Many new consulting services fail because of poor financial management. Sometimes the best decision a new business owner makes is to hire the services of a public accounting firm. An accountant can design record-keeping systems, set up ways to maintain records, analyze financial information, and help you relate that information to profitability.

Financial Data

Daily bits of information will flow into your consulting services business. As you serve clients, you will generate information about sales, cash, supplies, purchase expenses, payroll, accounts payable, and, if credit is offered to clients, accounts receivable.

To capture theses facts and figures, a system is necessary. If you don't feel comfortable setting up and managing such a system, don't be shy about hiring an accounting service. An accountant can help you design one to record the information you need so you can control finances and make profitable decisions.

The Accountant's Job

Once a system of records has been set up, the question is: Who should keep the books? The accounting service that has set up the books may keep them. However, if you have a general understanding of record keeping you can do them yourself and save money. Use your accountant for rechecking and analyzing your records. Once your business has grown, you may want to hire someone to keep your records and perform other office functions. In addition to record keeping, an accountant can advise you on financial management, providing you with cash flow requirements, budget forecasts, borrowing, business organization, and tax information.

Data Analysis

By analyzing cash flow requirements, an accountant can help you work out the amount of cash needed to operate your firm during a specific period — for example, three months, six months, or the next year. She considers how much cash you will need to carry client accounts receivable, to buy equipment and supplies, to pay bills, and to repay loans. In addition, an accountant can determine how much cash will come from collection of accounts receivable and how much will have to be borrowed or pulled from an existing line of credit. While working out the cash requirements, your accountant may notice and call your attention to danger spots, such as accounts that are past due.

If you're applying for a loan, your accountant can assemble financial information — for example, a profit-and-loss or income statement and a balance sheet. The purpose of such data is to show the lender the financial position of your business and its ability to repay the loan. Using this information, your accountant can advise you on whether you need a short-term or long-term loan. If you have never borrowed before, your accountant may help you by introducing you to a lender who knows and respects the accountant's reputation. This alone may be worth the cost of hiring an accountant.

Taxation Help

Taxes are another area in which an accountant can contribute advice and assistance. Normally, a record-keeping system that provides the information you need for making profitable decisions will suffice for tax purposes. However, if you purchase equipment that requires special depreciation, have employees who handle cash or require payroll taxes, or have extensive bad debts, a good accountant can help you identify the problem, suggest a method of keeping better records, and help you minimize your tax obligation by writing off bad debts as a business expense. Accounting firms will also get your federal and state withholding numbers for you, instruct you on where and when to file tax returns, prepare tax returns, and do general tax planning for your small business.