An accountant tells you how to judge whether your accountant
is right for you, and how to pick the right ones.
“Is my accountant right for me and my business?”
How important is that question? Well, how important is it that you have the
right doctor? Or the right spouse? That’s how important your choice of
accountant is, because your accountant is (or should be) the financial doctor
who monitors the health of your business. “What do you mean by ‘right’?”
“Isn't one accountant just like the next?” “Shouldn’t I
just go for the guy who charges the least?” “My cousin’s a bookeeper.
Do I really need an accountant?” If you’re like most business
owners, you have plenty of questions but not many answers that you are sure
of, but that’s good. You’re on the right track, because the best place
to start is with the right questions.
But let’s ask the big one first, and then I’ll go into the details
about evaluating an accountant and about selecting the one that’s right
for you.
“Do I Really Need An Accountant?”
“I’m just small potatoes in the business world. Accountants are
for the big boys, not for me.” If that’s what you think, you need
to adjust your attitude to fit the reality of your situation. Check out these
vital facts:
- In the government’s eyes, the burden is on the independant business
owner. With very few exceptions, the reporting required of a five-person operation
is similar to what is required of an operation employing five thousand people.
The five thousand person operation has a team of accountants to help them
deal with tax and reporting requirements. What kind of resources do you have?
- Unless tax law and reporting systems is your favorite hobby, you need a
tax expert, an accountant, to prepare your tax return. To the government,
your business is simply a series of transactions revolving around taxable
income and expenses. It takes an expert to sort these out to your government’s
satisfaction.
- Monthly, quarterly and annual reports are governed by strict regulations.
Failure to do things correctly could cost you some heavy fines. It’s
best to leave these reports to people who work with them every day.
“The Right Stuff”
What do you need in an accountant? The criteria are very straightforward. I’ve
placed them in question form for your convenience. Some of them apply only to
prospective accountants, some to accountants with whom you already work. Use
them to help you judge objectively whether your accountant is right for you.
- You want your accountant to communicate with you in plain English. You
are the decision-maker and your accountant is a translator and advisor. If
he/she can't make the facts understandable, what help are they?
- Is he/she interested in your business? Did this person take the time to
review the financial information provided?
- Can you develop a rapport with this person? He/she will be a critical element
in your financial team; you must be able to work well together.
- Is this the person who will work with you? The person selling you the service
may not be the one who will work with you. You need to be comfortable with
the person who will be providing the service.
- On what schedule and under what circumstances will your calls be returned?
You cannot expect 24 hour availability, but a response within 24 hours is
a reasonable expectation.
- What is the delivery schedule? I am amazed at how many people accept information
way past its useful life. Here is a reasonable schedule for delivery after
the end of the period: Monthly P&L statements, within ten days; quarterly
information, within 20 days; annual information, within 45-60 days. Remember:
to run your business properly, get accounting information every 30 days.
- Are you a good match in size? As with other businesses, accounting companies
service the largest clients first, because they generate the largest fees.
Make sure that your accounting company has selected your size business as
their target client.
- What is this person’s (or this firm’s) expertise? A degree is
important, but look beyond the college education. The person or firm has a
number of years experience either in your field or with your size business;
weigh this along with the college credits.
- Where does he/she go for second opinions? No one who deals with taxation
can claim to know it all. A good accountant will have a formal procedure in
place to refer to others more expert in their particular fields.
- What services will you receive, and what will they cost you? Know exactly
what will be provided, and how often. (See “Warning Bells” below
for tips on what to avoid.)
- What is the basis for the fee? Part of the fee will be based on the time
necessary to complete the work. Look for someone who is willing to say that
if you furnish your information in a certain format at a certain time, he/she
will do the work for a specified amount. (see “Establishing Fees”
with this article.)
Warning Bells
Be skeptical of the following types of packages:
- When someone says he/she will do everything. No one can do everything for
you. Worse, everything can be defined as what an accountant thinks you will
need, as opposed to what you really need.
- Be wary of the accountant who wants to build your tax return into his/her
price. This may mean that you will be competing with cash returns when it
is due.
- Be wary also of someone who will do your tax return “for free.”
In your own business, how much importance do you place on “free”
work?
Establishing Fees
Fees should be based on a combination of the volume and the condition of the
accounting information. Many accountants will simply state their per hour rate
for doing the work. This makes sense when the person proposing to do the work
has no idea what to expect. It can mean, however, that any inefficiency on the
accountant’s part will cost you extra money. In the beginning you may be
satisfied with an hourly quote, but you should establish the most likely fee,
along with the conditions for meeting that fee (how much work, when delivered,
in what format, etc.). Leaving this too open ended will result in too many surprises.
Be sure that your accountant understands that you will not pay for extras that
have not been discussed beforehand. While the extra work may be warranted (eg.
unique tax situations, especially confusing information from you) you have the
right to approve any increase in fees prior to the work being done and the bill
presented.
Understand the pricing structure so that when a change in fee occurs, you will
not be surprised. Two factors will affect this increase. The first is simply
rising prices. Like you, your accountant must absorb price increases and pass
them along. The second is an increase in the volume of work. By understanding
the basis of the pricing, you will be in a better position to evaluate the fee.
Like any other expense, fees should be affordable to your business. No set ratios
exist. What you pay will depend on where you live and the volume of work that
you have. (Our company uses a formula based upon the number of entries and the
number of employees.)
Shop for value which translates into service for a fee. When comparing two different
fees, make sure that you also compare the level of service that you will receive.
So, what are you looking for?
An accountant who:
- Explains things to you in plain English on a regular basis...
- Can solve your problems either through his/her own resources or through
a backup support system...
- Will treat the servicing of your account as a priority and...
- Will give you good value for the fee.
Remember: Make the choice that will help you and your business to prosper.