Many small business owners are scared of handling taxes, so they often have professionals prepare tax forms such as sales tax forms, payroll tax forms and income tax forms. They are more likely to handle their own accounting and bookkeeping. Bookkeeping is defined as routine business transactions such as accounts payable (paying vendors), accounts receivable (invoicing customers, collecting payments and managing not yet collected invoices) and other routine related functions such as operating a point of sale system where sales are recorded and inventory managed. Accounting is defined as non-routine business transactions and financial statement preparation to mention two functions related to small businesses.
Mixing business and personal expenses in e.g. a corporation may pierce the corporate veil resulting in the entity being disregarded. When mixing personal and business in your for profit entity, you will not find out the consequences of your actions until it is too late to correct for it. For instance, let's say you and your company have been sued and that you are in front of a judge at which time you find out that the liability protection you thought you had with the entity is disregarded because you ran both business and personal expenses through the entity.Most businesses with twenty or fewer employees choose to hire an external accountant to perform limited functions for the business. Below is a list of services that you should look for before deciding on a local accounting firm.
Accounting and financial statements
- Statement of Operations / P&L
- Balance sheet
- Cash flow statement
- Industry comparison (benchmark) report
- Cash Disbursement Journal
- Transaction Journal / General Ledger
- Payroll Journal
- Bank Reconciliation
Form filing to taxing authorities
- Sales Tax – Monthly or Quarterly prepared
- Payroll Tax Deposits – Monthly or Quarterly prepared
- Quarterly Payroll Taxes prepared – Form 941 and State
- Federal and State Unemployment prepared – Form 940 and UITR
- Withholding Statement for Employees
- W-2 Forms or 1099s
- Business Personal Property Tax
Unlimited consultation
Tax planning
- Advise the client of the new tax laws that affect their business
- Quarterly Estimated Income Tax
Income tax preparation
- Personal Income Tax Returns prepared
- Corporate and Partnership Income Returns prepared
Other considerations
- Do they provide pickup and delivery?
- Do they provide software solutions as part of the service at no additional fee?
- Do they meet clients and prospects face to face at their place of business?
- What kind of support and expertise does the company have?
- Do they provide the service consistently, timely and accurately each and every month?
- How soon after receiving the documentation and data does the accounting firm take to return sales tax returns, payroll tax returns and financial statements?
- How long has the company been in business?
- Ask for a list of references and call some of the references.
There are many choices in the market place as far as an accountant. The highest level of knowledge and skills will be found in certified public accountants (CPA). With the many alternatives and it is difficult for someone to determine whether someone has matching qualifications for the needs of the business. However, by choosing a CPA you will have made a safe choice. CPAs are regulated by a state department of regulatory agencies, required to be licensed, required to continuously update their skills and knowledge through educational requirements every single year, have at minimum a Bachelors degree in accounting, have been supervised by another CPA who approved the CPAs skill level before becoming a CPA, passed the CPA exam and must follow high ethical conduct standards. No other type of accountant has any of these requirements. Unfortunately, by selecting a non-CPA, you run the risk of severely undermining your business. You may think that the hourly rate of a CPA is too high for your budget, but I think you will more often than not find that it will be less costly to hire a CPA than to hire a cheaper accountant.