As a small business owner, my gut says it’s time to look for a new accountant. But I don’t know where to start. Our accountant has been totally focused on taxes. Think we should be working on more than that. Any advice?
Thoughts of the Day: Finance is the keeper of the numbers of the business, and therefore a critical function in any company. Accounting firms can provide advice about how well the company is performing and what weaknesses to work on. The accounting firm should teach small business owners how to keep safe from misuse of funds. Have a checklist of credentials to look for.
Finance is the keeper of the numbers of the business, and therefore a critical function in any company. Your accountant should honor that belief.
Privately held businesses need accurate data in order to make good decisions. The company’s accounting department backed up its’ accounting firm is responsible for managing receivables and payables, analyzing what’s going on, forecasting what’s coming and compare actuals to predictions.
It’s smart to ask the company’s accounting firm to provide assistance with data review and analysis. The accounting firm can expand the discussion of what’s likely to work and what might not pan out. Not only do accountants have classical training on what is appropriate, they also see what’s happening in the real world with lots of different clients. They provide valuable insight for a business owner who’s interested in learning more.
Purchasing is another key role to look at. When it comes to looking for vendors, especially in the area of banking, the accounting firm is likely to have valuable relationships and advice.
Your accountants should also periodically weigh in on how well the company is doing with profits, equity distributions, management of assets, loans and the balance sheet overall. They should be willing to have tough conversations about things that need improving.
Accounting firms can provide advice to owners and managers about how well the company is performing and what weaknesses to work on.
A good accounting firm will insist on regular meetings to review company performance. In those meetings they should come prepared to make recommendations to improve. They should also have a plan of services for the upcoming year.
Many accounting firms fall into the trap of focusing only on tax returns, and how to get the lowest possible bill for the client. That’s not always healthy, even though the owner puts a priority on reducing taxes and minimizing accounting firm charges. Make sure you’re not part of the problem.
The accounting firm should explain what the company needs to do to be healthy, including building up equity, profits, cash-on-hand, and having a plan to pay off debts. A good accounting firm will explain ratios the company should pay attention to, and help the company figure out how to improve year after year. Ask your candidates to provide a list of services and references.
The accounting firm should teach small business owners how to keep safe from misuse of funds.
Accounting firm can help spot fraud. There are articles daily about employee theft. Stealing often starts small, the employee gets away with it, and the theft funds grows over time. Much of that fraud is hard to spot, and employees may hesitate to report suspicions, especially if the problem starts with a higher up manager. Accounting firms can apply their fraud experience, if they’re allowed enough access.
Have a checklist of credentials to look for in an accountant / firm.
Hire a CPA to be your accountant. CPAs must meet rigorous standards in order to qualify for, and keep, that credential. In other words, the licensing process has already done part of the job of qualifying that your accountant is trained and keeping up to speed. In addition, we recommend that there be more than one partner, and partners should not all be related. Partners keep a watch on each other to insure everything in their firm is on the up and up.
Here’s a short list of questions we recommend asking:
- Who will be working on my account, day to day, and overall?
- What is the background, education, position, and specialties of the person working on my account?
- Size of the firm: number of clients, offices, partners, staff accountants, support employees
- How often should I expect to meet with a partner?
- What is your typical service offering, what optional services can you provide?
- How (and how much) do you charge for your typical service and optional services?
- Can you provide 4 references of accounts similar to my company in terms of: ownership structure, employee count, industry type, annual revenue, overall complexity of needs?
- Tell me about the worst account you stepped in to manage
- Tell me about an account you ended up firing/letting go, why?
Looking for a good book? Accounting Principles: The Ultimate Guide to Basic Accounting Principles, GAAP, Accrual Accounting, Financial Statements, Double Entry Bookkeeping and More by Greg Shields.