9 Reasons You Should Change Your Accountant

by Dan Lacy - May 3rd, 2011

Good financial information is critical to a success of any business, particularly a small business. The financial statement is the business owners’ report card on how the business is doing. This report card is used regularly by bankers, shareholders, investors, taxing authorities and by anybody looking to purchase or value the company.

The outside CPA firm is the source small business people look to for guidance in tax preparation, preparation of accurate data for their lenders, shareholders and numerous other entities. They are the go-to people that provide creditability, accurate and objective information relative to the subject company. How does one know when it is time to change accountants? Here are red flags that will give you clues:

1. It’s your money. Knowing the daily, weekly and monthly financial condition of your company is critical (business owners have 70% to 90% of their personal net worth tied up in their business). Many business owners have tried to delegate this responsibility to their outside accountant, controller or even the bookkeeper with devastating consequences. Financial management is not something that most business owners want to do; but it is your money; you need to understand everything you can about improving it. If your accountant is not helping you toward that end, then you have the wrong person. This is your report card; it tells the outside world how you are doing in business. You need to be very knowledgeable and conversant with your income statement, balance sheet and statement of cash flows.

2. Tax surprises. You have finished out the year and feel pretty good about what you accomplished. Your accountant is busy and doesn’t tell you the consequences of your performance until April 10 and then explains that you have a large tax payment to make prior to April 15. You don’t have the cash then you spend the next week trying to solve the problem. Your accountant needs to be engaged with your business in the last quarter of the year, asking questions about your projected profit for the year (if you don’t do this, call me for guidance) and helping you define your future tax liability. If your accountant doesn’t do this for you, ask him to get involved or find someone that will.

3. Large adjustments at year-end made by your accountant that are not clear as to why there were made. This can be an issue with deprecation, inventory and/or work-in-progress adjustments. This just happened 60 days ago, a business owner was pretty confident that their profit for the year was $150,000 and he was happy to explain to his banker about the improvement in the company’s performance; but when the year end adjustments were made, he now showed a loss. The accountant explained year end adjustments, prior year adjustments, all of which were unclear. Not a good deal.

4. Two sets of books. This happens too many times. You have an accounting system in your company with a set of books and your accountant has another one in his office. Yours is designed to do everything an accounting system can do; but you are only writing checks, balancing the check book and keeping track of accounts receivable and payable. At the end of every month you send your accountant a bunch of information (including data from your accounting system) for him to enter it into his system. A few weeks later he creates your monthly financial statements from his set of books which he returns to you. This is a duplication of effort, time and money and slows down information you need to run your company. It is a great set up for your accountant, not a good one for you.

5. Too busy. Your accountant is not easily reached and doesn’t return phone calls in a timely manner, especially in tax season. Most decent accountants are very busy in the first quarter of the year; but realize that businesses run 12 months out of the year and are available to answer your questions. Find another accountant if yours doesn’t return calls within a 24 hour period.

6. Over billing.

You change accountants and the first thing they advise you to do is to change your chart of accounts (how your income and expenses are defined throughout your financial statements). They recommend some G&A (overhead) costs be moved into COGS (cost of goods) and some COGs moved down to overhead. They spend hours revising your chart of accounts and financial statements and send you the bill (much larger than you ever thought). In some instances, this may be needed; but make sure you know the reason for the changes (historic data now won’t line up) and cost benefit ratio. In most cases this does more harm than good.

7. Relationship. Your accountant can be a trust ally in the growth and profitability of your company. If you talk to your accountant only once a year, there is little opportunity to create a relationship. Try sitting down with your accountant quarterly to shoot the breeze, if you cannot get that accomplished, find someone who is interested in you and your business.

8. Frankness. Your accountant doesn’t listen well and/or agrees with you on about everything you say. Neither are a good sign. You need objective, thoughtful responses on how to improve your company. If your accountant is afraid to give you the truth – move on. A few years ago an Anderson accounting firm provided monthly financial statements for a company that was loosing money (for months); the banker finally told the owner to get the ship straightened – the accountant never mentioned a word about correcting the problem.

9. Knows Everything. Your accountant thinks he/she is an expert on everything. Accountants are like every other profession; they have expertise and experience in specific areas. Most are great historians and making sure that the company complies with GAAP (generally accepted accounting practices) and tax issues. That doesn’t mean they have the expertise or experience in: 1) valuing your business, 2) providing advice on how to best grow your business, 3) investment advice, 4) evaluating acquisitions, 5) CEO coaching or 6) financing options.

With any of the above warning signs, it is always best to speak with your accountant about the issues at hand first. Sometimes, you may gain a clearer understanding and then feel more comfortable, but if you don’t, you need to move on. Changing accountants isn’t easy, but if it is the right decision, then it is absolutely what you must do!

Dan Lacy
Growth & Profit Coach, Financial Strategist, Cash Flow Doctor, CEO Mentor
phone: 765-644-8887

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