even if that role is purely advisory. A seasoned CPA will have already guided plenty of companies through the same growing pains and can best determine how to structure the accounting function. Among the options is a full-time bookkeeper who works hand-in-hand with an outside CPA, or a full-time accounting professional who turns to an outside CPA for occasional guidance. 

No matter how it’s structured, the responsibilities that fall within the accounting function include, at a minimum, the handling and/or providing input on:

• Accounts payables and accounts receivables
• Payroll
• Pricing and profitability analysis
• Cash flow and financing issues
• Inventory issues

The accounting functions for a growing company include the following, which require an outside CPA who has the experience and focuses on business consulting:

• Maintaining the proper organizational structure for productivity and fraud prevention
• Operational efficiencies
• Compensation and benefits packages
• Financial guidance  models and presentations

The ultimate is to be in a position to hire a chief financial officer. While it would be tremendous to have someone with that level of experience, most smaller businesses can’t afford one. The next best thing is to outsource the high-end responsibilities to an accounting firm, where a CPA with industry experience can be accessed much more cost effectively. 

No matter which way a growing business proceeds, it’s important that the accounting role include at least two people, for security. Having one person in charge of all the money coming into and being paid out of a business is a recipe for fraud and embezzlement. An additional financial professional acts as an internal control against anyone with an inclination to commit fraud.