Do I Need An Accountant For My Small Business? A Founder's Guide

Team Digits

Published January 22, 2025

As a business owner, you've mastered wearing multiple hats by leading marketing, operations, sales, and finance, to name a few. If you're reading this, chances are you're staring at a spreadsheet or knee-deep in QuickBooks tutorials, wondering where your time has gone. But when it comes to managing your startup's accounting, the stakes for getting it wrong are high.

Deciding to hire an accountant could be the difference between skating by and truly scaling your business. While the DIY approach might have worked in the early days, as your startup grows, the financial decisions become more complex and can impact everything from your tax liability to your next funding round.

So, when do you actually need an accountant — and when might you be better off investing those dollars elsewhere? Whether you're a pre-seed startup trying to make every dollar count or a Series A company looking to level up your financial operations, this article will help you make an informed decision about your company's financial future.

What does an accountant do for small businesses?

Let's be honest — many small business owners think accountants handle tax returns and keep the IRS happy.

But a skilled accountant is more like your financial co-pilot, navigating everything from cash flow turbulence to growth opportunities. They go beyond crunching numbers and act as strategic advisors who can spot financial patterns and potential pitfalls before they become problems.

An accountant provides your business:

• Financial reporting that makes sense: They translate numbers into actionable insights, helping you understand where your money went and where it should go next. Instead of drowning in transaction data, you get clear visibility into your company's financial health.
• Tax strategy (not just tax filing): An accountant helps structure your business operations to minimize tax liability and maximize deductions. They're particularly valuable when your business model gets complicated, like when you're dealing with multi-state operations or contractor relationships.
• Compliance and risk management: They keep you compliant with changing regulations and help you sleep better at night, knowing your financial house is in order so you can avoid risks. As your business grows, you'll face more complex regulatory requirements.

The difference between a CPA and an accountant

You might think those services sound like a CPA, so let's clear up a common confusion: the difference between a CPA and a general accountant. While all CPAs are accountants, not all accountants are CPAs. Certified Public Accountants (CPAs) have passed rigorous exams, maintain ongoing education requirements, and can represent you before the IRS. General accountants can still handle most day-to-day financial needs, but they might need to tag in a CPA for more complex situations.

Imagine you're expanding your SaaS business into Europe. A general accountant can handle your U.S. books, but you'll want a CPA who can navigate international tax implications and help structure your expansion efficiently.

CPAs can also help you keep your financial records in order. When your financial records are accurate and detailed, they become a strategic asset. They reveal patterns like seasonal revenue fluctuations, which customers are profitable, and which products have the best margins. This drives smarter decisions about everything from hiring timing to inventory management to pricing strategies.

Messy financial records create a snowball effect of problems — a challenge many business owners learn the hard way. Manual tracking may seem fine now, but when you’re trying to raise funds, investors want to see acquisition costs and historical finances. Ultimately, poor record-keeping can lead to costly mistakes, lost credibility, delayed deals, and limited options for your company's future.

Why hiring an accountant can benefit your business

A small business accountant knows the rules of the game and how to play them in your favor. For self-employed founders and entrepreneurs, that's priceless. An accountant adds strategic value in the following areas:

Strategic cash flow management

While you're focused on your business operations, your accountant is making sure you have enough runway to continue functioning as a business. They're helping you spot trends, manage working capital, and time your big financial moves for maximum impact.

For example, imagine you're planning to hire three developers in Q3, but your biggest enterprise client pays invoices on a net-90 basis. Your accountant can help you model different scenarios to ensure you'll have enough cash flow to cover payroll while waiting for that revenue — potentially suggesting solutions like invoice factoring or adjusting your payment terms.

Tax optimization and IRS navigation

Beyond filing tax returns, an accountant is actively looking for ways to optimize your tax position throughout the year.

Accountants know which business expenses you can write off, which tax credits your startup might qualify for, and how to structure your operations to minimize your tax burden legally. Plus, CPAs can represent you if the IRS comes knocking, which is definitely not the time you want to be flying solo.

Finances aligning with growth strategy

Accountants can also help to shape your growth strategy. If you need to know if you can afford that new hire, should lease or buy equipment, or should expand into new markets, your accountant can help you prepare financial projections that make sense to potential investors.

They'll push back on overly optimistic forecasts, spot potential cash flow bottlenecks before they happen, and help you build multiple scenarios to prepare for different growth trajectories.

Business structure and setup support

For new businesses, accountants are particularly valuable in getting your structure right from the start. They can help you choose between an LLC, S-Corp, or C-Corp, set up your books properly, and establish financial processes that can scale with you.

Getting these foundations right early on can save you major headaches (and dollars) down the road, and it’s easier to start out on a good path than having to correct course later on.

Helps build automation into your system

Professional accountants don't just help you with making financial decisions — they can also help you build out a financial tech stack that’s perfectly optimized for your business.

The best accountants embrace tools like Digits, which can help you automate routine bookkeeping tasks, understand crucial business metrics, and create professional reports for internal or investor use.

This way, your company can better use your own financial data, and your accountant can spend more time on the high-level, expertise-driven tasks that can truly help your business grow.

5 signs it's time to hire an accountant

Ever wonder if you've outgrown your DIY approach to accounting? Here are the telltale signs that it's time to bring in the pros.

1. Taxes are getting complex

Gone are the days when your business taxes were only about revenue and expenses. Now, you're dealing with multi-state operations, contractor payments, and maybe even international transactions.

When your tax situation starts looking like a complex math problem, it's time for professional help.

This is especially true if you're expanding into new markets or approaching $1M in revenue (in which you may have to deal with cash basis vs. accrual and heightened audit risk) — the tax implications alone can make your head spin.

2. Financial tasks are eating up your time

If you're spending precious hours reconciling accounts or trying to decode tax regulations, that's time you're not spending on growing your business.

When bookkeeping starts to feel like a part-time job, it's worth asking yourself: Could those hours be better spent on product development, sales, or strategy? Usually, the answer is yes.

3. Business growth demands better financial planning

Maybe you're hitting your revenue targets and thinking about raising capital, or perhaps you're hiring your first employees.

These growth milestones require thorough financial planning and forecasting, as they all rely on and impact your finances. If you're making decisions based on gut feeling rather than solid financial analysis, you're flying blind. An accountant can help you build financial models that support your business plans.

4. Compliance concerns keep you up at night

If you're lying awake wondering whether you've missed important tax deadlines or deductions, an accountant can help ease your worries. The same goes for concerns about audit preparedness or compliance with industry regulations.

A good accountant actively protects your business from costly mistakes and oversights by staying ahead of regulatory requirements and business transitions (like if you plan to convert from an LLC to a Delaware C Corp).

5. The plan is to apply for funding or loans

When it's time to raise capital or secure a business loan, your financial records will be scrutinized like never before. Investors and lenders want to see professional, accurate financial statements and realistic projections.

If your books aren't GAAP-compliant with consistent revenue recognition, or you're not sure how to prepare for due diligence, you need an accountant to help you put your best financial foot forward. They help build your financial narrative by documenting key metrics like CAC and LTV, structuring your cap table, and making sure your books can withstand the intense scrutiny of due diligence.

DIY vs. hiring an accountant: What's right for your business?

Money is likely the biggest factor when you're deciding between doing it yourself and hiring a pro. While DIY might seem like a budget-friendly choice, the real costs (and savings) might surprise you.

Basic accounting software like QuickBooks or Xero will run you approximately $30-70 per month. But that doesn't include the time you spend learning the software, managing your books, and staying up to date with tax laws. If you're billing clients $150+ per hour (and you probably should be), every hour spent on bookkeeping costs your business that amount in lost revenue.

Professional accounting services typically start around $150-300 per hour, or you might pay a monthly retainer of $200-1000+ depending on your business needs. But you're not just paying for number-crunching.

The hidden value of expert advice

An accountant often pays for themselves through tax savings alone. They know deductions you've never heard of and can structure your business to minimize tax liability legally. These savings could dwarf their monthly fee.

For example, they might help you:

• Time your major purchases for maximum tax advantage
• Structure your compensation to reduce self-employment tax
• Identify industry-specific tax deductions you didn't know existed
• Avoid costly penalties by keeping you compliant

There's also value in knowing your finances are handled correctly. During tax season, instead of pulling all-nighters reconciling transactions, you can focus on closing deals and shipping products. And if the IRS has questions, your accountant handles it.

Alternatives to hiring an accountant: Is there a middle ground?

The choice between full-service accounting and pure DIY is no longer binary. New tools offer a middle ground that might be perfect for your business.

For early-stage businesses with straightforward finances, robust accounting software might be all you need. Today's platforms go beyond basic bookkeeping — they can automate expense tracking, generate professional financial reports, and even help with invoicing. But here's the key: You need to be realistic about your business complexity and your own financial literacy. If your eyes glaze over at the mention of accrual accounting, software alone might not cut it.

Platforms like Digits bridge the gap between DIY and full-service accounting. It provides powerful automation for routine tasks, plus intelligent insights that help you make better business decisions. You get real-time visibility into your finances without needing an accounting degree to understand what you're looking at.

Plus, if you need that human touch, Digits offers accounting services performed by US-based CPAs. Whether you need extra help at tax time or want a professional to review your books at the end of every month, Digits can support you and your business as it grows.

The trick is finding the right mix of technology and human expertise for your specific needs. Maybe you use a platform like Digits for day-to-day financial management when you’re still a small startup, but as you grow, you decide to bring on one of our accountants for strategic planning and tax preparation. When you're choosing financial tools, consider your comfort with financial management, how complex your business is, your growth trajectory, and your budget constraints.

Should you hire an accountant?

So, after all that, the answer is: it depends on your business, growth trajectory, and budget. When you should hire an accountant is not a one-size-fits-all answer.

Think of accounting expertise as an investment rather than an expense. Yes, professional services will impact your budget, but poor financial management could impact your entire business. The real question isn't just "Can I afford an accountant?" but "Can I afford the potential mistakes and missed opportunities of not having one?"

Consider these trade-offs:

• Time spent on financial tasks vs. growing your business
• The cost of services vs. potential tax savings and financial optimization
• Peace of mind vs. constant worry about compliance
• Professional guidance vs. learning through trial and error

As your business scales, financial management becomes exponentially more complex. What worked at $100K in revenue probably won't cut it at $1M. An accountant can help you make data-driven decisions about expanding, avoid common growth-stage pitfalls, prepare for funding rounds or acquisition talks, and scale your financial processes efficiently.

Getting started: Your next steps

Whether you decide to hire an accountant or explore alternatives like Digits, the important thing is taking action to level up your financial management. Here's how to get started:

1. Assess your current financial complexity and pain points
2. Calculate the true cost of your DIY approach (including your time)
3. Research and compare solutions that fit your budget and needs
4. Start with a consultation — many accountants offer free initial meetings
5. Consider a hybrid approach using both technology and professional services

Whether you choose full-service accounting, a modern platform like Digits, or a combination of both, the key is finding a solution that gives you both confidence and control over your business finances.

Ready to take the next step? Schedule a demo to learn more about how Digits can help you take control of your finances.