Your accountant can do a lot more than handling your small business accounting and filing your taxes. When you hire the right accountant, they'll use their talents and technology to help you manage cash flow and reach your goals, whatever those goals may be.
Large organizations typically have an entire team of accounting and finance professionals handling their numbers, but the same can't always be said about small businesses. If you only think about your accountant when it's time to prepare your annual tax return, you could be missing out on the benefits of several other valuable services a good accountant can provide.
Here are five ways a small business accounting professional could benefit your business.
1. Managing payroll
Managing payroll is about more than just tracking employees' hours, calculating wages and issuing paychecks. You have to navigate various federal, state and local laws, and file payroll tax returns. Withholding rates and forms can change frequently. For example, in recent years, many states increased their minimum wage rates to a level that's higher than the federal minimum wage, and Congress created several payroll tax relief programs to help employers offset the cost of maintaining staff during the COVID-19 pandemic.
When you outsource your payroll, you won't have to worry about understanding and implementing new reporting requirements or wage and hour laws. Your payroll service can monitor the latest regulations and determine how they may impact your business. With a team of payroll experts on your side, you can avoid costly payroll errors as well as associated penalties. Plus, your accounting professional will have access to complete and accurate payroll data they can use to file returns or provide proactive advice.
2. Finding and claiming valuable tax credits
Tax credits are incentives that businesses and business owners use to reduce their tax liability. These can be more valuable than tax deductions because while deductions lower taxable income, tax credits are a dollar-for-dollar reduction in the tax due.
Are you familiar with every tax credit you and your business can claim? Unfortunately, few small business owners are, and millions of dollars in tax credits go unclaimed every year.
For example, the U.S. Chamber of Commerce reports that less than three in 10 businesses who qualify for the Research and Development (R&D) credit actually claim it each year. Often, this is because small business owners don't think they qualify. However, the R&D credit applies to a wide range of businesses, including those involved in software, manufacturing, architecture, engineering and construction.
Some other tax credits an accounting professional could help your business explore include:
- Employee Retention Tax Credit
- Retirement Plans Startup Costs Tax Credit
- Health Coverage Tax Credit
- Work Opportunity Tax Credit
- Empowerment Zone Tax Credit
3. Turning data into actionable insights
You may not realize it, but your business is sitting on a goldmine of data: accounting and inventory numbers, employee timesheets, marketing results, what your customers buy and when they buy it. So how are you using that data?
Many accountants now leverage data analytics tools and dashboards to uncover valuable insights within their clients' numbers. They can help you use that information to:
- Better manage cash flow
- Identify process improvements to increase efficiency
- Find behavioral patterns in your customer base or the market
- Help you decide when to hire, expand into a new market or take on debt
In recent years, hiring has been tough for many small businesses. If your accountant partners with ADP, they have access to exclusive resources to know what people are paying for jobs in your area and can help you decide on a compensation package that will help you attract and retain talent.
4. Identifying funding opportunities
Paycheck Protection Program (PPP) loans were a financial lifeline for small businesses during the pandemic, but getting one wasn't easy. Business owners had to fill out a complicated application, calculate their loan amount and supply copies of tax returns, invoices, bank statements and other documents. Unsurprisingly, accountants were called on to help small businesses navigate this process.
Of course, a global health crisis isn't the only situation in which businesses need access to funding. An accountant who understands your business and industry can help you determine the organization's current value, as well as identify the level of funding you might need, evaluate financing options and assemble the documentation the lender or investor might need to approve your request.
5. Benchmarking against other businesses
How is your small business performing? Are you charging enough for your products or services, offering employees a competitive salary and benefits, and managing expenses well? It's tough to know the answers to these questions unless you have something to compare your numbers to.
Benchmarking your performance against other organizations helps you see how your pricing, productivity and competitiveness measure up to industry standards so you can set realistic goals. Instead of just guessing at your key performance indicators, you can look at industry standards. Your accountant can help you with identifying financial and non-financial measures to track and deciding on the actions you need to take to improve your metrics.
Your accountant can do a lot more than handling your small business accounting and filing your taxes. If your accountant uses ADP's Accountant Connect SM, they'll have access to an extensive library of resources for adding value to your business, including compensation benchmarking, cash flow management, HR compliance, client insights, industry reports and business valuations.
When you hire the right accountant, they'll use their talents and technology to help you reach your goals, whatever those goals may be.
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