By Mark Clement
One of the pitfalls of running a construction business is the temptation to do everything: sales, estimating, project management, finances — well, you get the picture. When tax time rolls around, the ads on TV and radio for DIY tax software sound awfully encouraging. They promise to not only generate instant refunds, but to save you money for just plugging in a few numbers. "I can do that!" you exclaim.
Minding the bottom line is Job 1 for any business owner, but there are smart ways and not-so-smart ways to do it. One of the smart ways is to spend money where it'll do the most good. Hiring an accountant falls into that category. An accountant can not only manage your taxes but to help with payroll and other business issues. That is a good way to free you up for how you make your money: building things.
Organization
Accountants are like roofers, painters or floor guys: Their specialization, expertise and day-in-day-out familiarity with the tax code makes them efficient, fast and able to handle adeptly details that'd befuddle you for hours. But one of the most meaningful and far-reaching ways they help is with organization of your records. Accountants show you how they want you to file your receipts throughout the year, splitting out expenses into several areas.
This differentiation helps them tally everything up at the end of the year — and gives you an accounting system. (Note: A manila folder that says 2006 on the tab is not an accounting system; it is a pile of receipts.) Organization helps the accountant calculate an important number for sole proprietors: The Cost of Goods Sold. That is the basis from which your tax payment (or refund) is determined.
Another important organizational tool you'll get from an accountant is how to pay estimated tax for the coming year. Most sole proprietors have to do this quarterly. The accountant provides the forms you need telling you how much to pay, where to send the check and when to send it. Really thorough accountants even provide pre-addressed envelopes.
Payroll and forecasting
Organizing payroll and payroll taxes (both what the employer and employee pays) can be a full-time job on its own. Lots of contractors get buried in this kind of office work when they should be doing estimates and sending out invoices. If you forget a marketing expense in the year-end tally, that's no big whoop, but you must get payroll right. Every week. It'll keep your employees happy. It'll keep them working for you, too, because they're comfortable they'll be paid — properly and professionally.
Having an accountant oversee this phase of your business will help protect you from gnarly tax surprises down the road and will keep your company street-legal.
Good accountants do more than taxes, however. They can help you articulate your financial management — the big-picture decisions about your vision of your business: "In five years I want to specialize in accessible retro-fit work" or "I want to frame only custom homes" or "I want to be a full-service remodeler."
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