How to Hire an Accountant for Your Business

A competent and compatible accountant is a must-have for new business owners. Here's how to find one.

In their book, Start Your Own Business, the staff of Entrepreneur Media Inc. guides you through the critical steps to starting a business, then supports you in surviving the first three years as a business owner. In this edited excerpt, the authors provide tips on choosing the right accountant for your small business.

While do-it-yourself accounting software is easy to use, it's not the sole answer for business owners. Just as having Microsoft Word doesn't make you a writer, having accounting software doesn't make you an accountant. Software can only do what you tell it to do—and a good accountant's skills go far beyond crunching numbers. A good accountant can be your company's financial partner for life—with intimate knowledge of everything from how you're going to finance your next forklift to how you're going to pay for your daughter's college education.

While many people think of accountants strictly as tax preparers, in reality, accountants have a wide knowledge base that can be an invaluable asset to a business. A general accounting practice covers four basic areas of expertise:

1. Business advisory services. This is where accountants can really earn their keep. Since the accountant is knowledgeable about your business environment, your tax situation and your financial statements, it makes sense to ask them to pull all the pieces together and help you come up with a business plan and personal financial plan you can really achieve. Accountants can offer advice on everything from insurance to expansion. Accountants can bring a new level of insight to the picture, simply by virtue of their perspective.

2. Accounting and record-keeping. Accounting and record-keeping are perhaps the most basic accounting discipline. However, most business owners keep their own books and records. The reason is simple: If these records are examined by lenders or the IRS, the business owner is responsible for their accuracy; therefore, it makes more sense for the owner to maintain them.

Where accountants can offer help is in initially setting up bookkeeping and accounting systems and showing you how to use them. A good system allows you to evaluate your profitability at any point in time and modify prices accordingly. It also lets you track expenses to see if any areas are getting out of hand. It lets you establish and track a budget, spot trends in sales and expenses, and reduce accounting fees required to produce financial statements and tax returns.

3. Tax advice. Tax help from accountants comes in two forms: tax compliance and tax planning. Planning refers to reducing your overall tax burden; compliance refers to obeying the tax laws.

4. Auditing. Auditing services are required for many different purposes, most commonly by banks as a condition of a loan. There are many levels of auditing, ranging from simply preparing financial statements from figures that the entrepreneur supplies all the way up to an actual audit, where the accountant or other third party gives assurance that a company's financial information is accurate.

Choosing an Accountant

The best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague in the same industry. If you need more possibilities, almost every state has a Society of Certified Public Accountants that will make a referral.

Don't underestimate the importance of a CPA. This title is only awarded to people who have passed a rigorous two-day, nationally standardized test. Most states require CPAs to have at least a college degree or its equivalent, and several states also require post-graduate work. When dealing with an accountant, you can only hope they're well-educated and well-versed in your business's needs. Passing the CPA exam, however, is a guarantee of a certain level of ability.

Once you've come up with some good candidates (five is a good number to start with), a little preparation is in order before you interview them. The first step is to take an inventory of what you'll need. It's important to determine beforehand just how much of the work your company will do and how much of it will be done by the accountant.

Once you've given some thought to your expectations, you're ready to interview. Your principal goal is to find out about three things:

1. Services. Most accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Pension fund accounting? Estate planning? Will the accountant help you design and implement financial information systems? Other services a CPA may offer include analyzing transactions for loans and financing; preparing, auditing, reviewing and compiling financial statements; managing investments; and representing you before tax authorities.

Make sure the firm has what you need. If it can't offer specialized services, such as estate planning, it may have relationships with other firms to which it can refer you to handle these matters. In addition, make sure the firm has experience with small businesses and with your industry. Someone who's already familiar with the financial issues facing your field of business won't have to waste time getting up to speed.

2. Personality. Is the accountant's style compatible with yours? Be sure the people you're meeting with are the same ones who'll be handling your business. At many accounting firms, some partners handle sales and new business, then pass the actual account work on to others.

When evaluating competency and compatibility, ask candidates how they'd handle situations relevant to you. For example: How would they handle a change in corporation status from S to C? Or an IRS office audit seeking verification of automobile expenses? Listen to the answers, and decide if that's how you would like your affairs to be handled.

3. Fees. Ask about fees upfront. Fees can range from $100 to $275 per hour. However, there are some accountants who work on a monthly retainer. Figure out what services you're likely to need and which option will be more cost-effective for you.

Get a range of quotes from different accountants. Also try to get an estimate of the total annual charges based on the services you've discussed. Don't base your decision solely on cost, however; an accountant who charges more by the hour is likely to be more experienced and thus able to work faster than a novice who charges less.

At the end of the interview, ask for references—particularly from clients in the same industry as you. A good accountant should be happy to provide you with references; call and ask how satisfied they were with the accountant's services, fees and availability.

The Staff of Entrepreneur Media, Inc.

Entrepreneur Staff

STARTING UP? START HERE. For more than 30 years, Entrepreneur has set the course for success for millions of entrepreneurs and small business owners. We'll teach you the secrets of the winners and give you exactly what you need to lay the groundwork for success.

Related Topics

Editor's Pick

Everyone Wants to Get Close to Their Favorite Artist. Here's the Technology Making It a Reality — But Better.
The Highest-Paid, Highest-Profile People in Every Field Know This Communication Strategy
After Early Rejection From Publishers, This Author Self-Published Her Book and Sold More Than 500,000 Copies. Here's How She Did It.
Having Trouble Speaking Up in Meetings? Try This Strategy.
He Names Brands for Amazon, Meta and Forever 21, and Says This Is the Big Blank Space in the Naming Game
Business News

These Are the Most and Least Affordable Places to Retire in The U.S.

The Northeast and West Coast are the least affordable, while areas in the Mountain State region tend to be ideal for retirees on a budget.


50 Work-From-Home Jobs that Pay As Much or More than Average Salary

If you're tired of driving to an office and would love to work at home, there are plenty of high-quality full-time work-from-home jobs for you.

Growing a Business

Are You Using the Most Powerful Marketing Tool on the Planet? Ashley Kirkwood Shows You How.

Learn how to make money from (and through) public speaking, even if you've never been on a stage.


6 Secret Tools for Flying First Class (Without Paying Full Price)

It's time to reimagine upgrading. Here's how to fly first class on every flight, business or personal.

Business News

I Live on a Cruise Ship for Half of the Year. Look Inside My 336-Square-Foot Cabin with Wraparound Balcony.

I live on a cruise ship with my husband, who works on it, for six months out of the year. Life at "home" can be tight. Here's what it's really like living on a cruise ship.

Growing a Business

Chris Do of The Futur on his 1 Billion Mission

Interview with CEO of The Futur Chris Do about self development, creating the best content, and The Futur Euro Tour.