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How to Hire an Accountant or CPA for Your Small Business

how to hire an accountant to look after your books

As a new small business owner, you’ve probably heard “ask an accountant” a lot. Well, you don’t have an accountant. And unless someone in your family or a friend is an accountant, you probably don’t even know where to find one. So, we’re here to share some tips on how to hire an accountant.

In truth, while it’s a good idea to have an accountant lined up early, you probably won’t really need to hire an accountant during your business’s startup stage. As long as you’re keeping good records on how you’re spending your money setting up your business, you should do fine. You’ll only need to decide on an accountant (or decide to just use bookkeeping software) a little before you start to generate income.

This is why we originally planned our How to Hire an Accountant article a little later in our step-by-step guide. But one of our readers asked about how to find an accountant, so we decided to move this article earlier. After all, keeping an eye out for a good accountant, even if you don’t hire them right away, is absolutely the right thing to do.

This blog post won’t focus on bookkeeping software, which is another important item in setting up your business. We will have a series on that. It’ll come after we go over how to set up a very simple webstore on some of the big internet selling platforms. So, stay tuned for those articles.

Meanwhile, onto hiring an accountant. Let’s start with some definitions.

The Difference Between a Bookkeeper, an Accountant, and a CPA

Most folks have a vague idea of what a bookkeeper, an accountant, and a CPA do. But they probably can’t tell you the difference between the three. For a small business looking for accounting help, the difference matters quite a bit.

What is a Bookkeeper?

A bookkeeper is someone who makes entries of income and expenses into the books of a business. Modern day bookkeepers tend to work with computer software to keep track of all the money coming in and going out of a business’s bank account.

You don’t need specialized schooling to be a bookkeeper but of course it helps. You do need to be detail oriented and be able to enter data into a computer.

What is an Accountant?

An accountant is typically someone with some college schooling in accounting, but this isn’t required. In addition to understanding bookkeeping, an accountant typically can analyze a business’s finances. They’ll be able to help you see where you’re making your highest profits and where you’re losing the most money.

Accountants tend to have some understanding of the current tax law, so they can do some tax planning for small businesses.

What is a CPA?

CPA stands for Certified Public Accountant. As the name suggests, to become a CPA, you have to pass a certification test.

To qualify for the certification test, you’ll have to have a minimum number of college accounting credits and have worked under a CPA for one or two years. Once you become a CPA, you’re subject to a set of professional rules of conduct and must take continuing education classes every year.

The CPA is a US-only designation. The CPA-equivalent certification in other parts of the world is Chartered Accountant (CA).

A CPA can do a few things ordinary accountants and bookkeepers can’t do. One of the most important is that they can represent you in front of the IRS. The other is that they can perform attestation services, which is basically an independent audit of a company’s books.

CPAs specialize within accounting areas. For a small business, you’ll want to look for a CPA who represents small businesses and is familiar with tax laws.

CPAs can help you with tax planning. A good CPA should update you on things you can do throughout the year so you can save on taxes at the end of the year. The actual filing of your taxes should be the culmination of this tax planning.

Understand What Level of Help You’ll Need

Now that we’ve explained what bookkeepers, accountants, and CPSs do, you can more easily figure out the type of help you need.

Modern day bookkeeping is typically done with computer software. Depending on how you record your income and expenses, you might need someone to enter the data. You could do this yourself if you only have a few a day or a few a month. Some bookkeeping software can even sync with other software like credit card sales software and import the data automatically. If you have too many entries or don’t wish to do the work yourself, you can hire a bookkeeper.

You might want to hire an accountant if you need some data analysis. However, for a small business, if you need someone on that level, it’s best to just upgrade yourself to working with a CPA.

CPAs typically cost more. But their deeper knowledge on tax matters, the ability to represent you in front of the IRS, and their data analysis sophistication are likely worth the price.

Some CPAs have inhouse teams of bookkeepers and accountants. So, working with a CPA firm can get you different levels of people working on things that might need different levels of sophistication.

How do You Find a CPA for Your Small Business?

The best way to find a CPA is still the old fashioned way—through word of mouth. And you’re most likely to get the best recommendations from other small business owners. After all, some of them do use CPAs to help them with their business finances.

You’ll want to find a CPA that’s local, or at least in the same state. Some states require businesses to file income taxes and/or franchise taxes. A CPA who practices in the same state as you will know what needs to be filed.

We know. You just started your small business. You don’t have a lot of friends who are also small business owners. So where do you find some?

Go to Small Business Networking Events

There are a lot of traditional places where business owners tend to gather. It’s also not hard to find these networking events. These include:

  • Local Chamber of Commerce luncheons or talks
  • Local Small Business Administration meet-ups or free classes
  • Local community college free classes for new business owners
  • Internet forums for your town or region

Most of these organizations have their own website, so you can look up when the next networking event might be. Sometimes, they’ll even send you flyers. Often, the free classes are taught by CPAs (it’s a traditional way to develop a client base for professionals).

With internet forums, you can try a Facebook local group. Sometimes, Nextdoor might work too. Just be aware that this is the least reliable way to find a CPA because you don’t really know who is doing the recommending.

Search Professional or Government Websites

If you can’t find a business networking event near you or can’t usually make the timing of these events, you can also look for CPAs near you from various databases on the internet. In fact, even if you do get a few names from networking events, you should verify the names too.

These websites include:

CPAs are certified by each state. So, each state’s certification agency will typically have a searchable list you can use to find a CPA near you.

The Association of International Certified Public Accountants (AICPA) is a global organization of accountants. They have a searchable membership list. However, not every CPA belongs to the AICPA, so you’re not getting a complete list of CPAs near you. Still, it’s worth a quick look-up.

Small businesses tend to use CPAs for tax-related issues. In order to represent others in front of the IRS, you’ll have to be an attorney, a CPA, or an enrolled agent (non-lawyers or non-CPAs who have passed an IRS administered test and who must follow IRS rules of conduct). In order to file taxes for others, the tax preparer also has to have a Preparer Tax Identification Number (PTIN).

So, the accounting professional you hire to help you with tax matters should be a CPA with a PTIN. That’s why the PTIN database can help you find a CPA near you.

Research the CPA Possibilities

At this stage of your CPA search, you should have maybe 3-4 names that you could contact.

These days, you should expect every business to have at least a simple website. So, with your 3-4 names,  go to the CPA’s website and see what information you can find. You’re looking for:

  • At least 3-5 years of experience practicing as a CPA.
  • Experience working with small business owners. Even better if they have experience with your particular industry.
  • Whether they provide additional services like bookkeeping services (in case you don’t want to work with bookkeeping software yourself) or payroll services (you can use other companies for this, but you might find it more convenient to go through your CPA)

If everything looks good, contact them. Ask for a face-to-face meeting or a video or phone call to explore the possibility of hiring them as your CPA.

What to Ask a CPA You Might Hire

Here are our suggested questions that you can ask a CPA you might hire. Your goal is to find out if they have the right knowledge to help you run your business.

You’ve probably already found some of the answers when you reviewed their website, but it doesn’t hurt to ask again. The CPA might be able to tell you additional information not on their website.

Our suggested questions are:

What kind of clientele does the CPA have?

You’re looking for a small business specialist who preferably has clients in the same industry as you.

Will you be working with just the CPA or is there a team?

Who will be your point of contact? You want the CPA you’re talking to, to be your point of contact. If they’re going to ask a junior CPA or accountant to do all your work, then you might want to talk to that person. This way, you can base your hiring decision on that person.

What kind of information do they need from you to file taxes for you?

It’s better to know ahead of time what info you’ll need to send your CPA for them to complete their work. Businesses have to file federal taxes every quarter, so you’ll be sending the information to your CPA at least four times a year.

State taxes are generally filed once per year. They’re based on the same information as your federal taxes, so you won’t have to worry about sending the CPA additional information.

Do they have a preferred bookkeeping software that you should use?

Or will they be handling the bookkeeping/data entry for you too? Also ask if they can help you set up the bookkeeping software. Bookkeeping software makers typically have a customer service team to help you with setup, but it’s better if your CPA helps you set up items in their preferred way.

What is the general process of working with them, if anything has been left out during your conversation?

Having a good understanding of how you’ll be working with each other will minimize miscommunications later.

How do they charge for their services?

Some CPAs charge by the hour. Others charge for each task.

Are they available for consultations and how they charge for such advice?

If you’re still at the very start of forming your business, you might need their advice on picking a business entity. They might also be able to give you other tax saving tips related to setting up your business.

Make a Hiring Decision

Once you’ve talked to everyone on your list of possible CPA hires, make a decision on who to hire. You want to hire someone with the right experience, who seems like someone you can get along with, and who you trust. You don’t need to hire the most experienced person, but the least expensive isn’t always the best either. Hire the person with the right experience for a business of your size.

Don’t forget to politely let those who you chatted with but decided against know. This is a small world. You might not hire that CPA right now, but you never know if you might want to change firms later. It’s always better to have a cordial, professional relationship even from the beginning. You don’t have to call them. A polite email will be fine.

Do You Really Need to Find a CPA or Hire an Accountant to Help You with Your Small Business?

Depending on the type of business you have, you may not need to find a CPA. We had a previous business where we used a CPA. While we enjoyed working with him, we didn’t need his services much.

When we started this business, we decided to just use bookkeeping software. (We use QuickBooks Self-Employed.) Because we don’t need to log multiple sales and expenses every day, we’ve been able to keep our books fairly easily.

We use software to estimate our quarterly taxes and file our year end taxes. We know that if we have questions, the software maker has fairly good customer support to help us. For an additional fee, they also have CPAs on staff to help too. And, at the end of the day, if we really need a CPA’s help, we can hire our previous CPA.

However, we do have some familiarity with basic bookkeeping principles. So, depending on your experience level with personal and business accounting, you might be able to get by without a CPA for a while. We definitely recommend you find a CPA if you’ve never run a business before. And, once your business volume reaches, say, mid six figures or more, you probably should be working with a CPA for tax planning and savings.

In the Next Blog…

In our next blog, we move to something those of you opening a business with a physical location will all have to deal with: a commercial lease for a storefront or an office. We’ll go over the basics of a typical commercial lease. This way, when you do read your actual lease, you can orient yourself better.

Of course, our blog post is no substitute for hiring a lawyer to review your lease. You should still do that. We merely hope to demystify some of the concepts typically used in a commercial lease for you, to make the process easier.

Interested in starting and running a small business? Here’s the beginning of our step-by-step guide: What to do right after getting that great business idea.

Questions? Comments?