Does a small business company or an independent IT consultant need an accountant? It is a tough question when you just opened a business, and every dollar counts.
In the beginning, you know nothing about bookkeeping, accounting or taxes, and at least some advice would be helpful, but on the other hand, you may think you can figure it all out eventually by yourself and save some money.
Believe me, you don't want to do it. It does not mean you can't, but do you want to spend hours of your valuable time doing bookkeeping without proper education? Do you know the Canadian tax system well enough to make the right decision about your business structure? Do you know what are your business expenses, and what are personal? Can you calculate your taxes or payroll? Do you choose a proper shareholder structure to save taxes on dividends?
I did not know any of that and lost thousands of dollars in the first couple of years running my business.
For sure, with the power of the internet, you can learn at lease some accounting, but how much time will you spend learning something that does not make you money? Would it be better to spend that time expanding your business, finding new clients, and making money where you are an expert? In the short run, you will save a small amount on accounting fees, but you will lose a lot on taxes in the long term.
I know that having an experienced accountant as part of your team is one of the best business decisions you can make. At the same time, it does not cost much. You pay to the accountant by the hours, or you may subscribe to an accounting package that will free you from all that work and give access to a professional who knows tax law and can give your advice and answer any of your questions at any time.
One of the principal reasons you need to hire an accountant as soon as possible is to make sure you get the right advice from the beginning.
An accountant can save you thousands of dollars per year, just structuring your business differently or giving you the right tax advice. In my case, I saved thousands of dollars only by switching to a different HST calculation method after the recommendation from my accountant. The savings on HST payments covered the yearly accounting fees I pay to the accountant. Also, in case you are not a sole shareholder, the proper shareholder structure with the right class of shares can save on taxes paid from dividends.
Do you know that buying a coffee for your client is your business expense? It sounds like just a couple of dollars, but if you keep all the receipts and give it to your accountant, you can save a significant amount at the end of the year. That is just a single example of business expense, which you may not realize, and to know all of them you need a professional who will explain to you what receipts you need to keep and which one you do not need. Also, having that information will help you to plan ahead all the expenses.
An audit is not fun. You are going to lose time finding all the information CRA is asking from you, and if you do not know in advance what information you need to keep in case of an audit, you may not have it.
Do you know that you may have a successful business without any audits? All you need is an accountant who keeps track of all records, takes care of all receipts, and provides the correct information in time. If your business does not give any red flags to CRA, there is no reason to check it. Even in case of an audit, you are not going to deal with CRA directly, and your accountant will do it on your behalf, so you will continue doing your business and do not worry too much about the inspection.
Do you know how much money you make? You probably have an idea, but how current year is better compared to the previous? Where all money coming from, and where are they going? Do you know if you have some unusually large expenses in some areas?
Only the accountant can answer all these questions and give you a full picture.
With the right information, you may make changes to your business or keep it as it is, but at least that will be an educated decision.
Are you the person who can understand 70,000 pages of tax law and apply that to your business? You probably have no such expertise or time doing that, but paying a small accounting fee for tax services can solve the problem.
At the end of your tax year accountant will make sure all your expenses entered correctly and the amount of taxes you are going to pay is minimal. The accountant will prepare your financial statements, tax return (T2) with other tax forms(T4, T4A, T5), and file it to CRA.
I would suggest you consider a qualified accountant as a significant asset rather than liability that you may think it is because you pay accounting fees.
I work with the Canadian accounting firm Taxory Inc. They provide all types of accounting services to me, and I am pleased with the quality of services, so I am happy to recommend them to you. You can learn more about their services and contact them at www.taxory.com. If you provide a promo code YAPLEX, you will receive a 10% discount on their services.