Having a good relationship with your accountant is essential for any small business owner. Knowing that you can contact them regularly for advice through the year, not just at year end, will make a lot of difference to the relationship you have between your business and your money. A good first step to this is to gain some basic knowledge of what your accountant actually needs in order to effectively do their job. This will not only make them happier, but could also make your tax returns less expensive; helping you discover those small financial problems which could get bigger, and helping you better understand the true financial health of your business.
A Systematic Approach
“It's all about having a system in place that works for you, and that system will depend on the type of business you are running; a sole proprietorship or an incorporated company.” observes CGA Gabrielle Loren of Loren Nancke and Co. “As a sole proprietor you will need to keep track of your income and expenses, and while most sole proprietors know exactly how much they made, and track their expenses by month to know what they are spending; few realise that what accountants actually need are your expenses broken down by, by category e.g. wages, offices supplies, travel and so on.” Commenting that the less time she, as an accountant, spends reconciling records, the less expensive the cost of doing a tax return becomes.
Knowing your Responsibilities
Other than a great system you will also need to educate yourself about your obligations relating to GST/HST, payroll and your own personal tax obligations. Gaining an understanding about these basic responsibilities may not be top of mind for most new business owners, but choosing to learn and work with an accountant as you begin your business could save big headaches and big invoices months later.
Loren noted that many small businesses go through their entire first year of operations before speaking with an accounting professional. “It happens all the time,” she said. “Finding the right accountant early is very important as a) they should know about your business, b) they can't be too expensive, and c) they need to know what small business issues are.”
Something for Nothing
Loren also explained that many senior accountants will sit down with clients for free for an hour, something she encourages more small business owners to take advantage of. To get the most our of these early meetings you should come prepared with a list of questions including:
- How should I put my records together for you to save costs?
- How much accounting should I try to do on my own?
- How do I make sense of these numbers and know what my actual profit is?
- How much money should I set aside for taxes and HST?
Timing is Everything
Getting educated and working with your accountant from the outset could have a big financial benefit to a new start-up. “If there are issues, they come to light a lot sooner,” said Loren. “For example, we had a client who had been in business for three years and needed two years of returns done. His business was not doing well because he hadn't realized that he was selling his product for less than it actually cost to manufacture.” Loren concluded that had the client not waited so long before speaking with an accountant, his business might have been able to correct the problem much sooner.
Lastly, keeping an open dialogue with your accountant can help minimize other surprises like not setting aside enough money for tax obligations.
Small Business BC currently offers a number of related seminars including Tax Tips from an Accountant and an accounting consultation service, provided by Loren Nancke and Co called Ask the Accountant.