A recent article in Inc. magazine online discusses six excellent concepts – three things you should never ask your accountant and three things you absolutely should ask. They're provocative ideas and a great way to bring focus to the overall theme of the article, choosing the right accountant for your business.
The end of tax season brings the time when CEDF business advisors are reminding clients to provide their tax returns as continued required documentation for their loans. But this time of year also reminds me of a couple of other things I encounter, especially with novice business owners.
It may seem surprising, but I periodically find myself defining “accountant” for someone, or trying to interpret what they mean by “accountant.” Unfortunately the term is used very loosely in the small business world. So I have to ask, “Do you mean a Certified Public Accountant who has a five-year accounting degree plus required professional experience and a state license?”
“Or someone who has a Master of Science degree in accounting but is not a CPA? Someone who is an Enrolled Agent who has taken an IRS exam and can represent you before the IRS? Someone who has done bookkeeping or taxes for a living and refers to himself as an 'accountant?' Someone who has gone through the short course of one of the national tax preparation firms?”
There are numerous possibilities. In Connecticut, “accountant” is actually defined in state law and a CPA may understandably bristle at being lumped in with an individual with far less training. As a business advisor, I've learned to ask if a client is using a CPA because for many purposes it matters a lot. Besides creating the assurance of qualified tax advice, a CPA also has likely been exposed to a wider array of businesses and operations with greater complexity.
Such professional experience can come in particularly handy, but only if a business owner uses the CPA properly and hires one who is a good match for the business. If the extent of the relationship is to drop off a pile of papers on April 14 and then pick up a completed tax return later (sometimes without even any conversation about the business), then this represents either poor usage of (expensive) professional services or a poor hiring choice or both. I have encountered this situation numerous times with clients who do not seem to even come away with the adjusting year-end entries for the bookkeeper.
A good relationship with a CPA requires an investment of time and professional fees to solicit appropriate advice considering the scale and complexity of the business.
– Frederick Welk
CEDF Business Advisor