10 Questions Small Businesses Should Ask Their Accountant

Running a small business involves juggling many responsibilities, and staying on top of your finances is one of the most critical. Your accountant can be a great resource for making sense of your financial data, complying with tax laws, and planning for growth. But to make the most of this valuable relationship, you need to ask the right questions.

Here are a few ideas to help you have better conversations with your accountant and benefit from their valuable business expertise.

10 Questions to Ask Your Accountant

Whether you’ve been working with your accountant for years or you’re a new client, here are a few questions to ask.

1. Is My Business Structured for Maximum Efficiency?

Your business structure has a big impact on the taxes you pay, whether you’re a sole proprietorship, limited liability company (LLC), partnership, or corporation. Your accountant can help you decide whether your current structure is tax-efficient. 

For example, if you currently operate as an LLC, making an S corporation election could reduce self-employment taxes. On the other hand, structuring your business as a C corporation might be the way to go if you want to raise capital from outside investors. Your accountant can help you review each option's pros and cons. They can also file documents to change your business structure, if necessary.

2. Am I Using the Best Accounting Method for My Business?

The two primary accounting methods are cash basis and accrual basis.

Cash basis accounting records income and expenses when money changes hands. It’s simpler and works well for businesses with straightforward transactions. Accrual basis accounting records income and expenses when earned, regardless of when money changes hands. It provides a clearer picture of long-term profitability but requires more complex record-keeping.

Many small businesses start out using cash basis accounting because it’s easy. But as your business grows, accrual accounting might be a better choice, as it gives you a clearer look at your business performance.

Your accountant can explain which method aligns with your business goals and industry standards. They can also guide you through transitioning from one method to another if necessary.

3. What are My Financial Statements Telling Me?

Your financial statements aren’t just for applying for loans or preparing your annual income tax return. Your balance sheet, income statement, and cash flow statement help you understand business performance. Ask your accountant:

• What trends or insights do you see?

• How does my business compare to industry benchmarks?

• What ratios should I monitor?

Reviewing your financial statements with your accountant helps you spot problems early and look for opportunities for improvement.

4. How Can I Improve Cash Flow?

Cash is the lifeblood of any small business. It allows you to pay employees, keep the lights on, and invest in growth. If you’re having cash flow troubles, ask your accountant for advice on:

• Improving the accounts receivable process to speed up payments and follow up on overdue invoices.

• Managing accounts payable to ensure you’re not paying bills faster than necessary.

• Building a cash reserve for emergencies or slow seasons.

An accountant can also help you create cash flow projections, giving you a clearer picture of your financial future.

5. What Business Expenses Can I Deduct?

Small business owners often leave money on the table because they’re unaware of all the available tax deductions. Ask your accountant to identify common tax deductions and credits in your industry. For example:

• If you work from home, the home office deduction may let you write off part of your mortgage or rent payments, utilities, and other housing expenses.

• You can write off mileage when you use your personal vehicle for business purposes.

• If you hire veterans, ex-felons, or other people who traditionally face employment barriers, the Work Opportunity Tax Credit (WOTC) may lower your federal income tax burden.

• The retirement plans startup costs tax credit can help offset the cost of offering a retirement plan to employees.

Your accountant can explain the rules for claiming different tax breaks and any documentation you need to maintain.

6. How Can I Prepare for Future Tax Payments?

Small business owners typically don’t have income, Social Security, or Medicare taxes regularly withheld from their pay. Instead, they make estimated payments towards income and self-employment taxes throughout the year. 

Ask your accountant how to estimate and save for quarterly tax payments. Topics to discuss include:

• How much should you set aside each month?

• When are estimated tax payments due?

• What happens if I overpay or underpay my tax liability?

• Do I need to make state and local estimated payments, too?

Proactive tax planning reduces stress and ensures your business remains in good standing with the IRS.

7. What Financial Tools or Software Should I Be Using?

Technology can simplify financial management, but it’s hard to know where to start with so many tools available. Your accountant can recommend software for:

• Accounting and bookkeeping. QuickBooks, Xero, or Wave might fit your needs.

• Expense tracking. Apps like Expensify or Ramp can make it easy to log business expenses on the go and collect employee expense reports.

• HR management. Solutions like Justworks offer options for tracking time, paying employees, and managing employee benefits.

The right tools can save you time and reduce the risk of errors.

8. What Steps Should I Take to Prepare for Growth?

If you plan to expand, your accountant can offer advice on how to do so sustainably. For example, they might provide guidance on:

• How much capital you’ll need, and where you can find it.

• Whether you should hire a full-time employee or an independent contractor.

• How to optimize processes and systems to scale up.

Involving your accountant early in the planning process helps you avoid common missteps.

9. What Can I Do to Reduce Financial Risk?

Every business faces risks, but smart business owners take steps to prepare for the unexpected. Your accountant can help you manage risk by identifying and planning for potential threats. For example, they might recommend avoiding certain operations, buying insurance, or diversifying suppliers.

While you can’t avoid all risks all the time, your accountant can help you implement a risk management plan to prepare for any serious issues.

10. Are There Upcoming Legislative Changes That Might Impact My Business?

Tax laws, payroll compliance, and labor regulations constantly evolve. Your accountant can be a valuable resource to help you prepare for these changes. Ask them about:

• Federal and state tax updates. Are there any changes to tax brackets, deductions, or credits that could affect your business? For example, new tax incentives or sunsetting provisions in current benefits might impact your planning.

• Payroll compliance changes. Ask whether you need to prepare for any adjustments to minimum wage laws, overtime rules, or payroll tax rates. These changes can vary by state and carry penalties if you don’t implement them correctly.

• Labor law updates. Ask about new employee classifications, benefits, or hiring regulations. For example, if you hire independent contractors, you may need to adjust to new laws around worker classification.

How Justworks Can Help

Your accountant is more than just a numbers expert—they’re a partner in your business’s success. Ready to see for yourself?  Get Started with Justworks today.