As a small-business owner, do you use an accountant? If so, what for? Does your accountant only take care of your tax returns?
If you are like most small business owners, that’s the case. In addition, the bulk of bookkeeping likely falls on you or a “non-accountant” employee.
Dr. Chandra Bhansali, co-founder and CEO of AccountantsWorld, has some tips for small businesses about how to improve their odds of success by utilizing an accountant more widely.
Dr. Bhansali discusses cloud-based accounting programs, how they increase transparency and flexibility, and why that can be critical to your business’s success.
CREDIBLY: Can you explain what AccountantsWorld is and how it came about?
DR. CHANDRA BHANSALI: My wife and I started the predecessor for AccountantsWorld about 29 years ago. It was a professional tax program. Around 1999 we realized the Internet was going to be big so we started looking for an Internet-based solution, which led to the creation of a portal for accountants called AccountantsWorld.com.
In 2003, we sold our tax software business to Thomson Reuters and focused exclusively on cloud solutions for accountants. Today we have seven different solutions for accountants — everything accountants need, minus the tax program…that we sold (laughs).
How did the transition to the cloud change the way accountants operate?
That process, we believe, changed the paradigm of two cultures: payroll and accounting. Very few accountants used to offer payroll services.
We created the first payroll-processing center for accountants. We do everything behind the scenes for them. We do direct deposit, tax deposit, filing of tax forms, W2s and 1099s. Our system does everything.
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What kinds of problems do cloud-based accounting solutions help solve?
One of the biggest problems accountants have is the mess that clients make in the bookkeeping system. Many use something like QuickBooks. Most small businesses do not know much about accounting.
By using the cloud, accountants and their clients can work collaboratively and avoid making mistakes.
What are some other advantages of using a cloud-based accounting solution?
The cloud has made it much easier for accountants to offer complete solutions. Previously they had to get information, process it, then send it back to the small business client. With the cloud, the accountant’s staff can do everything in their offices.
From the SMB’s perspective, it can send bills or invoices to be paid using just a smartphone. It goes directly into the accounting system and can then go back to the SMB for approval.
In addition, the system includes a number of tools that allow clients to do all sorts of analysis of their business. This is something accountants could not do before.
You recently conducted a survey of small-business owners. What were you trying to discover?
The survey was about understanding how small businesses are doing their accounting work and what challenges they face when it comes to accounting.
We did the survey to help accountants understand a little bit about the needs of small businesses.
What did the survey reveal that might be helpful to small-business owners?
According to the Bureau of Labor Statistics, about half of all small businesses fail in the first five years.
Given that fact, our survey found that only about 15 percent of small businesses use accountants to do all of their accounting work. Another 20 percent, if they had the option to give their accounting work to an accountant, said they would be likely to consider it.
In addition, the survey found that more than 50 percent of small-business owners spend less than 10 hours a month on accounting work. Another 20 percent spend about 10 to 24 hours a month.
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Does this mean more time should be spent on accounting?
The question is not about spending more time on accounting but it is more about the need for SMBs to understand how accounting professionals can help them manage their business.
Many small businesses use accountants just for preparing tax returns. They don’t understand the meaning of all those numbers. A lot of it has to do with managing cash flow, something the accountant can help with.
What do you mean by managing cash flow?
Many people are profitable in business but they experience a cash flow crunch that they failed to project. They run out of cash at a critical time even though in the future they have the potential to make more money.
It is important to understand the need for professional help with cash flow projections. What scenarios do I have for growth? What are my expenses? How can I balance growth with those expenses?
You’re saying a professional accountant can help with these sorts of problems?
Certainly. The right professional may help you realize that sometimes it would be good to grow at a slower rate and keep expenses under control.
On the other hand, sometimes you actually can grow fast and still not have those cash flow problems. These are the kinds of things a professional can help with.
Are there other ways a professional accountant can help?
If you’re starting a business, your accountant can help you analyze surrounding businesses. One example we dealt with involved a client who came to an accountant we work with and said he wanted to purchase a laundromat.
The accountant, who was expert in retail, told him there were x number of laundromats within 10 miles of the area and the asking price was excessive. The client went back to the seller and was able to negotiate a much fairer price.
How does a small-business owner find and obtain the services of the right accountant?
Referrals are one very important source, especially from within your industry. Many small businesses join a trade group. Ask members of your trade group which accountant they use and what their experiences have been.
Ask, “Who actually helps you with your business?” Most accountants are reactive. It’s not because they don’t want to be proactive. The problem over the past 10 to 15 years has been that clients did their own bookkeeping and then came to the accountant with historical data.
Now, because of the cloud, accountants can be proactive because everything is in real time. So, when you get a referral, ask how proactive the accountant is.
After referrals and making sure the accountant is proactive, what else do SMBs need to do?
Once you find an accountant, conduct an interview. Ask for examples of how he or she proactively helped clients. Ask for examples of issues the accountant helped the client resolve. It’s also important, if the accountant has staff that would be working with you that you meet and talk with those people.
Find out what kinds of services the accountant offers. For example, does the accountant offer financial planning? What about retirement planning?
Finally, check the references he or she provides.
Do you have any final advice for the small-business owner when it comes to accountants?
Have you ever seen a patient go to a doctor and tell the doctor what medicine to prescribe? That doesn’t happen. Unfortunately, too many small businesses buy an accounting system, use it and then take the results to an accountant.
Get the accountant first. Let him analyze your business and suggest the right system so he can work collaboratively with you.