More Than a Bookkeeper

A quality accountant can provide analytical services and sound advice on a variety of issues and decisions that drive success and growth

Accounting is a foreign language to the owners of many service businesses. An accountant is far more than someone who prepares income tax returns. Understanding what an accountant does — and using those services — can mean the difference between a troubled business and a successful one.

Many owners think accounting and bookkeeping are the same. They are not. Bookkeeping is chiefly the clerical phase of accounting. A bookkeeper primarily records the business’ financial transactions.

Accounting is much broader. Accountants develop systems to classify and summarize transactions and interpret financial statements. They are — or should be — decision makers.

A business partner

Accountants are far more than tax preparers or “bean counters.” A good accountant can be a business owner’s financial partner for life — with intimate knowledge of everything from how to finance the next equipment purchase to how to pay for a child’s college education.

A general accounting practice usually covers four basic areas: business advisory services, accounting and record keeping, taxes and auditing. More and more accountants are also moving into personal financial planning, a natural extension of their familiarity with their clients’ financial affairs.

The four basic disciplines often overlap. For instance, an accountant helping prepare financial statements required for a loan might cross the line from auditing into business advisory services by showing how certain estimates could be recalculated to get a more favorable review. Or, after preparing midyear financial statements, the accountant might suggest how year-to-date figures will affect year-end tax liability.

An accountant can be hired to set up a bookkeeping system for a new or growing business, to help evaluate a particularly complex business transaction, to prepare annual tax returns, or to provide accounting services on an on-going basis. But, how can you find a good, affordable accounting professional?

Many choices

According to the Bureau of Labor Statistics, there were 1.2 million accountants and auditors employed in 2004. Some 134,000 CPAs owned their businesses or worked for firms serving mostly small or midsized businesses.

So, finding a professional to help your drain cleaning business grow should not be difficult. The key is to choose the right accountant. The first step is to take an inventory of what you and your business need in service and advice and how much you can afford to pay. You need to determine up front which tasks you can handle and which to delegate to a professional.

It’s essential to shop around. Many accountants offer free first meetings to discuss expectations, services needed, and the amount and kind of work they will be expected to do. The best way to start is to get referrals from your attorney, your banker, or a business colleague. For more possibilities, every state has a Society of Public Accountants.

In choosing an accountant, remember that bigger isn’t always better. A large accounting firm may have impressive credentials, but its fees are likely to be high, and a small business is likely to be served by a less experienced junior partner. This is not a bad thing, so long as the charges accurately reflect that junior member’s lower billing fees.

Things to consider

When interviewing potential accountants, consider services performed, personality and fees. Virtually all accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Pension fund accounting? Estate planning? Will the accountant help you install and set up bookkeeping software?

Other services include analyzing transactions for business loans and financing; preparing, auditing, reviewing and compiling financial statements; managing investments; and even representing the business or its owner before tax authorities in case of an audit.

In addition to services, make certain the accounting firm has experience with businesses of a similar size and, if at all possible, with your industry. Someone already familiar with the financial issues facing small businesses will not have to waste time and money getting up to speed.

Another important question: Is the accountant’s style compatible or complementary with yours? You want an account whose personality makes you comfortable and whose outlook generally fits your own.

On the other hand, it can be healthy to have an accountant who takes a different approach. For example, if you are extremely conservative, a more aggressive accountant may be able to help you see things in new ways. As part of the interview, ask whether the person you are speaking with will actually handle your business.

Always ask about fees up front. While you should not make your decision solely on price, the hourly rate is a consideration. Accounting firms charge by the hour at rates ranging from as low as $75 per hour to as much as $300 or $400. Some accountants work on a retainer, providing certain regular services against a flat monthly fee.

After determining what accounting services you need and what options will be the most cost-effective, get quotes from different accountants. Also, try to get an estimate of total annual charges based on the services you have discussed. Don’t forget references — particularly from clients in the same industry.

Nurturing relationships

After you choose an accountant, make sure the terms of the agreement are spelled out in an engagement letter, especially details about the returns and statements to be provided and the fees charged. This ensures you and the accountant have the same expectations and helps prevent misunderstandings.

The accounting relationship is much like a partnership in which each party is expected to do his or her share. For example, at tax time, don’t hand the accountant a shoebox full of jumbled receipts. Record details of all checks in your check register. Likewise, identify sources of income on your bank deposit slips. The better you maintain records — ideally on computer software — the less time your accountant has to spend on your business, and the lower your fees will be.

It is a good idea to meet with your accountant every month. Review financial statements and go over any problem areas so you know exactly where your money is going. This is when your accountant should go beyond “number crunching” to suggest alternative ways of cutting costs. The accountant also can act as a sounding board for any ideas or questions you have about your finances.

Obviously, not every business needs or can afford the specialized knowledge and skills of an accountant. But it is wise to know what services accountants can offer in case your business should need them in the future. Now is a good time to find an accountant and discuss how accounting services can help your business grow.



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