How can a small business owner tell whether or not their accountant is doing a good job?

As a small business owner, it’s essential to have an accountant who is doing an excellent job of managing your finances. But how can a small business owner tell whether or not their accountant is doing a good job? In this article, we’ll explore some key indicators that can help you assess whether or not your accountant is doing their job well.

Key Indicators to know if accountant is doing a good job:

Confidence and Proactivity

A good accountant should have the confidence to tackle any issue with minimal assistance. They should be able to ask questions to understand the background behind the issue and seek approval from the business owner for decisions requiring owner approval. Additionally, a great accountant should never present a problem to the owner without already providing at least one optimal solution.

Automation and Training

An excellent accountant should never be afraid to automate work and train their staff so well that their back-office role becomes obsolete. This frees up the accountant’s time, allowing them to focus on more strategic work such as planning, budgeting, forecasting, variance reporting, and raising capital.

Timeliness

One of the essential aspects of good accounting is timeliness. Your accountant should be able to keep up with deadlines for tax filings, financial statements, and other crucial documents. A good accountant should be proactive in managing your finances, ensuring that everything is done on time, and avoiding any penalties or fines.

Metrics and Efficiency

A skilled accountant should develop daily performance metrics against competitors and internal history and forecasts for sales and delivery sides of the business. They should also understand and document each micro step of each task performed by everyone on the staff to eliminate duplicity in information processing. By doing so, they can identify and implement opportunities for improving efficiency, reduce training time when cross-training or replacing staff, and ensure consistency and accuracy in work generated.

Cross-Training and Growth

A great accountant should cross-train staff to help them grow, avoid boredom, make the staff more resilient to turnover and absences, test and refine the clarity and completeness of documented job instructions and identify which staff learn more quickly than others.

Cash Flow and Legal Strategies

A knowledgeable accountant should project cash flow requirements for the future week, month, quarter, and year so that all balloon payments for loans, contracts, or maintenance can be adequately prepared for. Additionally, they should abstract all legal documents for salient points for accruals, insurance requirements renewal windows and requirements, termination dates, escalation clauses for pricing, trouble tickets, and arbitration. Furthermore, they should help the owners with legal tax strategies of separating passive income streams (rentals, royalties, and franchise agreements) in separate entities from the operating income entity.

Clarity and Accuracy

An excellent accountant should know that every molecule of ink on a report is a distraction that must omit any unnecessary clutter competing with the overall takeaways. They should also ensure that all balance sheet accounts are reconciled monthly with no unnecessary accruals or adjustments lingering in current balances.

Communication

Good communication is essential when it comes to accounting. Your accountant should be able to communicate with you clearly and effectively, explaining financial reports, answering your questions, and keeping you informed about your business’s financial health. A good accountant should also be available to you when you need them, whether it’s in person, by phone, or email.

As a small business owner, when is the best time to begin looking for an accountant?

It depends what you mean by “accountant”. Here are 3 options:

1. Bookkeeper.
2. CFO.
3. Tax accountant.

First, let’s talk about bookkeepers.

Bookkeeping is a critical function for any business, but with today’s technology, it can be automated to some extent. However, setting up the accounting software and linking it to your bank and credit card accounts can be complicated. For this reason, it is recommended that you hire a highly experienced bookkeeper to set up your accounting system. Once the system is set up correctly, ongoing entry can be minimal and possibly done by the owner in the early stages of the startup. In general, it is recommended to hire a bookkeeper as soon as possible to ensure that your financial records are accurate and up-to-date.

You may want to check – How Bookkeeping Can Help Small Businesses Reduce Costs

Next, let’s talk about CFOs.

Many startups may benefit from connecting with a part-time CFO early on, especially if they are experiencing rapid growth. A CFO can help with financial planning, budgeting, forecasting, variance reporting, and raising capital. By the time a company reaches $1M in sales, it should certainly consider connecting with a part-time CFO, and by $30M, a full-time one may be necessary. The good news is that we live in an age of readily available remote CFOs, and it is more cost-effective than it used to be for a startup to have CFO guidance. There are many resources available for startups looking to hire a part-time CFO, including The Street Guide on How to Hire a Part-time CFO.

Finally, let’s talk about tax accountants.

It is crucial to retain a good tax accountant immediately, not just after the first year-end when it’s time for the tax return. A good tax accountant can provide guidance on tax planning and help you avoid costly mistakes. Additionally, having a history of accurate, well-prepared company tax returns is essential when it comes to obtaining financing or selling the company. Don’t make the mistake of going it alone when it comes to business income taxes. Personal taxes, maybe – but for business taxes, it is best to seek the advice of a professional.

How do I select a good accountant for my small business? What questions should I be asking?

Selecting the right accountant for your small business can be a crucial decision. Not only will they help you keep your finances in order, but they can also provide valuable guidance on tax planning, budgeting, and other financial matters.

Also know – 10 Small Business Tax Issues-and How To Avoid them

Some questions to ask your potential accountant during the selection process include:

1. What type of clients do you typically work with?
2. How long have you been working as an accountant?
3. Can you provide references from other small business clients you have worked with?
4. What is your fee structure and what services are included in the fee?
5. What accounting software do you use and do you offer online access to financial information?
6. What is your preferred method of communication and how often will you provide financial reports and updates?
7. Do you offer additional services such as tax planning or business advisory services?

Here are some tips and questions to consider when selecting an accountant:

Consider their experience

It’s important to find an accountant who has experience working with small businesses, and who understands your industry. Ask them about their experience with businesses similar to yours.

Check their availability

You want an accountant who is available when you need them. Find out if they have regular office hours, how quickly they typically respond to emails and phone calls, and whether they have backup support in case they’re unavailable.

Discuss their fees

Accountants typically charge either a fixed fee or an hourly rate for their services, and it’s important to understand their fee structure and what services are included in the fee before you agree to work with them.

If you’re looking for a qualified Certified Public Accountant (CPA), you should be prepared to pay a higher amount for their services. However, if you’re just starting out and don’t have a lot of revenue, you might not want to spend too much money on accounting services.

Fortunately, with the development of advanced technology, remote accounting has become widely available and is often less expensive than hiring a CPA or a W-2 employee. Remote accounting firms use cloud-based software to manage your financial records, and you can often access your financial information in real-time from any device with an internet connection.

Ask about their technology

You want an accountant who is up-to-date on the latest technology and software. Ask about the software they use and whether they offer online access to your financial information.

Discuss communication

Communication is key when it comes to working with an accountant. Ask about their preferred method of communication and how often they will provide you with financial reports and updates.

Inquire about their additional services

Some accountants offer additional services such as tax planning, business advisory services, and financial analysis. Ask about these services and whether they would be helpful for your business.

What basic instructions should a small business owner give to a new accountant, if the small business owner has no accounting experience?

As a small business owner, hiring a new accountant can be daunting, especially if you have no accounting experience. However, providing clear and concise instructions to your new accountant can ensure a smooth transition and establish a productive working relationship.

Here are some basic instructions that you can provide to your new accountant:

Provide an overview of your business

Start by giving your accountant a brief overview of your business, including its industry, products or services, and any unique aspects. This will help your accountant understand your business operations and financial needs.

Share your financial documents

Provide your accountant with access to your financial documents, such as bank statements, receipts, invoices, and any other financial records. This will enable them to prepare accurate financial statements and help you identify potential tax deductions.

Discuss your financial goals

Share your financial goals with your accountant, including your long-term plans and short-term targets. This will help your accountant develop a financial plan and identify opportunities to improve your bottom line.

Outline your reporting requirements

Discuss your reporting requirements with your accountant, including the frequency of financial reports and the level of detail required. This will ensure that your accountant delivers reports that meet your needs and help you make informed decisions.

Clarify your tax obligations

Discuss your tax obligations with your accountant, including any deadlines, deductions, and credits that apply to your business. This will help you comply with tax laws and minimize your tax liability.

Set expectations for communication

Establish clear communication channels and expectations with your accountant, including how often you will communicate and how you prefer to be contacted. This will ensure that you stay informed and address any issues promptly.

By providing these basic instructions to your new accountant, you can establish a productive working relationship and ensure that your business finances are managed effectively. Don’t hesitate to ask questions and seek clarification if you are unsure about any aspect of the accounting process. If you have reached here, did you know how can a small business owner tell whether or not their accountant is doing a good job?

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