Once your small business is established, there are a lot of different questions that you might end up asking yourself. One of the first ones that will come up is whether or not you need to hire an accountant. As the numbers start going up and down with income levels, purchasing power, details that require tax analysis, and questions from potential investors, you need answers.
Do you have time to find these answers yourself? Or, is your time worth more than that? Is it smarter for you to hire an accountant?
There are a few different ways to answer this question. Separate from your business account, does it take you too much time to do your personal taxes? If so, it makes sense to hire someone to help you. When it comes to your business taxes, how familiar are you with business tax laws? If you have to spend a lot of time researching these details, it might be better just to hire someone else first.
And lastly, think about your opportunity cost in general. What are you giving up so that you can use your personal efforts to do your taxes or work with your finances? Once you’ve answered these questions, you have a good idea if you need an accountant or not.
Depending on the context, it can be smart to hire a tax accountant. The more money you make, the more money you can lose if you don’t pay attention to your taxes. You need to understand loopholes. You need to understand investments, stocks and bonds, dependencies, and many other financial factors. Ideally, you will find out a way to minimize your personal taxes. A good tax accountant will shortcut the way you get to that goal.
Business taxes are an entirely different thing. After you have established your business plan, you’ll have a rough idea of your finances. But, translating those finances on paper into the real world can be challenging.
That’s why having an accountant will be so helpful. They don’t have to be a full-time hire. They have to be someone who can look at all of your numbers and tell you the most critical data at the most crucial time. If you don’t want to hire a new employee, you could consider looking for an outsourced CFO instead. They could deal with a number of different accounting duties, such as taxes.
What Is Your Opportunity Cost?
If you’re trying to think about hiring an accountant, think about if you’re working to employ other people as well. Why would you hire a graphic designer? Why would you hire a webmaster? The answer is that you’re trying to maximize your use of money. It makes more sense for you to use cash on someone else than you to use your time and energy on something you don’t understand, then the decision becomes easy.
The opportunity cost of wasting your time is much higher than the opportunity cost of hiring professionals to do work in which they specialize. Comparative advantage is an essential concept in the business world.