Business Accountant Versus Accounting Software: Find What's Right for You

When it comes to handling the financial management of your business, you typically have two options—a do-it-yourself digital tool or an in-person professional.

The choice between these two will depend on your priorities, business needs and potential costs. Here's what to consider when deciding between forming a relationship with a business accountant or using software to cover your accounting needs.

Convenience versus complexity

Depending on how comfortable you are with numbers, using accounting software may be a convenient way to manage your business's finances. This option gives you control over your accounting, from bookkeeping to filing taxes. Taking care of these functions yourself may help you learn more about business finance than outsourcing to a third party.

It's possible that a software program may not meet all your needs. For example, you might have a large number of employees, multiple business partners, varied investments or a number of income streams from things like rental properties. If this is the case, your tax picture may be more complex than someone who only has W-2 employment income.

Using an online software is typically much more affordable than hiring an accountant. But this may come with pros and cons. Doing your own accounting takes you away from your business's day-to-day, revenue generating activities for hours each week.

If you choose the software route, there will be a learning curve while you get familiar with how to use it. Preview some options, and choose one that you find user-friendly. Look for user resources that offer clear guidance. And be sure there's a customer service line you can call if you have a specific question.

There's also a higher risk of error with software if you don't provide the right data or understand all your allowable deductions. Are you confident that you understand the most recent tax laws and that you'll file all the right forms come tax time? If not, you may want to hire a skilled professional.

The perks of professional insight

The main benefit of hiring an accountant is that they can do more than crunch numbers. They also provide up-to-date tax guidance and personalized strategies to help you maximize your savings.

Tax laws seem to change almost yearly. Because a qualified accountant knows the ins and outs of these changes, they can help you find ways to reduce your tax liability while ensuring you remain in compliance. For example, once you reach a certain level of business income, an accountant might suggest restructuring as an S corp to help you save on self-employment taxes. They also may help you find ways to increase business deductions, such as contributing more to a self-employed retirement account or a health savings account.

Online accounting software doesn't offer this type of guidance. Even though you may get free customer service with a software program, some companies might charge an additional fee if you have specific questions or need additional services. For example, you may need to have a tax preparer review your return before it's submitted or provide audit representation if the IRS decides to review your return.

Hiring an accountant is typically the more expensive option. You also forgo a certain degree of control and visibility when you hand over your accounting needs. Although your accountant must file your taxes by the federal and state deadlines, they likely have many other clients. You may have to operate on your accountant's timetable during the busiest times of year. Of course, you can have more control if you hire an in-house accountant. However, you'll usually pay much more for an employee's salary than for the services of an accountant with multiple clients.

Getting the best of both worlds

If you can't decide whether to use online software or an accountant, consider a hybrid approach. Several companies offer accounting software that you can use for your bookkeeping and to track business income and expenses. You then can export all this data and share it with your accountant to file your business tax return.

If you're looking for an accountant, talk to other business owners or people you trust to get recommendations, or speak to your banker. Search online to find local CPA or accounting associations in your area or search online for accountants who specialize in small business taxes.

Managing the financial side of your business can take a lot of time and skill. If you're comfortable with numbers, want to learn more or maintain more control over the financial aspect of your business, using accounting software may be the best option. However, if you have limited time but more resources to hire a professional who can offer ongoing tax guidance, then working with an accountant may be the best approach. If your needs land somewhere in the middle, consider a mix of software and in-person consultation to get the most of your accounting services.