Whether you are a start-up or a long-running business, you’ll always be looking at your costs; where you can recoup money, and where cuts can be made. Sometimes, professional services are at the top of the list of things to cut, mainly because the price of ongoing professional services can seem large, and the benefits they give aren’t as clear-cut in the budget. Accounting is a service your business can’t afford to cut; without proper accounting, it’s likely you’ll lose money by not taking advantage of tax breaks and structuring that will pay you back more than your accountant costs. Further still, you might misfile your taxes, bringing about unwanted visits and audits from the CRA.
When your business is just starting, you’ll want to consult with an accountant to assess the quality of your start-up. An accountant can advise you on the best structure your business can take; should you be a partnership, or should you incorporate? What are the incentives for each? They can also help you determine what accounting software is best for your business; there are a plethora of options available, and it can be daunting to decide between them if you’re not knowledgeable about the ins and outs of each.
For a startup, your accountant is primarily going to make sure your structure is sound so that when the wheels start rolling, you won’t come into any problems. They can help you pick which bank will have the best accounts for your business, as well as how to track your daily expenses and gains; this preliminary help with bookkeeping will enable you to establish best practices from the get-go. They’ll also go over how to best track profits and losses to report to the CRA, and advise you on which expenses can be considered business expense versus personal expense. An experienced accountant will even be able to go over your business plan with you, so you can make any necessary adjustments to the financials before pitching to potential investors.
It’s worth noting that while an accountant will help you with best bookkeeping practices, they will not act as a bookkeeper; accounting and bookkeeping are two different professions. Accounting is concerned with the interpretation and analysis of financial information; when your business is up and running, an accountant can create forecasts, find tax breaks, and assess the financial health of your company. A bookkeeper, conversely, is trained at recording financial data; while some bookkeepers engage in light accounting, they are primarily concerned with data acquisition instead of interpretation.
There’s plenty more your accountant can do for you, and we’ll take a look at some of the things an accountant can do for a well-established business in the next blog post. Until then, may your ledgers stay balanced.