The relationship between you and the person you choose to do your accounting and taxes is more important than you may realize. The right accountant for a small business can function like a valuable partner and provide advice and help with both business and personal finance decisions. It’s crucial that the relationship be comfortable and trusting.
“Certified Public Accountants (CPAs) are more than just individuals who do your yearly taxes,” says business consultant and author Maria Marsala, of Poulsbo, Wash. “The right accountant can advise you on a long list of other services, which may include advice on how you keep your records and on your financial performance, estate/tax planning, and retirement.”
Here are seven tips to help you to find an accountant who is the best fit for you and for your business.
You may be lucky going with a friend’s recommendation, but you should do your homework first. “The best way to locate a compatible accountant is to ask around the community,” says CPA and tax advisor Genevia Gee Fulbright, of Durham, N.C. “Ask bankers, insurance agents, and small-business owners. Keep in mind that many accountants acquire new clients solely through word of mouth; that gives them a strong incentive to provide quality customer service.”
“Some individuals working as bookkeepers or accountants have no formal license or education in accounting,” cautions Navin Sethi, CPA and tax manager with Rothstein Kass, in Walnut Creek, Calif. “That’s why you should do a thorough investigation before you hire an accountant. The best way to protect yourself is to hire a certified public accountant.
“In order to earn the CPA credential, applicants must meet the requirements of the state or jurisdiction in which they practice. A CPA applicant must also pass the national CPA exam and, depending upon the state, have some actual practical work experience before receiving a license. Finally, a CPA must adhere to requirements to take specified amounts of continuing professional education courses to retain a license to practice.”
Checking an applicant’s references is one of the most important steps in the hiring process. Even professionals can misrepresent their backgrounds and credentials or simply leave out important information.
Checking references takes time, but it’s a simple step that could save you from hiring someone who is woefully unqualified.
Fulbright emphasizes the importance of the chemistry between you and your accountant, especially in a small business. “Make sure that you have clear goals for your business and that your prospective accountant understands them,” she says. “Go to lunch, have a conversation. That will help you to decide if you’re both on the same page.”
Use the 60% Rule
There is a wide range of specialties open to CPAs, from individual taxes to large corporate clients, to small businesses, and everything in between. “Look for a CPA who has 60% of his or her business coming from small business owners like you,” says Marsala. “CPAs are more apt to keep up with the laws regarding clients they deal with most often. If your business is incorporated or is an LLC, make sure that the person specializes in corporate accounting, including financial statements and audits.”
Consider Special Needs
If you have unusual accounting problems in your business, look for an accountant with specialized training or experience.
“If you ever find yourself in need of an outside audit, additional designations such as CFE (Certified Fraud Examiner) would be helpful,” says Fulbright.
Perhaps you have limited experience in personal financial management and would like to explore the possibility of increasing your investment portfolio. “An accountant who is also a Certified Financial Planner (CFP) would be a good choice when you need investment/portfolio advice,” says Fulbright.
“The biggest problem many small business owners have is stepping back to take the time to evaluate their business,” says CPA Carol Katz, of Baltimore, Md. “They’re so busy running the business and keeping up with the paperwork that they don’t allow enough time to plan ahead. You should always consult with your accountant before entering into any significant business or financial transaction. Undoing a poorly thought-out transaction or removing assets from an entity without causing unnecessary taxes can cost much more than the time spent on a planning meeting and document review.”
“The nature of many small businesses requires owners to consider succession planning,” says DiAntonio. “Generally succession planning consists of either transferring the business to the next generation, selling it outright to a third party, or, perhaps, to an employee. Typically, a CPA who knows the practice and its assets can bring additional value to a potential sale or transfer. Also, once the business is converted into cash or a revenue stream, a financial planner can assist the client in maintaining and growing the client’s wealth.”
Make a Change
If you find yourself working with an accountant who isn’t right for you, don’t hesitate to look for a replacement. Your accountant is too important to your success for you to compromise.
Business owners should continually review where they are in the life cycle of their professional careers. “They may need to change the business form of the entity as their business grows,” says Katz. DiAntonio adds, “If the accountant used when the business was smaller no longer seems effective, then it may be time to move to another with more expertise.” Some owners may need tax-savvy ways to bring in family members to whom the business may eventually be transferred. Or, if there is no succession planned, they may need a structure for eventual sale of the business, including buy/sell agreements among partners.
Finding the right accountant for your business may take effort, but the time you spend on that job may well prove to be among your most profitable investments.