Accounting Professionals: Are The Necessary?
Does your business needs an outside accountant?
It all depends. If you require an audited or reviewed financial
statement, then, yes, you need a CPA. In any event, it is always
a good idea to maintain a relationship with an accountant no
matter how small your business. Whether your accountant is a
CPA is up to you. The real question is: To what extent do you
need outside accounting services? That also depends on you and
the nature of your business.
I always start with the admonition: The Buck Stops With You!
You cannot afford to dissociate yourself from understanding the
meaning of your financial statements. If you solely rely on your
accounting staff or accountant for completely accurate financial
data, then you are asking for trouble. If you are going to own
or manage a business, then you have a responsibility to learn
how to speak the language of business. The language of business
is accounting knowledge.
How involved you become in the accounting process will be
determined by time schedules, your mental pre-disposition,
desire for control, cash flow, etc. One scenario, if you can
afford it, is to hire an internal accounting staff to prepare
financial statements on a monthly basis and have an external
accountant check them over. Another common scenario is to
prepare part of the compilation yourself, such as preparing a
sales journal and a cash disbursements journal, and then hire
an outside accountant to prepare a bank reconciliation and the
financial statements for you. Some do this on a monthly basis,
others quarterly. Some business owners do the books themselves
all year and turn them over to the accountant at the end of the
year to verify the balances and do the depreciation entry for
There are numerous ways to work with an accountant. Regardless,
you should learn enough about accounting to be able to
communicate intelligently with your accountant. Since you are
intimately involved in your business you may recognize danger
signals that not even your accountant will see.
Selecting an accountant
Relying on the yellow pages to find an accountant can be risky.
The best way to find any professional is by a referral. However,
you need to interview prospective accountants before signing on.
One of the first priorities is to find out what their experience
level is. Your business may have very specific accounting and
tax issues that require a certain amount of expertise. Perhaps
you have a manufacturing concern. What does the accountant know
about raw materials, work-in-process, and finished goods
inventory accounting? Does the accountant know how to set up
job-costing and overhead burdens? Ask for references from other
Keep in mind, that you may go to an established firm with a
good reputation, but with whom are you going to have a
relationship? Is your account large enough to warrant a
relationship with a partner? You need to feel confident with
the person assigned to your account. Perhaps a smaller firm
with four or five accountants who are all seasoned veterans
might work better.
You will also want someone with whom you can relate. The
ability to communicate is a crucial factor. Your accountant may
be technically proficient but can you understand what he or she
is telling you? Does he or she listen when you ask questions?
Don’t be afraid to ask for someone else if you are having
Another important criterion is “accessibility”. Is your
accountant too busy to talk to you? Can you get your questions
answered within a reasonable period of time? Do you feel
important to him or her? Situations may arise where you need
information immediately to make an important business or tax
decision, will your accountant respond quickly?
Last, but not least, are the accountant’s billing practices.
Billing practices vary from firm to firm. Some firms are very
aggressive and put tremendous pressure on staff and partners to
bill every minute they can. Some firms require a review process
before any work goes out the door. This means that every person
who performs any work on your account, including the person who
puts the stamp on your envelope, bills you for it.
Find out in advance what happens if you call the firm to ask a
simple question that takes less than five minutes to answer.
Are you billed for five minutes or are you billed in increments
of fifteen minutes even though you only talked for five? Some
firms justify this increment billing by explaining that you are
paying for the accountant’s expertise that may have taken years
to acquire, therefore, they say, it’s worth it.
Some accounting practitioners charge a flat rate for services
rendered or a combination of flat services and hourly charges.
For instance, an accountant might charge $200 a month to
prepare a monthly financial statement but charge $100 an hour
for special projects. Within the monthly fee, the client can
call to ask questions that last fifteen minutes or less for no
additional charge. This way the client is not reticent about
calling. Getting your question answered may prevent little
problems from later becoming bigger more expensive problems.
Very often projects take longer to complete than anticipated.
Complications arise and the practitioner should be paid for his
or her work. Always insist that, if there are going to be
additional charges over and above what has been agreed upon,
that the accountant gets your approval first. Be sure to
clarify these procedures before engaging an accountant in an
“engagement letter”. This is a document that spells out the
responsibilities of both parties and how the relationship is
going to work.
Remember, there is absolutely no reason to be intimidated by
your accountant. After all, you are paying for the services,
and I promise you, the accountant wants your business.
About The Author: John W. Day, MBA is the author of two courses
in accounting basics: Real Life Accounting for Non-Accountants
(20-hr online) and The HEART of Accounting (4-hr PDF). Visit
his website at www.reallifeaccounting.com to download
for FREE his 3 e-books pertaining to small business accounting
and his monthly newsletter on accounting issues.