Choosing an Accountant By Jeanne Gray NJEntrepreneur.com
Friday, April 8 2005
Introduction by Sunny Kancherla- This piece, originally written for entrepreneurs, is an excellent one for many landlords and property managers. Since many of them don't have the time to understand all of the tax advantages of real estate ownership, they seek outside advice. However, owners and managers often bring with them the accountants they've had for years or passed down from family, friends, and associates. There is nothing wrong with this approach and in fact it is the way most people start out. However, I strongly urge any serious real estate investor to begin to seek out an accountant who can advise you on ALL of the benefits of real estate investing, including 1031 exchanges and cost segregation techniques. In short, you want to find someone who specializes in the real estate industry. This piece is included here to help you change the way you think about who you have handling your books.
An accountant is often linked with tax preparation which is very understandable as the complexity of the tax code has forced most individuals to seek out those services at some time for their personal needs. For a small or start up business, choosing the right accountant to assist with business matters as opposed to personal tax returns presents new areas to explore and be addressed.
Accounting Software
An accountant is often linked with tax preparation which is very understandable as the complexity of the tax code has forced most individuals to seek out those services at some time for their personal needs. For a small or start up business, choosing the right accountant to assist with business matters as opposed to personal tax returns presents new areas to explore and be addressed.
The nature or scope of the business venture may influence which accountant to choose since the the demands of the business may vary. The needs of a small business starting out of the home differ from those of a business started with large amounts of investment capital, business partners and/or a staff of employees. In each case the business owner needs to identify their current and emerging needs and review those needs with the prospective accountants they may hire.
The business owner should make an initial self assessment as to their familiarity with accounting and finance, their ability to install and use accounting software, and their experience with more complex issues of payroll, taxes, and cash flow management. The should be prepared to explain to the accountant the comfort level with these areas and the support they are seeking.
Accountants actually offer a broad array of services: government compliance and tax preparation, management consulting, and accounting, as well as having a number of specialties such information technology, mergers and acquisitions, bankruptcy, personal financial planning and more. Many of these services will not be needed by some companies, but for some companies they may be uniquely important.
Understanding their Credentials
There are two types of accountants available to the business owner, the public accountant and the certified public accountant. Both are highly trained, however, the certified public accountant has passed a battery of tests specifically created to assure a level of competency and ethics. When achieving that accreditation, the individual is required to meet certain requirements for continuing education and participation that futher assures their standard of performance.
When choosing an accountant, ask the individual if they are a member of the NJ Association of CPA?s and/or the American Institute of CPA?s. They should be able to show their certificate, and if necessary, those organizations may be contacted directly to verify their credentials
Since there are so many accountants, it may be easy to find one, but probably difficult to choose one. As a business owner, there usually are some resources already in place that can assist in finding a few accountants to make the selection. First, start with the contacts you have such as your bank representative, attorney or fellow business owners you may know from a networking organization. Firsthand personal experience has some value to the process of choosing an accountant, though it should not be the only reason one chooses a particular accountant.
You will need to meet with each of the candidates you have identified and interview them and to evaluate their services versus the needs you foresee for your business. In addition to being comfortable with the personality and personal style of the individual you will be working with, here is a list of questions that addresses many of the initial concerns of the small business owner:
How long have you been an Accountant and what are your certifications? Where did you obtain your training? What firms or colleges attended?
Do you have associates in your practice and/or will I be working directly with you?
What are the sizes (in sales) of the companies that you work with?
What percentage of your business is with companies/business owners versus individual tax preparation or financial planning?
What do you consider your key services of your practice or firm? Are there any specialties that you have?
Do you currently service a business such as mine and what is your experience?
Do you have some references from current individuals who you have worked with for over three years?
What would you like to know about my business and personal background to determine what services I should use? How do you foresee working with me?
Do you have rate schedule for the services you anticipate providing?
Are you familiar with the accounting software that is used to be used?
Do you come to the business premises to review our financial information or how will it be reviewed?
What additional services do you foresee my business needing as we grow in addition to the basics we reviewed?
For the small business owner, there may be some hesitancy about interviewing accountants since they are quite different from the business who is a multi-tasker. The accountant is a specialist and often has a great deal of book knowledge, a higher education to support their credentials, and in many instances they have a great deal of experience. This should not be intimidating to the business owner who may be starting with the humblest of ideas, but who one day may be requiring a full range of accounting services for a multi-million dollar business.
For the individual who has a very ambitious business plan and anticipates large amounts of investment capital, be more aware of the range of services that the individual or firm you are choosing. Financial and legal matters may be of greater concern sooner, and in this case view the accounting firm as part of a team that is being formed to support you. Establishing relationships with both an accounting firm and a law firm that have broad capabilities and possibly specialists you readily anticipate using is then very important.
For all business owners, take the time to obtain references, interview a few candidates, discuss your concerns with other business owners, and lay out your needs and the costs for them. This will be improve your chances of starting a relationship with a business professional who over time may become a very good business counselor to you as your business grows.
Jeanne Gray is founder of Enterprising Solutions Inc., a consulting firm specializing in growth strategies for small and entrepreneurial stage businesses. She is also the publisher of NJEntrepreneur.com. Jeanne may be contacted at jgray@NJEntrepreneur.com or by calling 732-662-9106.
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