Choosing the Right Accountant
Does your accountant help to run your business more profitably? Do they look at your operations and provide useful guidance? Or are they just good for tax/estate/other mysterious stuff?
How do you pay your accountant for advice? Like a lawyer? What kind of hourly charge?
From contributor D:
I have used the same accountant - a CPA - since I started hiring employees 15 years ago. Beyond getting me off to a good start, he helped me understand terminology, P&L and all the seemingly arcane things that help analyze the health of the business. Never spoke down to me.
First and foremost, our personalities clicked and we share the same sense of humor - we get each other. So whether he is advising me or I am telling him my woes, he is non- judgmental but has my best interests in full view. Almost like a confessor.
Where he really helps is tax advice - for both corporate and personal. That alone has paid his keep for years. Tax planning soon becomes something like estate planning - where income is and where it goes and when all makes a difference to the IRS. Nothing illegal of course, just wise planning that avoids unnecessary tax.
He also has helped with banking relationships and can help me preview what will happen with banks and how to deal with them. Now that we have all realized that no bank is any man's friend, I have an educated sounding board to consult. He also helps me know whether it may be better to lease or buy, grow, shrink or stand pat.
We use QB for all our bookkeeping, so he only sees that once a year, makes adjustments as he sees fit, and keeps it cleaned up.
The tax prep is a standard fee, both personal and corporate. Hourly beyond that, but reasonable - more like a junior associate lawyer. I have never regretted consulting him, and he is busy enough that he doesn't bill me for phone calls or spend time telling me I don't need his advice.
From the original questioner:
Clarification: we already use Quickbooks, and the mechanics of entering the numbers are all under control. The question is about the value added to your enterprise by having a close relationship with an accountant.
From contributor M:
We too have a numbers based relationship via Quickbooks with our accountant, and also a friendly and somewhat personal relationship. When we moved from Florida to Georgia, due to state taxes and the perks of being in a different state, my accountant suggested I get someone from Georgia. After meeting the new accountant and getting billed for an excessive number of hours just to chat, and also getting some misleading advice, I realized what I had in the previous guy. After getting set up in the new tax situation, I switched back. I really appreciate the fact that we do have something of a personal relationship, and that helps him guide me in some gray areas. By him being familiar with my personal lifestyle and my plans for the future, he can make suggestions in the tax area that will benefit me beyond what the new guy would have done. We also both understand he can not advise me to do anything unethical or illegal, nor would we want him to. Overall it just really helps our business to be guided by someone with similar values who we can trust. While I would say we are friends, we are not too familiar with one another either.
From contributor P:
Over many years and businesses and CPAs, I've found that some CPAs aren't worth a bucket of warm spit and others are invaluable. If you already have a good grounding in accounting and taxation, usually the only CPA who is worth anything to you beyond cranking out standard tax returns is one who is familiar with similar businesses and the mistakes they make. But not always.
I once violated all the rules and turned the CPA handling my account for a CPA firm into my live-in girlfriend and soon thereafter hired her full-time. That probably qualifies as an "improper" accounting relationship. A few years later we were audited. $5 million a year (non-woodworking) business with 25 employees. Very complicated corporate tax return which she had done, start to finish, as she was in charge of every aspect of bookkeeping and accounting. Stuck the IRS field auditor guy in an office on my premises for a week, dug up and gave him everything he wanted to see, which was a lot. Result?
No change in tax due. Not a dime. The trick is to find a talented CPA.
What I can't imagine is having no contact at all with the CPA handling my tax returns and tax planning. If for no other reason than to ascertain whether you should be doing business with someone else who has more insight into your particular business or is more on top of strategies to minimize your taxes.
From contributor T:
A good accountant should be equipped to advise you on a wide variety of issues, including:
- Incorporation (sole proprietor vs LLC, S-corp, etc)
- Cash flow, payment terms for vendors and clients
- Buy vs lease decisions for property and equipment
- Depreciation vs expensing of equipment
- Tax planning (short and long term)
- Selling your business, exit strategies
Compensation is all over the map, generally an hourly rate ($100-$300+/hr is typical). If you task your accountant to do something, get an estimate and consider capping the amount at a set maximum.
From contributor S:
When you know enough about accounting to be able to ask the kind of questions that will make a CPA squirm in his seat, then you are on your way to making money. Most CPAs like to sleep well at night, and are more than willing to see you spend more money than necessary to see that that happens. CPAs use fear ("Don't send up any red flags!") to keep you in their comfort zone. You need to learn accounting, so you can determine how aggressive you wish to be.
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