Startup Finances: DIY or Hire a CPA?

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Doing your own business accounting is easier than ever thanks to the wealth of small business technology available today. But while you can do DIY accounting, should you? Managing a small business’s finances involves a lot more than keeping the books and filing receipts. What can you confidently do yourself, and what should you hand off to a certified professional accountant?

How to Manage Your Startup’s Finances Yourself

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Handling day-to-day financial management yourself saves money on professional services. Most of the tasks a business owner can DIY fall under bookkeeping rather than accounting. Bookkeeping is the practice of recording financial transactions including expenses, invoices, and payroll. Meanwhile, accounting takes that financial data and interprets it. It’s this analysis that lets business owners make informed financial decisions.

Bookkeeping tasks you can DIY include:

  • Recording revenue and expenses in a ledger.
  • Filing receipts.
  • Invoicing.
  • Preparing financial statements.
  • Completing payroll.

Even for small firms, these jobs used to require a dedicated bookkeeper who would spend hours manually entering data, reconciling accounts, and generating reports. Today, companies can skip the bookkeeper and save time and money when they invest in accounting software.

Accounting tools aren’t one-size-fits-all, however. Whereas a retail business needs point-of-sale integration and real-time inventory management, a manufacturer requires advanced costing methods for adjusting pricing according to trends. Are you a consultant, engineer, or builder looking to grow professional services with the right accounting software? You need a platform that lets you organize finances by the job. With end-to-end visibility into every project, you can easily manage job costs and identify your top money-makers.

Of course, there are some features every accounting program should include, such as:

  • Time tracking.
  • Payroll.
  • Automated invoicing.
  • Payment processing.
  • Expense tracking.
  • Digital receipts.
  • Banking integration.
  • Reporting and analysis.
  • Cloud capability.

Finally, the right accounting software makes it easy to collaborate with your CPA. That’s one reason cloud-based software has become so popular. Rather than driving to your CPA’s office with a binder full of paperwork and a pile of receipts, business owners and their CPAs can securely access a shared database hosted in the cloud.

5 Things a CPA Can Do for Your Startup

You may have noticed a lot of financial important tasks missing from that list. That’s because while DIY bookkeeping is relatively foolproof as long as you’re equipped with the right tools, the average business owner lacks the expertise required to make complex financial decisions.

When it comes to major business decisions, getting expert advice is always a good idea. Here are five times you should consult with your CPA:

Choosing a tax structure

Business owners have options when deciding how to structure their business, each with its own legal and tax ramifications. A CPA helps you choose the most advantageous business structure for your startup.

Choosing an accounting method

Starting a business also requires choosing an accounting method. There are two main accounting methods, cash accounting, and accrual accounting. The right choice for your business depends on its size, gross receipts, and whether or not you maintain inventory.

Setting up payroll

A small business’s payroll system has to comply with a variety of state and federal laws. These laws dictate what type of benefits an employer must offer, how often employees are paid, how to calculate overtime pay, and how long to keep payroll records. Running afoul of these regulations can lead to major compliance headaches for employers, so it’s worth working with a CPA to set up payroll correctly.

Preparing business taxes

Preparing and filing business taxes is the top reason business owners consult a CPA. A CPA takes a company’s financial reports, payroll data, income and expenses, and other financial records and uses them to file tax returns so you claim the maximum deduction and keep your business compliant. Beyond saving time and frustration, professional tax preparation also reduces the risk of an audit.

Long-term planning

Perhaps most importantly, a CPA helps business owners zoom out and look at the big picture. It’s easy to get caught up in day-to-day management when running a business, but, according to Startups Base, growth requires thinking about long-term strategy, too. CPAs analyze the information presented in financial statements to establish profitability goals, performance indicators, and business forecasts to guide your company’s trajectory. Your CPA is also a key partner in mergers and acquisitions.

You’re not an accountant. So why are you trying to do the job of one? While there is a lot that business owners can do to keep their company’s finances on track, some jobs are best left to the experts.

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