A few of the questions from this article are about how the client can accommodate the accountant. At Accounting Works, we more often than not work the other way around. Small businesses are so important to us, (in fact, we are a small business ourselves) that we know there is not one template that fits all of our clients' needs. Working with clients on their current state of affairs as well as reaching toward future business goals is as important to us as it is to you!
10 Questions to Ask When Working With an Accountant
By Kim Lance Shandrow
Entrepreneur.com
Solely relying on free or inexpensive online small-business accounting tools instead of investing the services of a trained professional accountant can be a costly mistake that entrepreneurs make all too often. Don’t be one of them.
Springing for a licensed accountant can be worth every extra penny you spend, says ff Venture Capital chief financial officer Alex Katz. A qualified, certified public accountant (CPA) can tip you off to potentially irreversible financial missteps and brand new tax savings opportunities that you might not know exist. And we doubt most barebones digital accounting solutions could bring red flags like these to your attention as effectively as an accountant.
When you do invest in the services of a reputable accountant, it’s important to know what to ask and when -- not only to be sure you’re getting your money’s worth, but also to ensure he or she helps you do what’s best for your business and your bottom line.
1. What’s the best way to contact you and how often should we be in touch?
This might seem like too simple a question, but clear, effective and frequent communication is the key to a healthy, beneficial relationship with your accountant. Establish early on how often you’ll connect, either in person, on the phone or online (via a video chat app like Skype, Google Hangouts or Facetime). Decide together if you’ll meet weekly, monthly or bimonthly.
2. How can you help me prepare for (and survive) tax season?
Untangling the time-sucking tedium of tax prep is often the number-one reason small businesses hire an accountant in the first place. You’ll want to ask yours which tax credits and deductions you should claim. Also ask him or her if there are any new tax laws you should take advantage of to maximize write-offs.
“Tax opportunities, such as the R&D credit, accelerated depreciation or panoply of state and local tax opportunities, including tax forgiveness and outright grants or refundable credits, can even be applied for as part of the tax return process,” Katz says.
He suggests that you get answers to all of your tax questions long before the April 15 filing deadline. To avoid the year-end rush, get your accountant involved in helping you gather all of the necessary accounting documents and data all throughout year.
3. What are some considerations I should consult with you about on an ongoing basis?
A skilled accountant should get to know you and your business well enough to regularly keep you aware of -- and swiftly and appropriately reacting to -- an array of factors that could effect your bottom line, for better or for worse.
Your accountant should be well-versed in several disciplines, “including but not limited to GAAP [generally accepted accounting principles], corporate and individual tax, retirement planning and financial planning," Katz says.
He or she should also be open to assisting you in weighing the financial ramifications of certain decisions, like whether or not to hire an independent contractor or a full-time employee, buy or rent an office space, or rent or lease a company car and much more.
Your accountant should also work collaboratively with you in a way that makes it easy for you to consider and understand which actions you need to take now and in the future, ideally without the usual confusing accounting jargon. “If an entrepreneur in unable to develop that type of relationship with her accountant, it may be time to look for a new one,” Katz warns.
4. How can you help me grow my business?
A qualified accountant absolutely can help small-business owners expand over time, that is if have the right groundwork in place with you, Katz says.
To grow, you must start with a financial model that is “honest and built on a granular basis from the ground up.” Remember to update your plan on a monthly basis (or ask your accountant to) with actual results. Doing so can help you hone in on opportunities for growth in your market.
5. How can you help me clamp down on my cash flow?
Properly projecting your business’s cash flow is as essential as creating an effective mission statement and living up to it. Tedious, detailed flow projections aren’t easy to wrangle, but that’s what you have an accountant for.
Your accountant should be able to help you develop an organized, effective cash flow model that allows you to adjust your operations in ways that help you survive shortfalls, as well as improve receivables and manage payables.
6. What is my break-even point?
Your account should be able to analyze a number of metrics to calculate whether your business is making a profit or a loss. Knowing your break-even point is crucial to determining your business’s pricing structure and profitability. Once your accountant helps you identify yours, you should have a strong estimate of how many products or hours of service you have to sell to cover your costs.
7. Can you assess the overall value of my business?
Your accountant should be up to the task of estimating your company’s fair market value in excess of your tangible assets. He or she should start by examining your financial plan and then execute a discounted cash flow (DCF) analysis, a common but effective valuation method.
Another way your accountant can help nail down your business’s value is by deeply understanding what you do and the industry in which you operate, Katz says. “In so doing, an accountant can help the entrepreneur understand which aspects of the comparable companies drive their value, and can work with the entrepreneur to steer the company toward maximizing those aspects of their business.”
8. Can you help me review and negotiate business contracts before I sign them?
This is a common question for accountants, one that’s probably better to ask your attorney.
“An accountant should not practice law without a license,” Katz says. “They can work collaboratively with your attorney to add color and tax and commercial issues about which the attorney may not be experienced.”
9. What are some special considerations for my particular industry?
Businesses in different industries come with their own unique accounting issues. Your accountant should be knowledgeable about the various ones that specifically apply to yours.
For instance, if you own a startup that builds wearable tech, your CPA should be well-versed at identifying tax opportunities specific to the emerging technology industry, like potential R&D, facilities and training tax credits, as well as applicable manufacturing and sales tax exemptions, etc.
10. What are some common mistakes that I should avoid when working with you?
Not being 100 percent honest with your accountant is the worst mistake you could make, Katz says. “The truth will come out, either in the planning stage or in front of the IRS auditor.”
Failing to follow the advice of your accountant is another common mistake Katz sees. The whole point of hiring an accountant is for their expert advice. Thoughtfully consider it, then use it to make reasoned, balanced judgments.
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