What does an accountant do for a business? We’re glad you asked! As your business grows, keeping on top of your finances becomes more difficult. You have more invoices coming and going, possibly more debt or access to credit, a growing team, and an increasingly more challenging GST/income tax process. These classic signs of growth are your cue that it’s time to consider calling an accountant. Here’s what an accountant can do for your business.
Responsibilities: What Does An Accountant Do For A Business?
When asking, why should I hire an accountant, it helps to focus on the long list of skills they bring to the table, from financial analytics to accounting software knowledge and business smarts, to tax planning expertise. The beauty of outsourcing your accounting function is that you can choose their responsibilities based on your need. That can include:
Business structure advice: You might not realize it, but Canada has four types of business structures. Although you might be operating as what is known as a sole proprietorship right now, as your company grows, you should rethink your structure. For example, you might be better off as a corporation to take advantage of lower tax rates. They can discuss the pros and cons of operating as a sole proprietorship, partnership, corporation or cooperative to find the best strategy for you.
Introducing business processes: Starting your business with a less structured approach to workflows and procedures is expected. However, as you grow, you need to introduce new methods that streamline workflows, create best practices, and keep your business on track to meet your goals. Every detail can be reviewed and improved with the assistance of an accountant who will ensure everything is managed correctly to enhance profitability and profit margins.
Streamline invoicing: Your invoicing process should ensure you see a steady stream of cash flow from your customers. An accountant will improve your invoicing to ensure you keep up with your bills and get paid promptly. This might include introducing interest applied to customers once they are over 60 days past due or providing a discount to incentivize them to pay right away. In addition, accountants can integrate automated billing systems into your existing software or replace manual processes.
Update sales records and inventory reconciliation: Understanding your sales and inventory allows you to make smarter decisions. What products are always in high demand? What products do you need to move? What products generate the most profits or have the highest profit margins? Does your inventory line up with your sales? Your accountant tracks sales and inventory and runs reports to show you what’s happening. You can create a better inventory management strategy, phase out products that fail to move, and ensure you always meet customer demand. They can also recommend effective discounts to move poor sellers, reduce your losses, and make room for higher-demand items.
GST/HST management: A big mistake many small business owners make is not separating GST from revenue. An accountant will create two separate accounts so your revenue is used for business purposes and your GST is set aside for installments. As a result, you avoid penalties related to late payments or running a balance charging interest.
Accounts payable: You would think simply paying your bills on time is the best way to run a business. However, as your business grows, you need to pay closer attention to your cash flow. An accountant will create an accounts payable strategy. They will pay your suppliers soon enough to avoid penalties and interest yet far enough out to ensure you always have enough cash to cover necessary expenses like payroll and taxes.
Managing cash flow: Accountants create financial reports such as cash flow and profit and loss statements you can use to track your cash flow. This provides a clear picture of your profitability, with a breakdown of how cash flows in and out of your business and a tally of your assets and liabilities.
Payroll: When you run things alone, you only have to worry about paying yourself and your taxes. As your team grows, there are more people to pay and more worries about hours, wages, time off, vacation pay, CPP, EI, what goes to the employee and what needs to be withheld. An accountant or bookkeeper can manage these details. They can calculate what needs to be paid out to your team and what needs to be paid to the government. They also manage the paperwork to back up their calculations and the payments made on each employee’s behalf.
Tax planning and preparation: Although taxes can be a source of frustration and anxiety, you can reduce the stress and the amount of taxes you owe with professional tax planning. An accountant is your ace in the hole, not only when it’s time to file your taxes but throughout the year. They understand tax laws and they prepare for tax filing throughout the year by properly managing your records and payroll. Then, they ensure you take advantage of all the tax breaks available. Taking it one step further, they also identify opportunities to reduce your tax liability.
Tax and payroll compliance: An accountant keeps up to date on payroll and tax laws to ensure you meet your obligations. Every year the CRA introduces new laws that you are expected to follow. This includes the most current credits and tax breaks you can leverage and potential laws that impact your tax filing. They also help simplify taxes and payroll by putting processes in place, introducing autopayment for installments, and keeping you compliant so you come through an audit without breaking a sweat.
Accounting automation: Accountants can source the best accounting software to streamline workflows and automate your most time-consuming manual tasks. You reduce mistakes, keep your accounting department leaner, and also have team members focus on higher-value tasks and strategy.
Benefits To A Business Of Having An Accountant
So, how does an accountant help a business? Accounting functions aside, through ongoing financial reporting, your accountant can analyze data, track significant trends and patterns, and help you become better at business forecasting.
As mentioned, this can include cash flow and inventory opportunities but can also apply to things like when to access more capital, leveraging credit, tax planning, team expansion or reduction, profit margin improvements and more. As a result, you become more forward-thinking and grow with ongoing business advice from a financial expert.