Do I Need A New Accountant Or Can I Salvage Mine?

By Leo M. Misdom, CPA

Is your accountant helping you work on your business? Probably not. Most likely, your accountant prepares financial statements and tax returns but offers very little else. How does this help you run your business? It doesn’t. Has your accountant shown you how to read your financial statements, look for trends in them, monitor your receivable and payable turns, or track labor and materials to sales? Probably not. If you are like many small business owners, you get the statements and go right to the bottom line before you stick it in a drawer for safe keeping. Believe me, this is not your fault. You got into business to do what you do best. You rely on your accountant to help you.

Let’s talk about what a good accountant can do for you. To start, the accountant needs to understand where you are and where it is you want to go. The only way to determine this is to ask questions like:

• is there more than one owner;

• what are your goals for the business;

• which accounting software do you use; and

• do you own the property or are you renting?

 

Your accountant should review the quarter-end statements for accuracy and discuss with you what these historical numbers mean for your business going forward. It is important for your accountant to come to you for these visits. This gives the accountant the opportunity to see and feel your business. The quarterly visit is also the time to discuss whatever is on your plate. You should be prepared for these visits by having a list of things you and your bookkeeper would like to discuss. As the business owner, you should not limit your questions to tax and accounting issues. Leave those to your bookkeeper. You should discuss business, personal and tax questions. These are subjects your accountant has worked on many times in his career and can be a big help to you.

Here are a few discussion suggestions:

• What could you be doing to keep your team happy and motivated? Your accountant may suggest you examine a retirement plan such as a simple IRA or 401K plan and/or implementing an incentive bonus plan.

• Can I afford to hire a new sales person? Your accountant can help you determine the revenue a sales person would have to generate to support their compensation package.

• Your accountant should suggest helping you put together a financial budget and cash flow projections.

• Your accountant should also offer to have periodic tax planning meetings with you. How many times have you and your accountant had an unfortunate tax surprise once the year is already over? Well, shame on both of you. You can’t go backwards when doing tax planning. It’s already too late.

• Your accountant should ask you about your plans for the business and how this affects your family. Do you have a buy/sell agreement with your partner or a key employee? Are you looking to sell the business at some point? What do you want to happen to the business and its value if a bus hits you?

• You may want your accountant to do year-end compiled financial statements on his letterhead. These statements can be used to give to third parties such as your banker because they carry more credibility than internally prepared statements.

• Your business and individual tax returns should fit like a glove. What you do for tax planning in your business usually affects your personal return. Ask your accountant to address both your business and personal tax situation.

• You should also discuss the use of Key Performance Indicators to help you track the performance of your business on a regular basis. For example, you could track and compare the average time it takes to collect customer receivables (accounts receivable turnover) versus how fast you pay your vendors (accounts payable turnover). Remember, what you can measure you can manage.

Not every accountant is the same. If two accountants stood next to each other, there is no way to determine who is better. You need to ask the right questions, but more importantly, you need to listen to what they are asking you. If your accountant provides you with the services I have described above, you probably have a good accountant. If he doesn’t but is willing to, you may be able to salvage your accountant. But if he won’t or can’t, you need a new accountant.

Leo Misdom is a Principal in Chicago’s 24th largest accounting and consulting firm, Dugan & Lopatka, CPA’s, PC. For more information, give Leo a call at (630) 665-4440.