Another question I get asked a lot, especially at dinner parties by people who have just started their first business or are thinking of starting their first business, is when to hire an accountant. My answer is normally pretty simple. As soon as you possibly can. But if it were that simple, this article would end here and there would be no need to read further.

The fact is, that as a small business owner you have to decide how and where to invest every penny, and if you can afford to hold off on a particular expense, say for example, the hiring of an accountant, then it’s easy to convince yourself that you should.

That said, there are a few instances where you really should hire a professional accountant or accounting firm, even if it means you need to invest a little more.

1. Hire an accountant when you need to do your taxes

The first instance where you really should consider hiring an accountant is when you have to report something to the government, like your taxes for instance. My first key piece of advice to any business owner when they ask when to hire an accountant is to get a qualified accountant or an accounting firm to do their taxes.

Taxes are serious and your business needs to be serious about getting its taxes right. Few things can be more disastrous for a small business than to be audited by the Receiver of Revenue and then to have to pay tens or hundreds of thousands of Rands in back taxes, along with the resulting fines. So come tax time, unless you (or one of your partners) is a qualified and experienced accountant, get yourself a good accountant.

2. Hire an accountant to decide how to structure your business

Another important momento to consider hiring an accountant is when you are first setting up and structuring your business. There are a number of different business formats available to the small business owner, Sole Proprietor, Private Company (PTY) Ltd. or Personal Liability Company Inc., for example, and you want to make sure you choose the most appropriate model for your particular business needs. A good accountant will help you make the right choice and save you time, money and probably a lot of unneeded stress in the future.

Changing your business’s structure is a process that involves the government, lawyers, taxes and more bureaucracy than anybody would care to think about. A good choice early on can save a lot of headaches.

3. Hire an accountant when you need to get your business valuated

Probably one of the most important moments to hire an accountant is when you need to get a valuation for your business. Another one of those questions I get asked a lot by small business owners is how much I think their business is worth. I jokingly answer that it’s worth however much they can convince somebody to pay for it.

But joking aside, whether you are looking to sell your business because you want to retire or you are looking to sell only a part of your business to take on a new partner, having an experienced accountant look through your business records and give you a competent and compelling valuation for your business can help you get the best possible results during the negotiation process.

Another moment when you will need some sort of business valuation is when you are applying for an overdraft, business loan or financing for a project. A professional and comprehensive business valuation can help push through a loan application and can sometimes even help you get more competitive terms.

4. Hire an accountant as soon as you can afford to

Small business owners will often tell me they can’t afford an account right now. That they are not generating enough revenue from their business to cover the cost of an accountant. But if you think about how long it takes you to do the tasks that an accountant would do for your (such as balancing your books or preparing your taxes), is that a good use of your time? Wouldn’t your time be better spent on your core business processes that generate revenue?

Here’s an example. Imagine it takes you 20 hours to prepare and file your taxes, but you bill your time out at R1000 an hour. That means it’s effectively cost you R20000 to do your taxes. How much would an accountant charge you to do your taxes? Would it be less than that? Would he or she do it better than you? Could an accountant save you money by finding tax exemptions that you might have missed?

And that’s only your taxes. What about billing? What about stock? What about payroll? I sometimes ask potential clients to write down on a piece of paper the number of hours they spend a week doing all the tasks like bookkeeping, payroll, VAT, PAYE, billing and reconciliation of their bank accounts (often more than one), and then multiply that by 4 (the number of weeks in a month). Then I ask them how much they bill their time out for. I then show them our fees. Most times their costs for doing their accounting themselves are 5 or even 10 times greater than our fee.

5. Fixed-retainer accounting

Here at The Accounting Team we offer fixed-retainer accounting packages. What that means for our clients is that they know exactly what they are going to pay every single month. We found that works best for our clients, and it works well for us. Sure, there might be months when we have more to do (like when we need to submit your taxes, for example), but we find that if we take care of your accounting tasks for you over the course of the year, when tax time comes around, we have everything we need to make sure that your taxes get done properly and efficiently. And because we know your business inside and out, we have time to focus on the details that might even end up saving you money on your tax returns.

Accountants are changing. We have to. Technology is driving change and we need to keep up with it. Cloud based accounting and paperless offices are now the norm. Maybe that’s another reason to hire an accountant as soon as possible. A good accountant can help you create business and administrative processes to save you time, money, and maybe at the end of the day, even save your business.

Erasmus Pretorius is a Chartered Accountant and CEO of The Accounting Team. He has been helping small business grow since 2001.

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Erasmus Pretorius

With over 23 years of unwavering expertise, I am a seasoned Chartered Accountant committed to financial excellence. My journey in the realm of finance has been marked by astute strategic insights, meticulous attention to detail, and an unyielding dedication to precision. Over the years, I’ve navigated the complexities of financial landscapes, providing invaluable counsel to diverse clients. My proficiency extends across auditing, taxation, and financial management, coupled with a profound understanding of regulatory frameworks. As a registered professional, I have consistently upheld the highest standards of integrity and ethics, earning a reputation as a trusted advisor in the dynamic world of finance.