How to Hire the Right Accountant for Your Business
A business's bookkeeper or accountant should have the skills and knowledge that he or she needs to perform the required functions. If you're going to hire an accountant, you need to know what qualifications to look for. Here are some guidelines for choosing the right person (or people) to enter and control the flow of your business’s data — and for making sure that those people remain the right people:
College degree: Many accountants in business organizations have a college degree in accounting, but some got their bookkeeping methods and skills through on-the-job training.
Although employees without an accounting degree may have good skills and instincts, they often lack the broader perspective necessary for improvising and being innovative. So, you want to at least look twice at a potential employee who has no college-based accounting background.
CPA or CMA: When hiring an accountant in a business organization, determine whether he or she needs to be a certified public accountant (CPA). The other main professional accounting credential is the CMA, or certified management accountant, sponsored by the Institute of Management Accountants (IMA).
Unlike the CPA license, the CMA designation of professional achievement is not regulated by the state. The CMA is evidence that the person has passed tough exams and has a good understanding of business accounting and income tax.
Continuing education: Bookkeepers and accountants need continuing education to keep up with changes in the income tax law and financial reporting requirements, as well as changes in how the business operates. Fortunately, many short-term courses, home-study programs, and the like are available at very reasonable costs for keeping up on the latest accounting developments.
When you hire an accountant, consider working his or her continuing education into your budget. It not only shows that you're committed to that accountant's future with the company, but it also guarantees that your books are kept according to the most recent guidelines and legislation.
Integrity: What’s possibly the most important quality to look for is also the hardest to judge. Bookkeepers and accountants need to be honest people because of the control they have over your business’s financial records. Conduct a careful background check when hiring an accountant. As a small business owner, you have close day-in and day-out contact with your accountant, which can be a real advantage — you can get to know him or her on a personal level.
Accounting Glossary
accounting equation
The equation Assets = Liabilities + Equity, which demonstrates the two-sided nature of accounting and is useful for explaining the concept of double-entry accounting (or double-entry bookkeeping).
Accounting Glossary
accounting period
The time period for which financial information is being tracked in a business, such as monthly, quarterly, or annually.
Accounting Glossary
accounts receivable
An account that records the amounts that customers owe to a business.
Accounting Glossary
adjusting entry
A correction made to a bookkeeping account that adjusts for accounting errors or other necessary changes at the end of the accounting period.
Accounting Glossary
cash flows
Used to describe the source or sources of cash or how cash is used.
Accounting Glossary
Chart of Accounts
A list of all the accounts used by a business, including what types of transactions go into each account.
Accounting Glossary
debit
An accounting entry that increases an asset or expense account, and decreases a liability or income account.
Accounting Glossary
dividends
A portion of a company’s profits paid by share of common stock on a quarterly or annual basis.
Accounting Glossary
FASB
Financial Accounting Standards Board. FASB is the highest-ranking authority in the private (non-government) sector of the U.S. for making pronouncements on GAAP and for keeping accounting standards up-to-date.
Accounting Glossary
Federal Unemployment Tax
In the U.S., the fund that used to be known simply as Unemployment. Employers contribute to the fund, and states also collect taxes to fill their unemployment fund reserves. (The acronym FUTA means Federal Unemployment Tax Act.)
Accounting Glossary
fidelity bonds
A type of insurance — typically carried by employers for their employees — that helps guard against theft and reduce the risk of loss.
Accounting Glossary
FIFO
First-in, first-out. A method for costs of goods sold in which a business charges out product costs to cost of goods sold expense in the chronological order in which the goods were acquired.
Accounting Glossary
fungible
Describes a product that is interchangeable and virtually indistinguishable from another product.
Accounting Glossary
General Ledger
A summary of all of a business’s accounts and transactions.
Accounting Glossary
IASB
International Accounting Standards Board. The IASB (based in London) is the main authoritative accounting standards setter outside the U.S.
Accounting Glossary
Journals
The location in which bookkeepers keep records (in chronological order) of daily company transactions.
Accounting Glossary
LIFO
Last-in, first-out. A method for costs of goods sold that selects the last item you purchased first, and then works backward until you have the total cost for the total number of units sold during the period.
Accounting Glossary
LLP
Limited liability partnership. A legal structure that state laws offer to qualified professionals in which all the partners have limited liability.
Accounting Glossary
PC
Professional corporation. A legal structure that state laws offer to qualified professionals who otherwise would have to operate as an unlimited partnership liability.
Accounting Glossary
petty cash
A cash account that businesses keep on hand for unexpected expenses.
Accounting Glossary
revenue
Monies that are collected in the process of selling a company’s goods and services.
Accounting Glossary
salvage value
The amount that an asset is worth after it has been fully depreciated.
Accounting Glossary
statement of cash flows
A financial statement that summarizes a business’s cash inflows and outflows during an accounting period.
Accounting Glossary
transactions
Economic exchanges between a business or other entity and the parties with which the entity interacts and makes deals.
Accounting Glossary
worker’s compensation insurance
A type of insurance carried by employers that covers its employees in case they are injured on the job.
