The relationship between you and the person you choose to do your accounting and taxes is more important than you may think. Your accountant is the logical person from whom to seek advice and help with business and personal finance decisions, and the right accountant can function as a valuable partner. That’s why it’s crucial that the relationship be comfortable and trusting.
“A Certified Public Accountant (CPA) is more than just an individual who does your yearly taxes,” says business consultant and author Maria Marsala of Poulsbo, Washington. “The right accountant can advise you on a long list of other services, which may include how you keep your records, your financial performance, estate/tax planning, and retirement. CPAs, along with a banker and a lawyer, are a crucial part of a professional practitioner’s advisors.”
Following are seven tips that should help you find the person who is the best fit for you and your practice.
1. Search for Prospects
You may get lucky going with a friend’s recommendation, but you should do your homework first. “The best way to locate a compatible accountant is to ask around the community,” says CPA and tax advisor Genevia Gee Fulbright of Durham, North Carolina.
Ask bankers, insurance agents, small business owners, and even other practitioners. “If it isn’t a direct conflict of interest,” Fulbright says, “consider using the same CPA as a fellow professional. The information you share with your accountant is strictly confidential, and licensed accountants are bound to strict nondisclosure requirements.”
“One of the most important factors in selecting an accountant is the quality of the customer service she provides,” says Vincent G. DiAntonio, a CPA from Blue Bell, Pennsylvania. “This is reflected in everything the accountant does, from how quickly she returns phone calls to the accuracy and reliability of the advice provided. Sometimes a recommendation from a friend is the best way to find a good accountant, since some do not advertise. Many, in fact, acquire new clients solely through word of mouth. That gives them a strong incentive to provide quality customer service.”
2. Verify Credentials
“Some individuals working as bookkeepers or accountants have no formal license or education in accounting,” cautions Navin Sethi, CPA and tax manager with Rothstein Kass in Walnut Creek, California. “That’s why you should do a thorough investigation before you hire an accountant. The best way to protect yourself is to hire a CPA.
“In order to earn the CPA credential, applicants must meet the requirements of the state or jurisdiction in which they practice. CPA applicants must also pass the national CPA exam and, depending on the state, have some actual practical work experience before receiving their license. Finally, CPAs must adhere to requirements to take specified amounts of continuing professional education courses to retain their license to practice. Your benefit is that you will be working with a professional who is required to keep up-to-date on the latest and best accounting methods.”
3. Check References
Checking an applicant’s references is one of the most important steps in the hiring process. It may be rare, but even professionals can misrepresent their backgrounds and credentials, or simply leave out important information.
Checking references takes a little time, but human resource professionals know it’s a simple step that could save you from hiring someone who is woefully unqualified.
4. Find a Comfort Level
Fulbright emphasizes the importance of the chemistry between you and your accountant, especially if you run a small practice. “Make sure you have clear goals for your business and that your prospective accountant understands them,” she says. “Go to lunch; have a conversation. That will help you decide if you’re both on the same page.”
Every expert interviewed for this story agrees with the need to have an at-length personal interview before hiring an accountant.
5. Use the 60 Percent Rule
Keep in mind that there is a wide range of specialties open to CPAs, from individual taxes, to large corporate clients, to small businesses, and everything in between.
“Look for a CPA who has 60 percent of his or her business coming from small professional practices and business owners like you,” Marsala says. “They’re more apt to keep up with the laws regarding clients they deal with most often. If your practice is incorporated or is a limited liability corporation, make sure the person specializes in corporate accounting, including financial statements and audits.”
6. Consider Your Needs
If you have unusual accounting problems in your practice, you should look for an accountant with specialized training or experience.
“If you ever find yourself in need of an outside audit for your practice, additional designations such as Certified Fraud Examiner (CFE) would be helpful,” Fulbright says.
Perhaps you have limited experience in personal financial management and would like to explore the possibility of increasing your investment portfolio. “An accountant who is also a Certified Financial Planner (CFP) would be a good choice when you need investment/portfolio advice,” Fulbright says.
“The biggest problem many small practitioners have is stepping back to take the time to evaluate their business,” says CPA Carol Katz of Baltimore, Maryland. “They’re so busy running the practice and keeping up with the paperwork that they don’t allow enough time to plan ahead. You should always consult with your accountant before entering into any significant business or financial transaction. Undoing a poorly thought-out transaction or removing assets from an entity without causing unnecessary taxes can cost much more than the time spent on a planning meeting and document review.”
“The nature of many small professional practices requires owners to consider succession planning,” DiAntonio says. “Generally, succession planning consists of either transferring the practice to the next generation or selling it outright to a third party or an employee. This is often one of the most significant events of a practitioner’s life and should be planned appropriately by a trusted advisor.
“Typically, a CPA who knows the practice and its assets can bring additional value to a potential sale or transfer. Also, once the business is converted into cash or a revenue stream, a financial planner can assist the client in maintaining and growing the client’s wealth.”
7. Don’t Fear Change
Despite your best efforts, you may find yourself working with an accountant who isn’t right for you. If this happens, experts say you should not hesitate to look for a replacement. Your accountant is too important to your success for you to compromise.
Massage professionals should continually review where they are in the life cycle of their professional careers. “They may need to change the business form of the entity as their business grows,” Katz says.
Some practitioners may need tax-savvy ways to bring in family members to whom the business may eventually be transferred. If there is no succession planned, there probably should be a proposed structure for eventual sale of the practice, including buy/sell agreements among partners.
“If the accountant used when the practice was small seems ineffective, then it may be time to move to another with more expertise,” DiAntonio says.
Finding the right accountant for your practice may take a special effort, but the time you spend may well prove to be among your most profitable investments.
William J. Lynott has an extensive background in management consulting, marketing, and finance. He’s written more than 900 articles appearing in a wide range of consumer magazines, trade publications, and newspapers in 17 countries. Contact him at lynott@verizon.net.