I’ve noticed there has been quite a lot written about finding a good accountant but most of it tends to generalize rather than offering detailed advice to help consumers base their decisions on. So I will do my best to keep it brief, but I will also aim to provide you with some meaty information that can really help you in choosing an accounting service for your business. I should mention here that this post is mainly geared toward business owners, but the same principles generally apply to individuals as well. I should also mention that this discussion is full of generalities when I describe the different types of accountants and accounting solutions available.
Waiting until tax time to hire your accountant / bookkeper / accounting firm is is akin to waiting until labor begins to choose the doctor who’s going to deliver your baby!
When starting a new business there are many decisions you’ll make that will set the scene for success. One of the most important choices, one that is often left to the last moment (tax time), is hiring your accountant. This is akin to waiting until labor begins to choose a doctor to deliver your baby—not exactly a good time to be making informed, level-headed choices! And, like pediatric doctors, all accountants are not created equal; they have different specialties, ways of doing business, fees, overall knowledge Viagra pill whithout prescription levels, etc.
There are the good accountants and the bad accountants just like any other profession. So how do you pick one?
Well, a good place to start is understanding the different types of accountants that are available to you and what they do. Here is a list of the 5 most commonly found styles of accounting:
Family, friend or someone who does it on the side (Moonlighter). Their fee structure is generally free or a very low cost. We all know this type of accountant in one way or another. This type of accountant generally has a very big heart, the best intentions and wants to help in any way they can. While the moonlighting accountant can generally perform the basics of accounting and taxes, depending on their experience, this accountant generally lacks the qualifications on the performance side of the job.
Pros: Little to no cost.
Cons: You get what you pay for. If you are not paying anything or you are not paying much at all there tends to be less of an incentive to finish the project or get you the reports you need on a timely basis when it’s late at night or the weekend and the moonlighting accountant has other obligations. This type of accountant, while having a big heart and some good advice, more than likely could end up costing your business 5-10 times in tax and other consequences than the investment that you would have made in a Qualified and Reputable Accounting Firm.
Bookkeeping Services. Bookkeeping by definition is the practice or profession of recording the accounts and transactions of a person, business or entity. The process of bookkeeping is mechanical in nature and is generally performed by a person who possesses knowledge of the Income Statement and general knowledge pertaining to the Accounts Receivable and Accounts Payable portion of the Balance Sheet. Sometimes this type of service may boast the term ‘full-charge bookkeeping’ which includes the compiling of the transactions into the accounts and preparing financial reports.
Pros: The fee structure is very low and bookkeepers can be very helpful and insightful in determining the profitability of your company.
Cons: A bookkeeping service is generally very limited in the scope of accounting and payroll and often does not have an in depth knowledge of tax preparation or tax law. While the price point of this service is relatively low, the need for a tax accountant is a must for a business choosing to go with a bookkeeping service.
The small accounting practice who generally comprises of a single accountant who hires help on a seasonal basis or has an assistant (One Person Office).
Pros: The fee structure is often low since the owner/accountant produces most of the services for the client. The smaller firm practitioner generally specializes in small business and is knowledgeable, to some extent, in your particular type of business. They are familiar with the local regulations and taxes, they offer in house bookkeeping and payroll, and they also have tax knowledge to help you grow your business in a manner that will help you avoid over taxation of your business. The small accounting practice can be a good starting point for personal taxes, a home business or a small family business.
Cons: While the price point of this option can also be low, the one person office generally has inconsistent office hours, client service and performance due to the majority of work being done by the busy owner-accountant or seasonal/part time staff. The small accounting practice is not recommended for growing business’s that will need additional services that the accountant does not offer in the years to come because changing accounting relationships midstream can often have disastrous consequences for a growing business.
The qualified and reputable accounting firm (Accounting Firm) generally has several full time staff comprising of administrative professionals, accounting professionals ranging from tax accountants, public accountants, CPA’s, EA’s and business consultants that offer a range of expertise from information technology, finance, international business to marketing and advertising advisory services.
Pros: The fee structure is moderate and is usually based on the different levels of services provided. An accounting firm generally has an experienced owner or partners who are motivated and has grown the accounting business over the years, has earned a good reputation in their community and are committed to client service. The owner or partners manage their book of business and their primary job is client service, overseeing their staff, reviewing staff work, consulting, networking in the community and other management duties in the firm. This type of firm often offers a broad range of services from personal, business and not for profit tax, accounting, bookkeeping, payroll, forecasts, projections, audit/review, attestation services, loan packaging, budgeting, personal financial services and various high end consulting services. The accounting firm also tends to have reputable professional affiliates that it can refer its clients to when needed. The accounting firm has a lot to offer for personal and small/medium business clients and is thought of as the best value for the money paid.
Cons: Many times this type of firm does not have experts in all areas of business and the use of outside consultants may be necessary in some circumstances. Also, the business may not have the resources needed to perform larger projects that big business’s demand such as audits and various consulting engagements.
The larger qualified and reputable accounting firm (Regional and National CPA Firms) generally has hundreds to thousands of full time staff comprising of administrative professionals, accounting professionals; tax accountants, public accountants, CPA’s, EA’s and business consultants that range in areas of expertise from information technology, finance, international business to marketing and advertising advisory services.
Pros: The partners manage their book of business and their primary job is client service, overseeing their management staff, reviewing management staff work as well as other partners work, consulting, networking in the community and other management duties in the firm. This type of firm often offers a very broad range of services from personal, business and not for profit tax, accounting, bookkeeping, payroll, forecasts, projections, audit/review, attestation services, loan packaging, budgeting, personal financial services, high end consulting services and very specialized niche services. The regional and national CPA firms have a lot to offer to any person or business who requires a firm with extensive knowledge capital and deep resources.
Cons: The fee structure is generally the most expensive of all your choices, due to their national and international recognition and because they are subject to peer reviews, additional insurance costs, capital outlays and other costs.
There is a lot to choose from out there in your search for an accounting professional and, as you can see, knowing what you need from your accountant is the first step in the process. One size does not fit all.
Next week I’ll follow up with a few more suggestions for things to consider that might help you find the right accountancy service for your business.
Have you ever had a bad, or a stellar, experience with an accountant, firm or bookkeeping service? Share your story in our comments section and help other readers learn what to look for.
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