7 Steps to Finding the Best Business Accountant for You
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Building a successful small business sometimes means you need to recruit specialists to help. Finding a business accountant can help you better manage your finances, run your operation more smoothly and free you up to focus on the business.
Although business owners can use online software to manage their own finances, including payroll, banking and taxes, or hire a bookkeeper to handle some of these tasks, working with a certified public accountant might offer the most expertise and the best suite of services for your business.
1. Understanding your options: CPAs, accountants and bookkeepers
Certified public accountants:
Commonly known as CPAs, these financial professionals are licensed by state boards. To qualify, they must meet certain educational standards, pass the CPA exam, complete a certain amount of general accounting experience and participate in continuing educational development classes.
CPAs can prepare and compile financial statements and review and compile audited financial statements. They can also present to the Internal Revenue Service, if necessary and file reports with the Securities and Exchange Commission. CPAs also are considered fiduciaries with a legal duty and power to act on behalf of their clients.
General accountants can offer many of the same services as CPAs, including preparing compiled financial statements, but they can’t work on an audited financial statement or a reviewed financial statement. Accountants typically have an undergraduate degree in accounting. They can offer advice on tax policy and tax preparations and may work on financial forecasting. Some accountants might be enrolled agents, or EAs, are licensed by the IRS to represent taxpayers. To qualify, an EA must pass a three-part exam.
Accredited business accountants/advisers:
As business accounting specialists, ABAs have experience and proficiency with financial accounting, preparation, taxation and statements. They have a code of ethics and ongoing education requirements.
These service providers have the least amount of education and professional training, and generally record a business’s spending and cash flow and are not subject to any educational or certification requirements. Common duties include paying bills, generating payroll, writing checks and reconciling bank accounts and financial statements. Some financially-savvy business owners might elect to handle many of these back-office functions on their own, or assign them to an employee.
Generally, the higher level of education and certification that your financial professional holds, the more expensive it will be to work with them. Typically, bookkeepers are the least costly, followed by accountants and then CPAs.
Check out these six questions to ask when hiring a bookkeeper for your small business.
2. Assess your needs
There is no one-size-fits-all accounting solution for small businesses, so, in order to select the right accounting professional, you need to determine your needs. Here are some common questions to determine your requirements and urgency:
- Are you in a situation where you need immediate help with compliance?
- Do you only need help with tax preparation?
- Do you want more detailed assistance with your financial statements and forecasting?
- Do you need to outsource your payroll and other back-office functions?
- Are you facing an IRS audit and in need of assistance and representation?
- Do you need advice on your business model, financing or expansion plans?
While these are just some of the possible services, they are among the most common requests from business owners, according to Bill Hughes, a CPA with Denver-based Hughes & Company, who specializes in small business work and has clients in the medical, manufacturing and legal fields. At his firm, Hughes said about 60 percent of his work for small businesses is bookkeeping, including sales tax, payroll taxes, payroll services, followed by 30 percent in income tax services and 10 percent in forecasting and financial consulting.
“Our most popular services are helping them keep up with everything. So many businesses try to operate the business like a checkbook, with the money that comes in and out, but that doesn’t track the profitability and doesn’t give them good monthly or quarterly data to see where the business is going,” Hughes said.
Among her clients, Tabitha Swanson, CPA and founder of the Westbrook, Maine-based, tax firm The Swanson Group LLC, said tax preparation and compliance are the most frequent needs. “Business tax returns are significantly more complex than an individual tax returns, and it has been made more complex by the new tax law that went into effect last year,” she said.
Of course, your business’s requirements impacts the kind of accountant and firm that you work with. If you have relatively simple needs, such as tax preparation, then a sole proprietor may be well-suited for your work. If you need additional services and support, a small, local firm may be the right fit. For larger businesses with more complex finances and growing needs, a large accounting firm might be most appropriate.
“Finding the right size provider for your business is very important,” Swanson said. “You want to find out if they can provide the services that you need.” Swanson said she’ll sometimes refer a potential client to a larger firm. Meanwhile, she occasionally receives clients that larger firms send her way. “Not every CPA is the right fit for every business,” she said.
3. Access resources in your community
Once you’ve identified your needs, it’s time to hire the right person. Industry experts recommend networking within your community to find a suggested professional in your community for suggestions. A few commonly available resources include:
- Local chamber of commerce: Many accountants, CPAs and accounting firms are members of local chambers and you can find them through the local listings. Business owners can also look up other local businesses and seek recommendations. For instance, a local restaurant owner might contact another food service professional and inquire about who they use as an accountant.
- Professional organizations in your field: In many regions, states and cities, small businesses participate in professional organizations for their field, and this can be a rich source of information to find accountants. Contact the organization for a list of recommended accountants or inquire with other members to see who they work with and if they’d suggest using that individual or firm.
- Professional accounting organizations: Most states and some cities have professional groups for accountants and CPAs. These organizations can help connect you with CPS and accountants in your area and/or with experience in your industry.
- Crowdsourcing: Inquire with your friends, family, customers and suppliers, and ask who they use for their business accounting needs. You can also post to your social media networks to find suggestions.
4. Find a professional with relevant experience
Another key to finding the best accountant for your business may be locating an business accountant who is familiar with your industry and your market. For instance, if you own a manufacturing company, it can be helpful to work with an accountant who is experienced working with industry and the particular financial and tax issues that can arise. If your business accountant or CPA has experience in your field, they’ll be in a better position to offer business and financial advice, making them a valuable resource.
If you feel comfortable with the business accountant who doesn’t have experience in your field, that might not be a deal-breaker, Swanson said.
“Each industry has nuances, and if the professional doesn’t have experience, they may be willing to put in the time to get up to speed – and not on your dime,” she said.
5. Interview potential accountants
When you’ve identified a potential accountant, or several candidates, it is important to meet with them and interview them for the job. If possible, Swanson advises having an in-person meeting and starting to establish a relationship, but phone or Skype meetings can work as well. Ask the accountant about how they’ll handle hypothetical situations and also any specific questions about your business’s needs.
Ask them for examples of how they have worked with other clients with similar financial situations or businesses in your field. If they run a small firm or are solo practitioners, ask them about their experience as a fellow small business owner. “It’s very important to sit down and get to know the person you’ll be working closely with,” Swanson said.
Hughes offered a few suggested questions:
- Where should we start on my account?
- What will you need to get started?
- What kind of documents do I need to supply?
- What is your experience?
- What other businesses do you work with?
- What is your experience in my state and city, and what local laws might apply?
- When necessary, what attorneys or other specialists do you work with?
On its website, the National Society of Accountants also offers a detailed list of potential interview questions.
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6. Understand the fee structure
Most small business owners are worried about keeping their costs in check. In fact, that thriftiness drives many entrepreneurs to try and handle their financial, banking and tax needs on their own. The good news is that working with a business accountant doesn’t have to break the bank, as long as you are clear up front with the fee structure and realistic about your needs and your budget.“ Business owners should be clear on the fee structure up front so there are no surprises,” Swanson said.
Hourly: Some accountants and CPAs work on an hourly basis and their fees are usually commensurate on their experience and the scope of the work. While rates vary based on location, experience and type of work, clients can expect to pay a starting rate of about $100 per hour for services. A recent National Society of Accountants (NSA) survey reported its member accountants bill an average of $83 per hour for payroll services, while financial statement preparation averages $134 per hour and tax services averaged $145 per hour.
Project-based: If you have ongoing or complicated financial needs, hourly fees can add up quickly. For some small businesses, a project-based fee is more economical. In this instance, an accountant will review the scope of work and use their hourly fee to inform a flat cost, Swanson said. Her firm prefers a fixed-fee model, “so clients know upfront what they will be spending,” she said.
Also, the National Society of Accountants estimates that 89 percent of its members offer free consultations, which creates an opportunity to sit down with potential accountants before committing to any payments.
7. Come prepared
Once you’ve identified the accountant you’d like to work with, you need to assemble the documents they’ll need to work on your account. The specific paperwork will depend on the scope of their work, such as financial planning, document review or tax preparation. In general, it is essential to make sure your documents, including tax forms and bank statements, are up to date and that you supply the accountants with everything that you have.
The more organized clients are, the easier it is for accountants to get to dig in and work efficiently, Hughes said. He said he has had clients come with receipts and documents stuffed into shopping bags, while other business owners have QuickBooks files neatly organized on a portable USB drive. Some banks will allow accountants to view their clients’ records online in read-only mode, which Hughes said is extremely helpful and he suggests that clients grant that access.
Potential documents your business accountant might need include:
- Most recent state and federal tax returns
- Payroll statements
- Bank statements
- Financial statements
- Real estate statements
- Proof of expenses
- Real estate documents
The bottom line
With a good accountant on your team, Hughes said a business can run more efficiently and profitably. It also frees up a business owner to focus on their passions. “If they’re spending time doing the back office work, it is costing them money and time,” Hughes said. “It also takes away from what they went into business to enjoy.”