Accountants: the why and what for

Nation's Business, Feb, 1990 by Paul N. Strassels

Accountants: The Why And What For

You need an accountant. All businesses do. It doesn't matter if yours is a huge corporation or a mom-and-pop grocery. It is foolhardy to attempt to operate a business without retaining the services of a skilled financial professional who is well versed in your line of work. Therein lies your task: finding the right accountant at a price you can and are willing to pay.

Price is only one of the important considerations in choosing an accountant, however. For instance, although some accountants might gladly expand their practice to include you, at a very reasonable price, they may have little or no practical experience tending to the accounting needs of your kind of business.

Here's what to look for in an accountant:

* A confidant who will keep you on the straight and narrow. For example, if your business generates a lot of cash sales, you may be tempted to dip into the till - a temptation you must avoid. Your accountant should stress the importance of playing by the rules, even when doing so costs you money.

Trust is essential. You should be able to talk with your accountant on a confidential basis, revealing things about your business that you don't want anyone else to know. You must trust your accountant with all the financial details of your business, and you must have confidence that this information will go no further. Moreover, you must be willing to accept and follow the accountant's advice.

* A technician who will keep you in compliance with the dozens of federal, state, and local rules and regulations that affect your business. It is simply too easy to overlook or misinterpret one or more legal requirements, which in turn can have disastrous results.

Your accountant must see to it that you file all the tax returns, forms, and reports required by the Internal Revenue Service and state and local governments - on time - and pay any taxes due.

You must not ignore Labor Department regulations on hiring, and you must stay abreast of the latest thinking on employee relations and discrimination on the basis of age, sex, and national origin. You must keep yourself straight with the rules on retirement and other employee benefits.

* A tactician who understands how you run your business and can help plan your business strategy. For example, an accountant who is familiar with your cash flow can accurately judge your estimated tax payments and can also advise on cash management.

* A bookkeeper. Most accountants do not perform bookkeeping services, instead letting others on their staff do them for you. That's a plus, because you don't want a high-priced accountant charging you for time spent keeping your books. But, once armed with well-organized and complete financial information from the operation of your business, your accountant can prepare your taxes and financial statements accurately and relatively quickly, and also can provide you with the advice you need to operate profitably.

* A financial professional who is respected by your lenders, partners, and creditors. When you want to satisfy your partners that you are running the business properly, or you want to borrow to expand your business, you must rely on the reputation of your accountant. When the accountant provides financial statements that show you are doing well, that should be all you need.

* A tax planner and return preparer who is adept at keeping your taxes low and, at the same time, keeping the IRS off your back. That's not easy. Low taxes usually mean extensive tax planning and a fairly aggressive stance on various tax issues. Those aggressive positions are usually the very ones that interest the IRS. It takes a skilled accountant to walk that fine line.

That is quite a bit to expect from one person, and, frankly, you are unlikely to find an accountant who satisfies all those requirements. You should, however, measure the accountant you finally select against those standards.

Use the following checklist when you are interviewing prospective accountants. Yes, you should set up interviews. Otherwise, you won't be able to compare individuals and what they can do for you.

Experience. How long have they been practicing accountants? How much experience do they have in your field?

Credentials. Are they public accountants or certified public accountants? What professional organizations do they belong to?

Support. Are they solo practitioners, or are they members of a firm that can provide additional support? Do they offer bookkeeping services?

Fees. Don't be shy about asking what your bill will be for all the services you need. That way there will be no nasty surprises later on.

Reviews. How often do you need to meet? What additional services can the accountants provide if necessary?

References. Do they have other clients in comparable businesses? Ask for names, and take the time to see if those other clients are pleased with their accountant's services. If not, ask why.

In fact, ask your colleagues and others in your field whom they use for accounting services. Such recommendations may help you track down the best accountant who specializes in your kind of business. But don't use the same accountant as your chief competitor. That could lead to conflicts of interest.