You Don't Actually NEED An Accountant
Jul 18, 2024In the ever-evolving landscape of entrepreneurship, managing your finances can often feel overwhelming. While hiring an accountant might seem like a logical step, Shannon reveals why this might not be necessary right away. Shannon's insights are both eye-opening and practical for entrepreneurs of all levels.
One of the most surprising revelations from Shannon is that new entrepreneurs might not immediately need an accountant. This isn’t to undermine the importance of accounting, but rather to highlight alternative ways to handle your financials in the early stages. Shannon emphasizes prioritizing your limited resources efficiently.
According to Shannon, the cornerstone of your business financials should be bookkeeping. However, this doesn't mean you need to hire a professional bookkeeper right off the bat. She suggests several straightforward methods such as using a spreadsheet, QuickBooks, or even a simple notebook. The key is to stay consistent and update your numbers every month. “Even if it’s crayon on a napkin, something is better than nothing,” she emphasizes. If bookkeeping feels overwhelming, she recommends outsourcing it to someone with basic bookkeeping knowledge, like a VA (Virtual Assistant) or an EA (Executive Assistant).
While you may not need a full-fledged accountant initially, having a tax professional is non-negotiable. For entrepreneurs with simpler business structures like LLCs or sole proprietorships, your business taxes are often just an extension of your personal tax return. Shannon advises finding a tax professional who understands your specific needs and can help you prepare your return accurately. Finding the right tax expert is crucial. She warns that while tax planners and strategists can be incredibly valuable, there are also many who might try to sell strategies that aren’t suited to your business. She recommends approaching tax planning with a sense of skepticism and advocating for yourself by asking questions and ensuring you understand the strategies being implemented.
As your business grows, so should your financial team. Shannon outlines the progression from basic bookkeeping and tax preparation to incorporating more advanced roles such as a CFO or controller. However, these roles don’t need to be filled immediately. Early-stage businesses can often get by with a combination of contractors and part-time professionals managing various financial operations, such as invoicing, billing, and payroll.
While stitching together a network of contractors may work in the short-term, Shannon recommends thinking about permanent solutions sooner rather than later. Having a consistent figure involved in your financial operations can make the transition smoother when your business scales. This person could gradually take on more responsibilities and become a critical part of your business’ growth.
Shannon also addresses the heart of the matter: return on investment. When deciding where to allocate your funds, consider where you will see a tangible return. For example, investing in ads that generate revenue can potentially yield better returns than prepaying for a year of bookkeeping services. This approach doesn’t undermine the value of bookkeeping; instead, it highlights the importance of prioritizing expenditures that drive immediate growth, which in turn can fund more comprehensive financial services.
Ultimately, Shannon’s advice revolves around taking active control of your business finances. Whether you choose to handle the basics yourself or gradually build a team of professionals, the essential factor is staying informed and involved. By fostering good financial habits and aligning your expenditures with your business’s current stage, you set a solid foundation for sustainable growth.
For those seeking further guidance, Shannon offers resources like the Small Business Starter Kit and CFO on Demand, catering to entrepreneurs who want tailored advice without breaking the bank. Her pragmatic approach ensures that you’re not just surviving but thriving in your entrepreneurial journey, one financially sound decision at a time.
What you'll hear in this episode:
04:27 Use bookkeeping, tax professional, tax strategist effectively.
06:53 Choose tax professional wisely, expect proactive advice.
10:27 Use contractors with a permanent fixture.
14:09 Early-stage business owners need to prioritize profitability.
If you like this episode, check out:
Why You May Want a C Corp in Your Business Structure
Listen to This Before Creating a Partnership
If I Started Over, Here's What I Would Do First
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
