Small business owners and entrepreneurs often find themselves dealing with two separate yet related issues: One is the trouble of doing their own books (including navigating the complex tax system) when that’s really not a core competency and takes them away from things they actually got into business to do. The other issue is finding and making the case for the financial resources that will help them grow.
It’s tough having to wear every hat, says LaMar Van Dusen, who founded and leads Phoenix Management, an Ontario, Canada based full-service accounting and financial firm that also provides a range of business advisory services. Notably, Phoenix Management provides business owners flat-fee accounting services, which frees business owners of the worries of add-on or hidden costs. Despite the services offered by companies like Phoenix Management, too many small businesses and entrepreneurs either don’t know or are reluctant to tap into outside experts who can help, according to LaMar Van Dusen.
One study by business management software firm Sage North America showed that 40 percent of North American small businesses don’t even use an outside accountant. Those that do use them, don’t tap into their full scope of capabilities: Only 33 percent use them for financial planning and 25 percent for business consulting.
Having trusted advisors to help guide startup companies is important and can take some of the weight off. These advisors can be qualified bookkeeping services or individuals; CPAs with a focus on small businesses and a love for tax code; outside business consultants and even banking professionals; all of whom the business owner or entrepreneur can establish a relationship of trust.
In this interview, LaMar considers how small business owners and entrepreneurs can shift their thinking, so they can focus on what’s really important: Growing a successful company.
Why are small businesses and young entrepreneurs less inclined to use outside accountants and, presumably, other professional services? Is it a cost issue or one of trust or just one of not having had a chance to figure it out?
LaMar Van Dusen: I read a study recently on PaySource One that said that 23 percent of small business owners are spending six or more hours a month on payroll. That’s time they could be spending on generating new revenue for their company. They could be closing sales or pursuing new business or enhancing their customer service. Time is an important resource, just like money. They have to learn to spend it wisely.
What is the price you have seen that entrepreneurs ultimately pay in terms of productivity, errors and lost opportunity costs?
I know a lot of entrepreneurs and many of them try to do it all. Because they think they have to, and sometimes they do in the very beginning. But, it gets old really fast. Maybe they only have one or two employees in the beginning. Then the company starts to grow and accounting and payroll and taxes becomes more complicated.
They may be talented entrepreneurs, but they probably aren’t tax professionals and they’re not keeping up with all the changes in tax law. They might make mistakes, and errors cost their new businesses money.
There are security issues too in accounting. Do you want to store your financial records on a server in your office? How do you keep track of all that? Cybersecurity issues are a moving target. Professional accounting firms are up on all that.
At the end of the day, it just makes financial sense for a small business to outsource these kinds of tasks.
How do you suggest business owners and entrepreneurs approach the challenge of working smarter? Does it help to show them how to look at their returns on investment? What should they factor in?
Most companies decide to outsource work first to cut costs, and secondly because they are looking for specialized expertise they don’t have. Once they see that they don’t have to reinvent the wheel because somebody already has done that, they’re a lot more open to letting others handle basic tasks like accounting.
It’s pretty easy to calculate return on investment, and most companies get a very good ROI — usually around 25 percent — in these kinds of deals. When you sit down with them at the end of the quarter and show them the numbers, they’re usually pretty happy about it.
What tools and resources do you recommend to help small business owners lighten some of their workload?
Well, QuickBooks is great and it works well for a lot of small companies. But you should still enlist a qualified CPA to make sure everything’s squared away, especially at tax time.
There’s FreshBooks, which is cloud-based accounting software. It addresses security issues I mentioned before because you don’t have to worry about how secure your own server is. They have a pretty good blog with topics of interest to small business owners.
People who are starting or running a small business often don’t know what great resources the Canadian government offers — everything from grants and loans, guaranteed loans, wage subsidies, and resources on financial management. I’ve connected a lot of my clients to these kinds of financing options. You’d be surprised how many people don’t know they’re out there.