Before hiring an accountant or bookkeeper, there are several things you should consider, including the services you require, benefits or result you seek, and experience of the person or firm providing the services. Follow this guide and, with a little luck, you’ll find the right accountant for your small business.
Decide on Service Needs. Get Referrals
Decide what accounting, bookkeeping, tax and financial planning services your business needs, and how much you can afford to pay. Ask friends, business associates, colleagues, bankers and lawyers for referrals. I’s easier to start with a list of accountants and bookkeepers that are trusted by people you know.
Interview two or three qualified accountants or bookkeepers and assess their qualifications and fit.
Know Your Accounting, Bookkeeping, Tax Compliance and Planning Needs
Depending on the size and complexity of the business you own and manage, your accounting and financial management activities could range from basic bookkeeping, financial reporting and tax compliance to budgeting, operational finance and complex tax planning.
Budgeting and planning entails setting operational and financial targets, monitoring those targets against actual result and taking timely corrective actions.
Operational finance includes preparing, tracking and managing customer invoices, vendor bills, inventory and more.
Bookkeeping, accounting, reporting and tax compliance are the most basic level of accounting services which entail recording financial transactions, processing payroll, preparing financial reports and filing tax returns when they become due.
Flareapps.com small business tip #038Weigh the Cost-Benefit of Hiring an Accountant or Bookkeeper
“Caveat emptor” applies as much to buying accounting and bookkeeping services as it does to purchasing a car. Like any other major purchase, when retaining accounting services, you should compare costs and benefits. Your objective should be to maximize return on the fees you pay by avoiding errors and missteps which can be costly, time consuming and harmful for your business. Insist on getting the reports and analysis you need to run and manage your finances and operations in a timely manner so you may proactively grow profitability and manage financial risks.
The cost of accounting and financial services usually vary with the experience and qualifications of service providers, and the nature and scope of service you need. Highly trained and reputable accountants or bookkeepers cost more than those with fewer qualifications. The more complex the tasks and the higher the volume of services you consume, the more you should expect to pay. Bookkeeping, payroll processing, standard financial reporting and tax compliance are basic”routine” activities which generally cost less than planning, budgeting and forecasting services. Tax, financial and business planning is more complex, therefore the costs of these services are higher.
Not all accountants and bookkeepers have the experience and qualifications required to provide business, financial or tax planning services. Be careful when purchasing services from less qualified advisors. Although you could pay less for services, you may also receive less benefit if the quality is inferior. Errors or bad counsel could put your business at risk. Fewer on-paper qualifications don’t necessarily mean inferior services, though. You may find many accountants and bookkeepers who charge less but have solid real-world experience and a track record of providing excellent service. Striking a balance between what you pay and the quality of the product delivered is the key.
Flareapps.com small business tip #039Do Some of the Work Yourself and Save Money
Remember, accountants and bookkeepers who prepare your payroll, perform routine bookkeeping, or file yearly tax returns, generally do not provide advisory services such as monitoring your business’s financial performance, profitability and financial risk. If you do not have a financial advisor or can’t afford one, you can learn to be your own CFO. Fortunately, there are many inexpensive accounting software packages which create easy-to-understand financial performance metrics at no extra cost.
For example, online accounting applications like Flare create one of the most comprehensive business and financial performance dashboard in real time. Flare’s financial dashboard gives small business owners and freelancers the key performance metrics and tools they need to understand their business’s finances and then take action to increase profitability. Flare is easy to use, too. So you don’t need financial management experience to reap the benefits. Flare’s collaboration feature also lets you invite your accountant or bookkeeper to use Flare. You can save money by performing routine operational tasks, such as invoicing customers, tracking business expenses, bank transaction categorization, reconciling bank accounts and creating budgets. At tax time, or when you need a little assistance, your accountant can easily step in and help out.
Interviewing an Accountant or Bookkeeper. Who Should You Hire?
The best way to find a good accountant is to get referrals from your attorney, your banker or a business colleague. But before you start shopping, a bit of understanding of services accountants and bookkeepers provide can be helpful.
Most non-CPA accounting and bookkeeping professionals generally provide basic accounting and bookkeeping, financial reporting and tax compliance services. That does not mean they are not qualified to provide financial and business planning and budgeting services. During my long accounting and financial planning career, I have met non-CPAs whose work is as good as many CPAs. So, don’t paint with a broad brush. Evaluate each professional based on their training, experience and track record – not on their designations or fees.
CPAs, because of their qualifications, training and experience, usually charge more than non-CPA service providers. CPA firms generally provide the following four types of services:
- Bookkeeping, accounting, reporting and analysis
- Income tax compliance and planning
- Financial statement attestation
- Business advisory services.
Business advisory services include planning, budgeting, financial restructuring, acquisition and disposition of business, and risk analysis. Advisory services are usually the most expensive because they require the highest level of expertise.
Accounting and bookkeeping – recording and summarizing transactions – are the most basic services and generally cost less.
CPAs also provide tax planning and compliance services. It pays to have a tax expert on your side because they can help you save you a lot of money. IRS and state tax authorities each charge multiple tiers of fees and penalties for failure to file on time. While CPAs can help you maximizing tax deductions, they may also offer other important services such as choosing the right business structure, business sale or acquisition planning, and expert financial statement attestation or audits sometimes required by lenders.
Flareapps.com small business tip #040Questions to Ask Before Hiring an Accountant or Bookkeeper
As we discussed previously, the best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague. You can also get referrals from the Better Business Bureau and associations such as the National Society of Accountants, American Institute of CPAs, and the National Association of Certified Public Bookkeepers.
Here are ten critical questions to ask when interviewing an accountant.
- Are you licensed to practice in the state and do you hold professional designations like CPA, EA, CMA etc.? What are your credentials?
Don’t assume every accountant is licensed or certified. Certification is not the ultimate indicator of competence, but it may be a good baseline to gauge service quality and fees. Also don’t assume that certification means better service. There are non-licensed professionals who do excellent work and typically at lower costs.
- What is your work history, level of experience and length of time in public practice?
Training and experience matters. A CPA or certified bookkeeper may have credentials but little real-world experience. Newly graduated CPAs and bookkeepers are a good example. They have designations but little work experience.
- What differentiates your firm’s services from that of other CPAs or accountants? Do you bring anything of value other than basic level of service? Are you well connected to legal and financial services associates?
- What is your specialty or area of main expertise? Do you excel in tax, accounting or financial planning? Do you specialize in a particular industry?
- What is your service philosophy and business standards? How accessible are you? How long does it take for you to return calls or answer emails? Do you have a proactive approach to client service? Do you care about clients’ business success? Ask yourself whether you like or think you can get along with the CPA managing your account.
- Who are your typical clients? What size of business are they, what are their revenues and how many employees do they have?
These questions are particularly important for smaller business, micro-businesses and freelancers. You want to ensure that the size of your business or its income doesn’t mean you’ll get less attention.
- What are your fees? How do you charge? Hourly rate? Fixed fees?
- In the past 5 years how many of your clients have been audited by the IRS? What was the amount of tax assessments size and what type?
- Which bookkeeping software do you use? Does it offer a real-time financial analytics dashboard and collaboration features? Is it easy to use and does it have tools or automation for improving productivity? Can I use the software of my choice or do you have to use what you use?
- Can I have a list of past or present clients that I can call and ask about your services?
I’s always a good idea to corroborate what you are being told.
Once you’ve settled on an accountant or bookkeeper, ask for an “engagement letter” or agreement that spells out service terms, deliverables, your responsibilities and fees. Read the document carefully, ask for clarifications as appropriate and make sure the terms of agreement, service level and fees meet your expectations.
Flareapps.com small business tip #41Creating a Win-Win Relationship After Hiring an Accountant
Remember, the more you do and the more organized your documents, process, books and records are, the less you will pay in accounting or bookkeeping fees. If you hand in a shoe box full of bills, invoices and bank statements to your accountant, you may pay more because the accountant has to spend time understanding and organizing documents.
When possible, use an accounting software, spreadsheets or a ledger to record checks, deposits, invoice and bills. Write short memos on checks and deposits to note sources and uses of funds so that your accountant knows how to categorize transactions. The better you maintain your records, the less time your accountant has to spend and the lower your fees will be.
Make a habit of discussing your financial and tax planning issues on a regular basis.
Finally, use your accountant as a sounding board when making important business or financial decisions, and let them to offer suggestions for reducing cost and lowering financial risks.
There are many things to consider when hiring an accountant or bookkeeper. Remember to:
- Ask questions about services and experience before hiring an accountant.
- Don’t hire based on credentials alone.
- Use accounting software that provides performance metrics so you can better understand your business’s finances.
- Use accounting software so you can do some of the work and be more organized. Doing so can save you accounting and bookkeeping costs for tasks you could easily learn to do yourself.
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