Question
What is the proper kind of relationship to have with one’s accountant? I see my bookkeeper twice a week, so I know where the money is going, but I’ve never actually met the accountant (she was hired by my former partner, and as far as I know there’s nothing wrong with her work). We ship her the ledgers at the end of the year and get back the tax returns in March, and that’s it. That can’t possibly be the best setup, but I’m curious as to what the alternatives are.
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?
Forum Responses
(Business and Management Forum)
From contributor B:
Have you considered Quickbooks? Our accountant is Quickbooks certified and does our taxes from QB. They are also a great resource for problems with QB. Having a bookkeeper seems a waste 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.
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.
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.
