ACCOUNTING AND THE SMALL BUSINESS OWNER

‘‘A good accountant is the most important outside
advisor the small business owner has,’’ according
to the Entrepreneur Magazine Small Business Advisor.
‘‘The services of a lawyer and consultant are vital
during specific periods in the development of a small
business or in times of trouble, but it is the accountant
who, on a continuing basis, has the greatest impact on
the ultimate success or failure of a small business.’’

When starting a business, many entrepreneurs
consult an accounting professional to learn about the
various tax laws that affect them, and to familiarize
themselves with the variety of financial records that
they will need to maintain. Such consultations are
especially recommended for would-be business owners
who: anticipate buying a business or franchise;
plan to invest a substantial amount of money in the
business; anticipate holding money or property for
clients; or plan to incorporate.
If a business owner decides to enlist the services
of an accountant to incorporate, he/she should make
certain that the accountant has experience dealing
with small corporations, for incorporation brings with
it a flurry of new financial forms and requirements. A
knowledgeable accountant can provide valuable information
on various aspects of the start-up phase.
Similarly, when investigating the possible purchase
or licensing of a business, a would-be buyer
should enlist the assistance of an accountant to look
over the financial statements of the licenser-seller.
Examination of financial statements and other financial
data should enable the accountant to determine
whether the business is a viable investment. If a prospective
buyer decides not to use an accountant to
review the licenser-seller’s financial statements,
he/she should at least make sure that the financial
statements that have been offered have been properly
audited (a CPA will not stamp or sign a financial
statement that has not been properly audited and certified).
Once in business, the business owner will have to
weigh revenue, rate of expansion, capital expenditures,
and myriad other factors in deciding whether to
secure an in-house accountant, an accounting service,
or a year-end accounting and tax preparation service.
Sole proprietorships and partnerships are less likely to
have need of an accountant; in some cases, they will
be able to address their business’s modest accounting
needs without utilizing outside help. If a business
owner declines to seek professional help from an accountant
on financial matters, pertinent accounting information
can be found in books, seminars, government
agencies such as the Small Business
Administration, and other sources.
Even if a small business owner decides against
securing an accountant, however, he/she will find it
much easier to attend to the business’s accounting
requirements if he/she adheres to a few basic bookkeeping
principles, such as maintaining a strict division
betwen personal and business records; maintaining
separate accounting systems for all business
transactions; establishing separate checking accounts
for personal and business; and keeping all business
records, such as invoices and receipts.