Choosing an accountant? Be careful. There may be more riding on the decision than you think.
(article continues below)
Unfortunately, once you've selected an accountant, it's a pain to switch. Your accountant gains detailed knowledge of you, your business and your data -it makes it very tough to transition to a new accountant. The end result is that many businesses that work with mediocre accountants don't make the change to a better accountant simply because the switching costs are too high.
Given the inertia that settles in after you've selected an accountant, it's important to make a good choice the first go-around. Makes sense, right?
Surprisingly, most business owners don't thoroughly consider their needs when selecting an accountant. That's because many of us who don't have a strong accounting background view all accountants as being equal.
But the reality is that all small business accountants are not created equal.
This article explains how accountants can assist your business and provides useful questions you should use to choose an accountant that truly can help your business grow, not somebody who just crunches the numbers.
What Do Small Business Accountants Do Anyway?
The increasing role of small business in the American business landscape and more powerful and accessible information technology has changed the role and importance of the small business accountant.
Why do you need an accountant? Some small businesses make due with a bookkeeper - someone to perform the tedious task of recording financial information and cranking that data into the necessary formats, like P&L statements and tax forms.
But a good small business accountant does much more than just record transactions and passively generate documents-they actively analyze, interpret and convert that data into actionable business intelligence.
Based on where you want to go with your business, they should be able to tell you how to get there. If your accountant is just showing you the financial tracks of where you have been, you've made a bad choice and you're missing out on a great opportunity to receive good business advice.
To be sure, today's small business accountant offers more than crunched numbers. They can be your primary resource for:
- Tax Planning. Beyond simply preparing tax forms, an accountant should be involved in business planning throughout the year. They should be able to regularly advise the business so it functions with peak tax efficiency.
- Business Consulting. A good accountant should be able to help your business grow. Talented small business accountants function as a trusted general business consultant, assessing business problems and offering specific solutions. They offer advice on internal controls, risk management, lease versus buy decisions, inventory strategy, pricing, and even marketing. In short, an accounting professional who really understands your business from the inside out should be a trusted business advisor who is highly motivated to see you succeed.
- Personal Finance Advice. A good small business accountant understands that your personal finances are integrally linked to your business finances. They view the two holistically and offer advice on both fronts. For example, while serving as your small business accountant, they might offer retirement planning advice and estate planning advice that is ancillary to your small business activities but that will ultimately leave you in a stronger financial position.
- Technology Know-How. Computing technology has dramatically improved small business capabilities as powerful business software is no longer only for corporations and the Internet provides a level of access to knowledge, customers and suppliers hardly dreamed of even ten years ago. A good accountant must -- must! -- absolutely be proficient in applying the fantastic and inexpensive information technology that turns business data into strategic intelligence. They need to be very familiar with leading small business management software packages from leading vendors like MYOB, Intuit and Peachtree.
- Networking. While the strength of an accountant is still what they know, a mark of a successful pro is also who they know. Your accountant should be a good source of referrals as they should now precisely each of their clients' strengths and needs. Need to get a loan for your small business? Your accountant ought to be able to introduce you to the right banker.
Questions to Ask Your Prospective Accountant
The bottomline is that you should expect today's accountant to be much more than a bookkeeper. Most do add considerable value. The trick is to separate the wheat from the chaff.
So, with your raised expectations, how do you choose the right accountant for your small business? Like any relationship, it boils down to a compatibility of interests, experience and outlooks. Seek recommendations from your peers and ask prospective accountants the following questions:
- Do you have your CPA? Business owners are often confused as to the certified public accountant (CPA) designation. A CPA has a surpassed accepted financial education levels, passed state-administered tests to prove competency and periodic re-certification exams. Certain situations, such as audits and many loan applications, require CPA involvement. Not surprisingly, CPAs can charge higher fees than a non-CPAs. But there are a great many non-CPAs who excel at small business accounting and financial and technology consulting. Again, getting to know them and your needs is the necessary first step.
- What kind of creative business advice will you offer me? A good accountant can deftly handle data and numbers but should also be able to demonstrate quick and creative business acumen. Ask the candidate to offer three quick ideas on how your firm might be able to save money right now. Ask them for three examples in which they offered useful business advice to other clients that went beyond just tracking the numbers. While "creative accounting" is usually a negative, having a creative business mind can be a huge asset towards helping your company to grow.
- Do you consider yourself to be tech-savvy? Small business accounting software has made powerful accounting tools available to everyone. But these accounting packages, most notably MYOB and QuickBooks, are only as useful as the person who installs them and runs the applications. Even if you are not a "tecchie," do your homework to be able to determine whether the candidate understands the role computer technology plays in turning business information into business intelligence. For example, ask them how they will integrate your computer files with the technology in their office. What role will the Internet play in keeping in touch and interchanging financial information?
- Who are your other clients? Imagine this scenario. You hire an accountant based on the assumption that he understands the basics of your business. Then, you find out that he's never had a client like you before. Instead, he's only prepared tax forms for wealthy individuals that don't own businesses. Avoid that possible disaster by asking who the accountant works with. If they are businesses that are similar to yours, that's a good sign. In asking about their clients, you will also want to understand how busy they are and whether they have the time and resources to support you adequately.
- How do you calculate your fees? Ask the accountant what you can expect fees to be and will he guarantee that you will not exceed certain amounts that you agree upon up front. In a time-based fee structure, make sure to find out the hourly rate, as well as all fees for expense reimbursement. Find out now whether a simple two-minute phone call or a one page fax means an hour of billable time. If that's the case, run for the door.
- Are you active in the local business community? Who do you know that can help me? Find out whether your prospective accountant can introduce you to people who might be useful to you, including prospective customers, suppliers, bankers, and investors. Since talk is cheap, take it one step further. Ask the accountant for examples of introductions they've made in the past for other clients and how those introductions played out.
- Why should I use you? As a final question, it's always good to let the accountant make the case for why you should engage them. Find out whether your prospective accountant can introduce you to people who might be useful to you, including prospective customers, suppliers, bankers, and investors. Since talk is cheap, take it one step further. Ask the accountant for examples of introductions they've made in the past for other clients and how those introductions played out.
What's your take on choosing accountants? Have any advice for business owners on this topic?
I've had terrible experience with accountants - it is really hard to find one who is willing to explain matters.
I got the feeling that most of them want to keep you in the dark so that you will be completely dependent on them forever.
I'll be printing this post and using it in the future, I'm sure!
As a fairly successful small business owner, this is good advice. Accounting is the Achilles heal of many business owners, and advice on finding better ones is appreciated. Thanks.
Consider this my "thumbs up" on a great read here. I'm starting a home based e-commerce business and just formed my LLC. I'm curious if anyone has suggestions for CPA's who specialize in my type of small business?
SUPERB ARTICLE! I have just spent time venting about my horrible experience with accountants. I am SO DISGUSTED with the accountancy profession (if you can call it that). It seems either they don't understand the neo-small business (i.e. e-commerce, integration of personal and business finance, etc) or they don't want to touch you yet because you aren't bringing in their standard of income.
UGH! I will DEFINITELY be printing this and taking it along to my next accountant interview. I live in Australia but the advice is sound.
Great article!My wife and I have been in business for 5 yrs now and have almost nothing(finances)to show for it.We do look forward to our next 5 yrs to be both productive and lucrative.Thank's to your article we DO KNOW how important it is to not only have an accountant but to have an accountant who can make you company grow and not just crunch the number's.
This was very helpful. I'm interviewing accountants now. Didn't really know what to ask. The questions and responses stimulated a lot of good thinking. Thanks!
Thanks for this valuable read! We haven't been comfortable with our accountants. We have been contemplating changing accounts. Although switching accountants could prove costly, it may be worth it nonetheless!
|Spi & Span
An excellent starting point for me as a new business owner. I have been thoroughly stressed trying to hire an accountant. Now my hesitant feeling is validated. Thanks for the good advice!
This has put me quite a bit at ease. I've been stressing steadily over the lack of impression and viability the accountants I've talked to have expressed. This has definitely helped me form a list of accountant expectations to press forward with and will undoubtedly expedite the accountant selection process. Thanks so much!
I am an accountant and I hear stories like this almost everyday. It is unfortunate that there are people that think they are bookkeepers or accountants but don't have the experience or knowledge to back it up.
The one thing that I would add to the article is to ask for references and then call those people and ask about the accountants knowledge, performance, and service.
I am still learning to be an accountant and this is very motivating and informative, it prepares me very well for what is coming and how I can personally contribute to this wonderfull proffession of ours!
I have been a CPA for a good number of years already and I am proud to say that I am not one of the accountants that people feel negatively about. It is my first time to read an article like this - short and concise and useful in every sense in terms of finding a good accountant. The accountant today should really be more of business consultant than a bookkeeper. Sometimes, it also makes sense to invest in an accountant who can give you sound advice - whether it be in the field of marketing, finance, sometimes even HR and admin.
my accountant is asking for $8000 for making a 5 yr business plan for a small business we are buying? is that ok or is he ripping us off?
Sasha, you'll know the answer when you get the business plan. Seriously, that's not an unusual fee for writing a business plan. It depends a lot on the nature of the acquired business. Still, you should ask your accountant for some sample business plans that he's written so you understand what the deliverable is that you'll be getting for your money.
I will definitely be using this for my next accountant selection interview. I own a personal training business in Chicago and was wondering if anyone could recommend an accountant in the area or at least a reference?