In fact, over 80% of small and medium-sized Canadian businesses manage their books internally — and of those, only 26% have their own accountant. That means that in almost 60% of these companies, the owner, office manager of senior manager takes on all accounting tasks.
While this isn’t quite the same as someone carrying out their own heart surgery, accounting does require skills that are difficult to learn on an ad hoc basis. We take a look at how an accountant can save your business money and help it to grow, along with what you should look for in an accountant. We also answer some frequently asked questions, like “How much does an accountant cost for a small business?” and “What does an accountant do for a small business?”
What is a business accountant’s key benefit?
So, what does an accountant do for a small business? Any accountant who specializes in working with small and medium-sized companies can offer a wide range of services. These are four of the biggest advantages of having an accountant:
Tax filing and tax efficiencies
One of the most important accounting tasks for any business is keeping financial records so they’re ready for tax filing season. Preparing and filing tax returns is also a considerable amount of work, and an accountant can take that away from you and perform it in an accurate and efficient way.
Finding tax efficiencies is where accountants really earn their money. They can work out the most tax-efficient way to pay yourself and whether to do this through a salary or dividend payments (or both). They can also ensure that you benefit from the small business deduction, if it applies to your business (this reduces your combined federal and provincial corporate tax to between 9 and 12.2%).
They can help you with the timing of receiving a salary (so you can defer tax) and advise you on whether there are any income-splitting opportunities available to you (this is where you share your business income with your spouse to reduce your overall tax burden).
A key tax benefit is the advice they can give you on selling your business. For example, selling an incorporated business versus a sole proprietorship or partnership could save you hundreds of thousands of dollars, thanks to the lifetime capital gains exemption for incorporated businesses (read more about the benefits of incorporating your small business).
As a business owner, you really should be focusing on running and growing your business, rather than being its accountant. Hiring an external accountant will free up a lot of time. In the hands of an amateur, managing accounts can be extremely time consuming, plus there is a much greater risk of making mistakes, which can land you in hot water with the CRA.
A professional accountant will give you back a lot of valuable time and keep you fully compliant, which can also save you money in the long run.
Good business accountants don’t just look back at what has happened with your business, they also look ahead to what is possible. They can help you to forecast your costs and revenue more realistically.
Similarly, they can help you to create a more effective and achievable business plan that can really help your business take off. They can help you create both short-term and long-term plans, which not only help your business thrive but also give you a greater sense of control.
How much does an accountant cost for a small business?
This is a difficult one to answer, but the short reply is: not usually as much as they’re worth. A good accountant could help you to make considerable tax savings and will also free up a lot of your time so you can focus on growing your business.
The amount you’ll spend on an accountant will depend on a number of variables. These include the size of your company and the kind of work you want your accountant to do for you. As we’ve seen above, there are plenty of ways that an accountant can have a positive impact on your business.
How much an accountant charges for a small business will depend on where you’re situated and the kind of accountant you hire. You could pay anything upwards of $150 per hour for a CPA (chartered professional accountant). Alternatively, many accountancy firms will charge a monthly fee for a set number of tasks, which can work out to be less expensive (and which will ensure you don’t receive any surprise invoices). These packages can start from as low as $500 per month and can go up to several thousand dollars per month.
How to find a small business accountant and what to look for
Ideally, you would want to use an accountant who has been referred to you, either by your financial advisor or an acquaintance who has experience of working with them. Whether the accountant is referred to you or found through an online search, there are some important questions to ask them before hiring them.
What are their qualifications and experience?
While a bookkeeper could help your business with certain tasks, an accountant will bring a lot more value to your company. There is a strong case for hiring only a Chartered Professional Accountant (CPA). CPAs have to go through six modules of an accounting course, complete a minimum of two-and-a-half years of accounting work experience and then pass a final exam. They also need to maintain their certification by completing around 40 hours of continuing education each year.
Does their preferred billing method work for you?
Make sure that your potential accountant can break down how they calculate their billing rates. Also, it may be better for your company to choose an accountant who can provide service packages, rather than simply hourly billing.
Do they have experience with similar businesses to yours?
It can be important to have an accountant who understands the industry you’re in. They will know the potential pitfalls to watch out for and have a better understanding of any tax efficiencies that might be available. It also pays to hire an accountant with experience of any unusual aspects of your business, for example if you work with a specific type of customer or if a large amount of your products are exported.
Will they have enough time to devote to your business?
It’s important to know that your accountant will get back to you on any inquiries in good time. While a busy accountant can be the sign of a good accountant, you don’t want to be neglected. Ensure they can commit to responding to your queries within a suitable timeframe before hiring them.
Why cheaper is rarely better
Finally, while it makes sense to be careful with your expenses, you don’t want to base your decision on hiring an accountant on price alone. A good accountant should be considered an investment in your business; they can help you save money, grow your business and become more successful. This decision isn’t a time for nickel and diming.
Help with discovering if you need an accountant and finding the best one for your business
If you’re not sure if your business needs an accountant, your IG Advisor can take a closer look at your business and its finances to help you make that decision. They may also have an accountant among their referral partners who they can recommend for you.
Call your IG Advisor today to set up a meeting. If you don’t have an IG Advisor, you can find one here.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant.