Accountants and other tax professionals can be worth their weight in gold during tax time, especially when it comes to legal and compliance issues. With the Income Tax Act numbering more than 3,000 pages, the amount of information often proves too much for the average business owner to stay on top of on their own. Since every business is different, it’s important to look at your situation to decide what you need, from simple accounting support to complete day-to-day bookkeeping activities. As your company grows, you can help maximize your business income by hiring a tax specialist or accountant.
Familiarity with Accounting Principles
Just like you know your business on an expert level, an accountant or tax preparer knows the financial aspects of business like a pro. That expert-level accounting knowledge comes in handy when you need to decipher all those financial statements, reports, and accounting terms that come with handling your business books. Even if you want to handle your bookkeeping and accounting on your own, hiring an accountant in the beginning to coach you in all things financial can get you off to a strong start. An accountant can talk to you in straight terms, weed through terminology, and teach you how to manage your own finances. You don’t want to miss key information or make mistakes early on that could cost you down the road. An accountant can start you and your business off on the right track with easy-to-use accounting systems that simplify the process.
Strong Understanding of Tax Laws
Tax law is complicated by design and, arguably, by necessity. Most entrepreneurs have the gusto to tackle just about any complex issue, but sometimes the cost-benefit trade-off just isn’t worth it. Sure, you may be able to put together a set of bang-up financial statements for a meeting with potential investors, but when it comes time to file your taxes, don’t you want to know you’re getting every deduction available to you? You should also know which tax laws apply to you and what tax breaks are available in current and future taxation years.
Accountants are experts in these areas and can help you navigate the complexities of tax law, all while keeping your best interests in mind. Your accountant or tax preparer can help you pay the right taxes for your business type and industry to avoid being hit with penalties and fines, and they can give you advice early on so you can comply with all tax regulations. With an accountant who knows tax laws in and out, you can take a more relaxed approach to tax season, knowing your return is accurate and complies with all the tax codes.
More Time to Focus on Business-Growing Tasks
Even if you have some working knowledge of accounting, managing your books can take up a lot of your time. As a busy entrepreneur, that time spent away from accomplishing tasks that could directly grow your business or help you manage it well can slow your progress. For example, acquiring new clients or moving into new markets helps your business expand, but you may not have as much time for those activities when you handle your own bookkeeping. Likewise, time away from management activities, such as dealing with performance issues or troubleshooting service problems, can affect your business. Hiring an accountant so you can focus on winning more business, innovating, building your team, and development activities can be worth your investment in the long run because it means more revenue for your business.
Support During Rapid Growth
Is business suddenly booming? Making more money is a great thing. But as you expand, your workload increases significantly. You serve more customers, hire more employees, and take on additional vendors, among other tasks. Plus, your tax obligations may change as your business grows. All those things require more paperwork and number crunching. It’s also important to manage your new cash flow to make strong financial decisions that help you continue your growth. An accountant can help you manage that rapid growth to keep you on track financially and tax-wise. That gives you more time to focus on those management tasks that keep your growth positive.
Figuring Out Slow Profit Growth
Increasing sales seems like a good thing. But some businesses seem to increase revenue without actually increasing their profits. That can mean you have too much overhead or financial issues that keep your profits from increasing the way you expect. If you sell more than ever but you don’t a higher profit, an accountant can take an objective look at your situation. They might find higher-than-normal costs, point out areas where you can cut expenses, or recommend pricing adjustments to increase your profit margins. Those increased profits can make the investment in an accountant worth the expense.
Professional Financial Reports for Investors
Accountants can create detailed, accurate reports that keep your investors happy and allow you to focus on tasks like growing your business. If you’re looking for a loan or funding from an investor, you need to present a polished business plan. An accountant can help you flesh out the financial portion of your plan, ensuring you think of everything. This helps you show up to meetings prepared to give your pitch to investors with thorough financial plan and reports that show you’re serious about growing your business.
Maximized Growth Opportunities
If you want to open a new location, distribute in a new province, or hire employees in other provinces, an accountant can help ensure you’re compliant with regional sales, income, or payroll tax-reporting requirements. Looking beyond the current tax season, accountants can align your company’s growth strategies with tax strategies. Accountants are attuned to tax industry trends as well as new developments and evolution in the tax law, which can help inform your decisions around things such as incorporation, hiring staff, exporting to new markets, or even mergers and acquisitions. Working with an accountant to maintain accurate and timely financial reporting also provides you with the complete picture to make sound decisions on how and when to scale and expand your business.
Support While Buying or Selling Property or Your Business
Another part of your growth plan require you to buy or sell property. In other cases, you may decide you’re ready to sell your business to move onto other opportunities. If you want to grow through an acquisition, sell off parts of the business, or sell the entire business, an accountant can walk you through the process and determine how to structure the transaction so you don’t get hit with overwhelming taxes. That support proves especially helpful if you don’t have a lot of experience in buying and selling and the tax implications of doing so.
No one wants to think about a Canada Revenue Agency (CRA) audit, but it’s always a possibility, even if you complete your tax returns accurately. The CRA performs audits on businesses with tax returns that raise red flags. The agency may also choose businesses at random for audits. An accountant can guide you through the audit process by preparing you to manage the audit or by working with the CRA on your behalf. An accountant can save you precious time and money while offering professional guidance during a particularly stressful time.
Being audited once is a minor hassle, but being audited repeatedly is a major ordeal. If the CRA notes errors in your tax filing, this is exactly what can happen. Hiring an accountant is a great way to prevent mistakes in an income tax return. Not only does your accountant reduce the likelihood of an audit, but accountants also ensure everything is in order in the event the CRA selects your business’s return for auditing. Going into the audit with someone in your corner who knows your tax return better than you do can make the process easier and less stressful.
Bookkeeping Organizational Systems
You’re already aware that you need to keep detailed records of all your revenue and expenses throughout the year plus copies of all your receipts. Being diligent with this kind of record keeping makes it easier for an accountant to navigate your financials and identify savings opportunities. But sometimes figuring out how to keep it all organized proves challenging.
Keep in mind, “navigating your financials” doesn’t mean sorting through a year’s worth of paper receipts you keep in a shoebox. Taking advantage of accounting software and the online tools available helps you keep your records organized and makes them easy to review. For example, QuickBooks Online can help you to manage your accounts, sync your bank accounts, manage your quotes and invoices, and run payroll and critical reports. Online apps like Expensify make it simple to digitize and log your expenses on the go so nothing gets lost, everything gets logged, and you can maximize any available deductions.
Answers to Questions
Running a business means you encounter lots of different financial decisions. Each of those decisions can affect your tax obligations and overall financial health. Having an accountant on your team gives you a go-to source for all those financial questions that come up during the course of running a business. Because of their strong accounting and tax knowledge, they can tell you how your decisions can affect your company and what you need to consider for that specific situation. Suppose your business has positive cash flow and you want to extract some free cash to fund personal expenses. Your accountant can help you figure out the tax consequences of paying yourself a salary versus a dividend. Or perhaps your business wants to make a donation to support a local charity group. Your accountant can help you discover ways to maximize the tax benefits of the donation.
Accountants can answer these and a whole host of other questions, even before you know what to ask. That’s why it’s a good idea to meet with your accountant regularly. Chatting about your current situation and your plans for the future may help your accountant spot potential issues of which you aren’t even aware. As with any other type of law, complexity breeds opportunity. The insight of a tax professional, though, can help you identify underlying possibilities that could save your business’s hard earned cash.
Planning for Future Tax Seasons
Hiring an accountant during the current tax season is a good start. Tapping the expertise of an accountant year-round is even better, because it puts you ahead of the game and in a position to stay on top of future tax seasons. Bringing an accountant into the picture early in the year gives you ample opportunity to gain a complete picture of your company’s financial past, present, and future. Your accountant can then work with you to ensure you stay in compliance while providing you with advice and information with respect to remuneration options, available credits, and deductions to make every dollar count.
Strategizing to Maximize Finances
Tax planning is important for your business and equally, if not more important, for you as a shareholder. Seemingly innocuous decisions you make in the early years of your business’s life can have a significant tax impact down the road when you sell or transfer your shares. A tax professional can provide you with the advice you need when you need it. Should your shares be owned by a holding company? What’s the best way to structure your business’ stock to minimize the tax impact of taking on new equity investors? Say your company’s capital structure is no longer appropriate due to recent changes in the business. Are there tax consequences to a share reorganization? Your accountant can help you create a winning strategy going forward.
When it comes to taxes, you might be surprised by how much you can gain from letting an expert take the wheel. Whether you own a new or well-established small business, your business success during both difficult and prosperous times can benefit from your accountant’s tax expertise. Hiring professional help can minimize your tax obligations, maximize your access to credits, and cement your financial story for when you access funds to grow your business. Ultimately, it’s important to focus your efforts where you can make the largest impact on your business and let your accountant do the same.
Using a cloud-based accounting system can help keep your finances under control along with working with an accountant. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.