Although the question of “Do I need an accountant?” seems fairly straightforward, the answer is more complicated than it might appear. The duties of an accountant are to ensure that financial records are accurate and that financial statements are accurately prepared. An accountant also ensures that taxes are filed timely and accurately. Therefore, the correct answer to the question depends on several factors:
•The age of the business
•The type of business
•The gross revenue and net profit
•The number of employees, if any
•Whether there is a computer program or not
For a new business, the focus should be on obtaining new customers; hiring an accountant for the day-to-day business operations would not be cost-effective. Generally, a smaller business should make use of one of the accounting programs available, such as QuickBooks, Peachtree, and the like, which will generate all necessary financial statements. The only requirement for successful operation is that the user understands basic accounting, such as which entries are income, which are expenses, and so forth.
Many small businesses are sole proprietorships and as such do not need elaborate software or an accountant. Many software programs can be upgraded to accommodate more sophisticated accounting needs, but for a small business, this should not be necessary. A period of free technical support is usually included in the purchase of software, and training classes are available in most areas.
In order to justify hiring an accountant, of course, the business must generate sufficient revenue to pay for his or her salary. Usually, unless the business generates millions per year, an accountant is not necessary.
Since most small businesses are operated by the owner and/or family members, it might be prudent to hire a bookkeeper in order to ease the workload of the owner. This primarily depends on the activity level of the business and the annual revenue. Most accounting programs have a payroll module that facilitates tax filing, quarterly filings, and the like, and seamlessly interfaces with the regular accounting module.
If there is no computer program and the accounting system is manual, then an accountant is probably a necessity.
For income tax filing, hiring a tax accountant is a necessity in order to maximize all the deductions to which the business is entitled. At some point, which will be determined by gross revenue and net profit, it will be necessary to obtain the services of an accountant, but it is more determined by the profitability of the business rather than the age of the business.