A small business accounting firm can be, and should be, a key partner in the management of your business.
Many owners have significant anxiety about handling the financial end of their businesses, either because they have no experience, or because they just don’t have the time or the interest to do their own bookkeeping. Handing it off to someone who is trained in accounting and blessed by the state seems an obvious choice. Maybe.
When you are recording your own financial transactions, whether in a ledger or an accounting program, you are seeing the day to day impact of the decisions you make. If someone else is assembling your raw data and returning it to you as sanitized reports, you may not be as close to the information as you would be if you had to pull together and age all the payables yourself.
By way of explanation, let me give you a couple of examples of poor service on the part of outside accountants which I’ve encountered during consulting projects:
An accountant who had been with the firm for over ten years called to congratulate the owner on his improved profits for the previous quarter. His profits hadn’t improved – he’d stopped paying himself and the rent, among other things.
A contractor showed me his latest P & L with the highest quarterly net profit he had ever achieved. His largest expense was labor. The P & L contained no labor for the entire quarter.
In both of the instances above I believe the accountant should have flagged and reported the problem to the business owner. I think that’s part of what you are paying an accountant for. In these cases the owners looked at their improved bottom lines and accepted it a face value – and that’s a problem.
Here’s what I’ve seen during consulting projects in accountant’s offices (they have management issues, too):
Raw data comes into the office and is entered into an accounting system by office personnel and the program spits out all the requested reports. The accountant looks them over and, if no issues are noted, sends the reports on to the client.
It’s a perfectly fine system IF the accountant is actually looking at the numbers and not just assuring him/herself that all the categories are listed. Certainly the accountant for the manufacturing firm should have noted that Officer Salary, and Occupancy were zero and, at the very least, looked at the rest of the numbers to determine why that might be. The contractor’s accountant had made a mistake and failed to include the labor – shouldn’t s/he have noticed that oversight immediately if every previous quarter had a labor cost?
Obviously you can’t expect the accountant to spend hours consulting with you every month – they have their own businesses to run.
I don’t think that exempts them from seeing, and reporting, obvious inconsistencies in your numbers.
So what should you expect from your accountant?
- be able to clearly explain where the numbers come from, how they are derived and what they mean.
- alert you to potential problems.
- help you learn how to use numbers to manage your business.
If you are unable to have those kinds of conversations with your accountant, or s/he feels that’s not part of the service you are paying for, then you might consider interviewing new accountants and find out what they will offer for the same dollars.
As long as I’m throwing sticks at accountants (many of whom play a vital part for their clients), here is an issue the accountant should have been able to help his/her client solve. Instead she paid me a lot of money to figure it out:
A food service vendor was buying increasing amounts of product and selling all of it, but revenue was dropping. The accountant told her she was paying more for her products and she needed to raise her prices. A quick audit of receipts showed almost no increase in the cost of her products. The answer was in inventory. At month end she simply added up what she bought, deducted what she sold and reported the difference as inventory. If her accountant had suggested she maintain a daily inventory the salesman who was stealing product and selling it on the side might have been caught before he was able to do so much damage.
Your clients expect a certain level of service from you. You have a right to expect the same from the people you hire. Decide what you want and ask for it.