We’ve talked about how to know when you need an accountant for your small business. Today, we’ll lay out when you would need to hire a full-time accountant to work in-house. This is a very different kettle of fish, and there will be plenty of time in between the two hiring events for most companies.
An accounting firm or an outsourced accountant can be all your business needs for years. It may be all you ever need, if your finances stay relatively straightforward. On the other hand, if you grow quickly, take on complex financial arrangements, or just end up demanding a lot of your outside accountant, hiring for an in-house position makes sense.
Accountants versus accounting clerks
Before we dive into the how, let’s talk about the what. It’s possible that what you really need is a specialist accounting clerk or bookkeeper. These positions require a little less general knowledge than a full-fledged accountant.
To start with, most accountants have logged something like 120 hours of college credit in the field. Many then go on to earn certification from their state. While you don’t always need a licensed CPA (certified public accountant), it helps. CPAs can file paperwork with the SEC and cost more than their non-certified counterparts.
Bookkeepers – which have three double-letters in a row in their title – are focused on getting the books in order. They’ll manage the day-to-day accounting for a business, but they’re unlikely to offer any strategic help.
Most small businesses can start out with a bookkeeper, who will ensure everything is on the up and up. Once you hit the milestones below, though, you’ll probably want to move up the accounting food chain to get extra help with your finances.
When you started the business, you were a one-person shop. To make things simple – and because you had no idea what else to do – you formed an LLC. Now you’ve got people who want to buy into your business, employees who you want to issue shares or options to, and a massive loan with the local bank.
When things get more complicated, the best path isn’t as clear. Accountants can help you both navigate the financial maze you’ve landed in and find the route that makes the most sense for your taxes.
The key to hiring a good full-time accountant lies in understanding that this is a person who’s going to help you with the financial strategy of your business. This isn’t someone who comes in, does the books, and reminds you to ask your clients about their overdue payments. A bookkeeper can manage that for you for a fraction of the cost – accountants earn around $75,000 annually, on average.
You’re making a lot of money
This might be self-explanatory. The more money you’re earning, the more money you’ll need to keep track of. If that money is coming from multiple countries or through multiple associated businesses, there’s even more reason to hire someone to keep everything in line.
If you look around long enough, you’ll see all sorts of suggestions as to how much money counts as “a lot.” At Capterra, we managed to keep the lights on and everyone happy with no accountant and plenty of revenue. Some companies will feel the pinch at $200,000 while some will be fine until they’re raking in well over $1 million.
Things do get more difficult, though, as your options expand – which happens as you earn more. If you’re concerned about the right approach to financial management and how to plan for the long-term, try working with an outside accountant to see how much value you get from a specialist.
That leads nicely into the final point.
You’re spending a ton on your external accounting firm
Maybe you’re already well into a relationship with an external firm. If you’re already sending them $70,000, you might just hire someone in-house for the extra time and dedication that comes from adding an employee – keeping in mind that you should tack an extra 20% on to whatever you’re planning to pay your new employee to cover the cost of benefits.
Again, there’s a bit of grey around this suggestion. If you think your current relationship is strong, and you’re not looking for more than your firm is giving you, keep things running. Maybe it’s not worth the extra cash to have someone sitting at a desk in your office.
If, on the other hand, you’ve seen what good accounting can do for you and you wish you had a lot more of that insight, post the job. Someone who not only works for you, but has a vested interest in your success has a very different view on your business.
If you’re not ready to hire someone full-time, consider getting a local accounting firm to help you manage the trickier part of your finances – taxes, basically. You should also consider getting away from the Excel or envelope accounting system you’re currently using and trying out some software.
Capterra has a directory full of accounting software options for any business. Let me know in the comments below if you’ve had luck hiring in-house or if you’ve decided to hold off.
Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.