Don't assume only big companies need the services of an accountant.
Accountants help you keep an eye on major costs as early as the startup stage, a time when you're probably preoccupied with counting every paper clip and postage stamp. Accountants help you look at the big picture.
In fact, perhaps no other business relationship has such potential to pay off. Nowadays, accountants are more than just bean counters. A good accountant can be your company's financial partner for life -- with intimate knowledge of everything from how you're going to finance your next forklift to how you're going to finance your daughter's college education.
A general accounting practice covers four basic areas of expertise:
- Business advisory services
- Accounting and record-keeping
- Tax advice
These four disciplines often overlap. For instance, if your accountant is helping you prepare the financial statements you need for a loan, and he or she gives you some insights into how certain estimates could be recalculated to get a more favorable review, the accountant is crossing the line from auditing into business advisory services.
The best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague in the same industry. Don't underestimate the importance of a CPA (certified public accountant). This title is only awarded to people who have passed a rigorous two-day, nationally standardized test.
The first step in setting the stage for a successful search is to take an inventory of what you will need. Given the level of fees you are prepared to pay, you must decide where your responsibility stops and where the accountant's begins.
Once you have compiled your documentation and given some thought to your expectations, you're ready to interview your referrals. Five candidates is a good number to start with. For each candidate, plan on two meetings before making your decision. One of these meetings should be at your site; one should be at theirs. Both parties need to know the environment the other works in.
During the ensuing interviews, your principal goal is to find out about three things:
Most accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Estate planning? Will the accountant help you design and implement financial information systems? Other services a CPA may offer include analyzing transactions for loans and financing; preparing, auditing, reviewing and compiling financial statements; managing investments; and representing you before tax authorities.
Although smaller accounting firms are generally a better bet for entrepreneurs, they may not offer all these services. Make sure the firm has what you need. In addition to services, make sure the firm has experience with small business and with your industry.
Is the accountant's style compatible with yours? Be sure the people you are meeting with are the same ones who will be handling your business. At many accounting firms, some partners handle sales and new business, then pass the actual account work on to others.
When evaluating competency and compatibility, ask candidates how they would handle situations relevant to you. For example: How would you handle an IRS office audit seeking verification of automobile expenses? Listen to the answers, and decide if that's how you would like your affairs to be handled. Realize, too, that having an accountant who takes a different approach can be a good thing. Be sure that the accountant won't pressure you into doing things you aren't comfortable with. It's your money, and you need to be able to sleep at night.
Ask about fees upfront. Most accounting firms charge by the hour; fees can range from $100 to $275 per hour. However, there are some accountants who work on a monthly retainer. Figure out what services you are likely to need and which option will be more cost-effective for you. Get a range of quotes from different accountants.
Try to get an estimate of the total annual charges based on the services you have discussed. Don't base your decision solely on cost, however; an accountant who charges more by the hour is likely to be more experienced and thus able to work faster than a novice who charges less. At the end of the interview, ask for references -- particularly from clients in the same industry as you.
After you have made your choice, spell out the terms of the agreement in an "engagement letter" that details the returns and statements to be prepared and the fees to be charged. This ensures you and your accountant have the same expectations and helps prevent misunderstandings and hard feelings.
Make the most of the accounting relationship by doing your part. Don't hand your accountant a shoebox full of receipts. The better you maintain your records, the less time your accountant has to spend -- and the lower your fees will be.
It's a good idea to meet with your accountant every month. Review financial statements and go over any problems so you know where your money is going. This is where your accountant should go beyond number-crunching to suggest alternative ways of cutting costs and act as a sounding board for any ideas or questions you have.
A good accountant can help your business in ways you never dreamed possible. Spending the time to find the right accountant -- and taking advantage of the advice he or she has to offer -- is one of the best things you can do to help your business soar.