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Every business in every industry has accounting needs, and those needs change dramatically as the business grows and develops. When a company has a true partnership with an accounting firm, it is able to anticipate several stages and ensure that a plan is in place.
While every business is unique, there are general qualities that tend to define a successful relationship with an accounting firm at every stage.
Companies using an accounting firm for the first time
If your business uses an accounting firm, it’s likely because you are responding to a need such as tax compliance requirements or an arrangement that now requires an audit, review, or compilation of financial statements.
The first step is to determine if your need extends beyond what prompted the initial call. For example, it is important to consider the impact of tax compliance decisions made for the business on individual owners.
Make sure that the company you hire can move beyond that immediate need and help you face the next challenge or question that will arise. Ideally, this business will not just react to questions or problems, but will help you structure your growth and guide decision making in the best way for current and future operations.
Taxation and compliance in growth mode
As your business adds new product lines, enters into different types of agreements, begins selling in different states, or holds inventory in multiple locations, the need to be proactive from a tax perspective and compliance is amplified.
While you can get away with a reactive approach to accounting at the start of a business, as you scale the stakes just get too high. It can be a huge shock if you find out that you owe taxes in states you didn’t intend to pay, for example.
Growing companies also tend to make more complex deals, whether it’s an equity, debt, or income deal. These transactions can have an unexpected impact on your finances, and you should structure them carefully to minimize tax exposure.
At this point, your accounting firm can’t just solve problems. It should be part of your decision and review process. In addition, certain regulatory requirements come into effect when your business reaches growth milestones. When you reach over 100 employees eligible to participate in your employee benefit plan, for example, you must perform an annual audit of the employee benefit plan. This is a somewhat specialized function that not all accounting firms offer, so you may need to hire more than one firm.
Related: 4 Reasons It’s Time To Hire An Accountant For Your Small Business
Bridging the Gap by Entering the Upper Middle Market
Once a company reaches a certain size, it makes sense to broaden the expertise of your internal team. At this level, the relationship with your accounting firm evolves to a higher level of technical problem solving.
Your accounting firm must have a range of technical expertise to support your internal team. A tax partner from your accounting firm would work with your internal tax manager, while an audit partner would be more engaged with the CFO.
Upper middle market companies tend to rely on their accounting firms to support complex areas such as international expansion, mergers and acquisitions, equity compensation, or even the IPO. The strategic relationship with the accounting firm is there to support the internal team and confirm the impact of these operations.
Related: Every Entrepreneur Should Know About Accounting
Ready for the unexpected
Throughout the pandemic, especially in the early months of spring 2020, it was easy to see that businesses of all sizes with the right accounting firm were better prepared to act quickly and decisively.
Whether you’re answering questions about government assistance or temporarily shutting down the business, it’s best to have an established relationship that you can count on. And the problem with these kinds of questions is that you rarely see them coming.
Related: Why Accounting Skills Are Essential For Entrepreneurs