Great beginnings: nurturing your new accountant - small businesses and accountants

Entrepreneur, May, 1996 by David R. Evanson

Nurturing your new accountant

Is it time to change accountants? If you're not happy with the fees you're paying or the service you're getting, then the answer is definitely yes. To avoid a revolving door filled with accountants, the secret is to build a solid relationship from the beginning this time. To help you get off to a good start, we asked a couple of accountants their opinions on the sure- fire way to a successful alliance.

Assuming you've worked with an accountant before, you should have a pretty good idea about what your new accountant can do. But it's still smart to clarify the fundamentals of your relationship, says Michael Predhomme, a Birmingham, Michigan, CPA.

Start with the financials. "Clients should get a clear-cut explanation of payment terms and billing cycles and a discussion of how often they will be billed," says Dan Nemes, a CPA with Nemes, Allen & Co. in Bingham Farms, Michigan. The reason for this is twofold: You don't want any surprises, and your accountant wants to be paid for work done without spending a lot of time explaining the particulars of each bill.

"Always discuss the fees in advance," Predhomme agrees. "Based on what I expect to be doing for the business, I should be able to give the business owner an estimate of what his or her annual fees will be."

As that comment suggests, fees are closely tied to one of the main reasons people switch accountants--service. "CPAs need to know what your needs are so they can do the service part of their business," says Nemes. "Guessing who's going to do what is a no-win situation."

"The more you can do for yourself, the less the fee will be," says Predhomme. "Of course, if at year-end you're preparing your own taxes, this defeats the purpose of having an accountant. But it's important to remember that service has two components--what you have the skills and time to do yourself, and what your expectations are as far as what your accountant should do."

There are some things you can probably do yourself without any accounting acumen. Summarizing receipts by categories, such as travel, supplies or postage, and keeping your personal expenses separate from your business expenses are two easy examples.

Payroll, on the other hand, is a trickier issue. While you don't want to get bogged down in the minutiae that surround this subject, once you've established a system, payroll checks and all their attendant government filings are basically clerical work--and that's not what you want to be paying your accountant for, says Predhomme. Moreover, there are plenty of payroll services out there that can take care of this headache for you at relatively minimal expense.

The important thing, Nemes says, is clarifying the division of labor. "You and your CPA shouldn't be overlapping work," he says. Your CPA should take over where you leave off, so "find your comfort level and work back from there."

As a final word on service, Nemes says, "Remember, the closer to the beginning of the year that you hire your new CPA, the better work he or she can do for you." Getting help planning for equipment purchases and making estimated tax payments are the two biggest reasons to get the show on the road as soon as possible.

The Basic Food Groups

According to Nemes, a healthy diet of information is the best way to get your relationship with your new accountant off on the right foot. For starters, you need to discuss the reasons you left your old accountant. Specifically, what were the problems?

To be certain the new relationship doesn't fall into the same traps, make sure you ask questions about all unresolved issues. If, for example, your former accountant told you all your independent contractors were likely to be reclassified as employees and you disagreed, ask for your new accountant's opinion. If he or she agrees, it's possible the problem didn't lie with the old accountant. Shoring up such technicalities ensures this new relationship won't be sabotaged from the start.

Nemes also suggests adding a hefty serving of old tax returns and financial statements to your new CPA's plate. "Give him or her plenty of numbers to work with," he says. You should provide your new CPA with at least the past three years' worth of tax returns and any financial statements you may have. He or she needs this information to help you make decisions. "And, of course, it goes without saying," adds Nemes, "never hide information from your CPA."

Finally, Nemes urges, give your accountant plenty of feedback once you've gotten the ball rolling. Keep the lines of communication open, and let your CPA know if he or she is doing what you expect. Most important, clear up any misconceptions right away. Says Nemes, "You don't want to find yourself in search of a new accountant all over again."

Icing On The Cake

In some instances, a new accountant looking at your books can pinpoint a number of areas that need work that could result in significant tax or dollar savings for you. It may just be something simple that a fresh pair of eyes picked up on, or it may be something neglected by your former accountant that needs to be taken care of.