As an accountant for several consulting firms, I often see that many firm owners wait until tax time to hire an accountant, specifically to complete their taxes. Is this you?
The problem with this is that they have missed substantial tax savings and financial improvement strategies because they were operating reactively instead of proactively.
In this episode, I will share a story that breaks down the when, who, what, and why to hiring an accountant for your consulting firm.
When a consulting firm or entrepreneur delays hiring an accountant, they hinder the firm's growth. PERIOD
Let me paint a picture for you.
Let's say that you are a small boutique firm called The Best Marketing Firm Ever that generates about $300,000 in annual revenue. Not bad, right? Well, after covering your expenses, the Net Profit for the year was $125,000.
Now when they file their taxes, it resulted in a tax bill of $19,125. That is bad! You worked all year to generate a profit only to give 15.3% to the IRS.
Unfortunately, you did not plan for such a huge bill, and you don't have the money readily available. Now you will be subject to IRS penalties and interest.
Suppose you had hired an accountant a year ago. In that case, you could have developed a tax-saving plan along with financial management and accountability that could have cut that tax liabilities on the business to $0. The End!
The Truth Is - I see this story play out in real life more times than I care to admit!
You see, there are often money leaks, missed tax deductions, and cash flow shortages that, if someone were proactively watching your finances, WOULD not occur. I recently had a client tell me that they have more money in their bank account than they've ever had in their 13 years of business.
You see, it is easier than you think to have more money, more profits, and pay less taxes in your business. You have to partner with the right accountant or virtual CFO to provide the blueprint, the accountability, and the financial expertise to make your business dreams come true.
To position your consulting firm to say yes to profits, you MUST become a proactive business owner instead of reactive. You must plan for every dollar you are going to earn and forecast the outcome continuously.
Below are questions you can ask yourself to determine if you should hire an accountant:
- Are you where you want to be from a revenue, cash flow, and profit position?
- Did you pay a high tax bill last year?
- Do you feel like there is money leaking out of your business?
- Do you feel like you are doing everything you can, but your company has reached a growth or financial ceiling?
- Are you earning 6- or 7-figures but often have little to no figures in your bank account?
These are key indications that you need to partner with a virtual CFO soon. Also, please understand that it is never too early to hire an accountant.
- Hire an accountant that has a proven track record.
- Hire an accountant that understands your business and industry.
- Hire an accountant that is willing to educate you on how to leverage your numbers to scale your business faster, smarter, and consistently.
Your accountant should be your right-hand partner, and she should care about the success of your business.
And let me be crystal clear, your accountant should not look at you like another random tax return and invoice. And if your accountant starts the conversation like that, RUN!!!!!
Your accountant should not provide financial reports without educating you on what the numbers mean and how to use that information to scale. If they do, RUN!!!
Last, and if you are an accountant, I may step on your toes here. Sorry, not sorry. Your accountant should not bill you each time they talk to you. If they are billing hourly, RUN!!!
Your accountant should help you have more money consistently, not cost you BIG with no return on that investment in the end!