In my last column, we began looking at the "three-legged-stool" -- that is, who small businesses need as supporting advisers. The first leg discussed was a business-minded attorney.
The second leg of the stool is an accountant, which for businesses should always be a Certified Public Accountant whose practice focuses on small businesses.
Accounting tools such as QuickBooks have made day-to-day bookkeeping and accounting much easier for small-business owners. But even though these tools are relatively easy to use, it can take quite a bit of time and a certain level of expertise to get everything set up properly.
"Do-it-yourself accounting tools may provide some assistance, but the entrepreneur will incur a learning curve and have to invest time in these sites when he should be investing time in developing the business," cautions Vic Alexander, chief manager of KraftCPAs here.
Many entrepreneurs try to bootstrap setting up their books by doing it all themselves, but in doing so they may fail to consider important issues that a CPA can help sort out.
"An entrepreneur should involve a CPA in the developmental phase of the business," Alexander said. "When developing the business plan, the CPA may be able identify potential sources of revenue or expenses that have not been considered.
"The CPA should also help the client in evaluating the appropriate entity structure (i.e., C-corporation, S-corporation, LLC, partnership or proprietorship) to accomplish the ultimate goals of the owner. The CPA can also help make introductions to bankers, attorneys, insurance agents, etc."
More than tax help
It is important to keep in mind that a CPA can provide assistance well beyond tax preparation.
"The CPA should be able to assist the client with asset protection, retirement planning, evaluation of systems of control for the business, setting up and maintaining accounting systems, business valuations and identifying key performance indicators that will allow the owner to manage and grow the (company)," Alexander says.
Since a CPA can be an important adviser throughout the life of a business, it is essential to find an accounting firm that's a good fit for the entrepreneur and the business.
"The CPA is the most trusted adviser in many instances, so the entrepreneur needs to feel comfortable with the CPA they intend to use," Alexander said.
"The best way to locate a firm to meet your needs is to first identify what the current and projected needs of the company are.
"Most people then talk with other successful entrepreneurs or professionals to identify firms that could be a fit for them. The entrepreneur can then review firm websites and interview firms they're considering."
So, like a good attorney, a CPA can become a trusted part of the entrepreneur's team who can add value throughout the life of a business.
My next column will look at the final key component of the "three legs of the stool" supporting a small business -- a commercial banker.
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