NFIB

When Do You Need an Accountant to Help Start a New Business?
04/ 15/ 2002


Many new small business owners are reluctant to spend the money required for professional assistance and consultation. In some instances, however, professional help is nearly mandatory. In today's Workshop, Jeffrey Moses describes circumstances in which an accountant should be consulted.

The main focus of consulting with an accountant when getting a new business underway is to help establish, right from the beginning, the company's tax structure and liability. Ongoing bookkeeping and payroll -- along with basic financial recording of revenue and expenses -- can be maintained by the business owner. However, an experienced financial expert will get you off to a safe start by informing you about tax laws and helping you set up a financial structure to make sure that your taxes are paid as you go. (For instance, will you be required to collect sales tax on out-of-state sales, will you have certain products or services that may not require collection of sales tax, etc.). This information can be gathered from books and magazines, but an accountant experienced with helping to set up small businesses will know all the latest laws and requirements.

Accountants are also invaluable when you're buying an existing business or franchise. Financial analysis and negotiations in such matters can become extremely complex. And because a good deal of money is often involved, it's good to have a skilled expert on your side.

If your business will involve paying or holding money for clients (such as an ad agency paying for media purchases or a real estate agency establishing escrows for property purchases), you should consult with an accountant to setup specific step-by-step procedures.

Accountants can help set up viable payment schedules that a new business can offer customers. Also, the proper system can be put in place for extending lines of credit to individuals and businesses that use your products or services frequently.

If your business will require any special insurance, an accountant will prove invaluable in helping you determine liability amounts.

New businesses often require some time to become profitable. An experienced accountant will help you calculate financial time-lines, with potential revenue and expenses, so that you can more accurately project your new company's need for up-front financial reserves. Remember, the most common reason for new business failure is insufficient start-up funding.

New businesses often find it difficult to determine how much should be taken out for salaries to owners. Just because a business has customers and is generating revenue doesn't mean that it has become profitable. An experienced accountant can help you set up a salary structure, so that you can begin taking out living expenses as soon as they are realistically available.

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