The reasons (and benefits) are many and obvious: the new owner has the networks and built-in notoriety to boost their sales, in the beginning, to get their venture off the ground quickly.
Additionally, they have the knowledge and experience in the nitty-gritty day to day reality of doing the actual work, which enables them to personally deliver high impact results without the high cost of hiring out that expertise.
As a result, many entrepreneurs experience success which inevitably brings growth which is welcomed and celebrated and rightly so! (link)
But it also brings the added burden of “accounting” for increased business activity: tracking expenses, paying employees, reconciling checking and credit card accounts, and more people handling more money, etc.
For the owners who haven’t started bookkeeping or accounting practice, chances are they are going to have to hire or outsource these accounting services.
If this describes you, then read on as these are the top 10 Do’s and Don’ts for Hiring Small Business Accounting Services:
Top “Do’s” for Hiring Small Business Accounting Services
Hiring a small business accounting services is much like hiring an employee.
- Ask Referrals – Your network of trusted associates and fellow business owners is your BEST resource for qualified and dependable outside services, especially small business accounting services.Begin by brainstorming the top 3-5 most respected and admired business owners you know. They should have a minimum of 10 years of time in business and a clear track record of financial stability and success.Then…ask them if they would recommend their bookkeeper and CPA. If so, add their referral to your list of candidates to consider.
- Interview Bookkeeper and CPA candidates – In the same way that hiring the first applicant for a key role rarely works out, hiring the first bookkeeper or CPA you talk to could be a costly mistake.So set up meetings with all 3-5 candidates and interview them all asking the same questions and writing down their answers. Resist the temptation to stop the interview process mid-stream even if you hit it off with a candidate.
- Determine Alignment – Number one, evaluate what type of clients they serve – do they successfully serve other clients in similar businesses like yours? If they specialize in serving regional construction firms with 10mill in annual sales, and you are 3 employee nail salon, may not be a great fit, even though they may serve their clients well.On the other hand, an accounting service that serves 20 employee restaurants can probably serve a 5 person insurance agency quite well.
- Check References – this almost speaks for itself…but don’t overlook it. By talking to their existing clients you will hear the “rest of the story” from the client’s point of view, not the one selling or describing their great services.
- Get Clear on Expectations – if assume an accounting service provider will automatically provide you with what their other clients might have mentioned in passing could leave you disappointed. For brand new business owners, it may not yet be clear to them what they need to expect (they should talk further with their network of trusted associates), but those who do know what they expect, they need to communicate those expectations! As I mention in my book Less Chaos More Cash it is easy and even natural to assume that employees know what we expect, the same is true for the “professionals” we are hiring. “You’re the professional, I shouldn’t have to tell you what to do!” is a common assumption with a predictable outcome…frustration for both parties!
Top “Don’ts” for Hiring Small Business Accounting Services
- Do Not Hire Based on Affordability or Lower Fees – controlling costs is necessary…in particular in a small business where sales volume hasn’t yet reached a point where it puts start-up expenses into a proper proportion. But it is a terrible way to evaluate the accounting services you need. Accuracy in your books and strategy in your tax planning is too important and the “cost” of getting it wrong is so dangerous to a small business that selecting a low-cost option just to save money is a very bad idea. What governs the decision of what is appropriate to pay, must be measured against the value of having accurate financial statements and the amount of money saved in taxes by effective planning.
- Do Not Hire Your Friend or Family’s “Guy” – it’s understandable that friends and family want their small business owning kin and loved ones to succeed. And as a result, they may be quick to offer advice in the interest of playing a role in that success…up to and including recommendations for small business accounting services you should retain.
But…Oceans 11 – I know a guy
You must be aware of the advice trap (Michael Bungay Stainer’s book link) in this situation and be prepared to respectfully decline your loved one’s insistence that they “know a guy” or that you should use “The Guy” who does their taxes.
Unless your friends and family fall into the category of trusted and vetted and successful business owners with a decade of experience, you DO NOT want to hire that “Guy”.Period!
- Don’t Hire Someone Who Can’t Explain “It” – Bookkeeping and Accounting are as deep and varied professions as any other business, with nuance and complexity that can be a little over the overwhelmed business owner’s head. That being said, the accounting service provider MUST be able to explain the fundamentals of the services provided and the thinking behind the strategy so that the owner can be more than a passive recipient of the service and an active partner in accomplishing the larger goal of success in the business.
To play that role, the owner must have enough understanding of what is being done so they can contribute effectively, and that is the responsibility of the provider.
While the owner must acknowledge their need and dependence on the knowledge and expertise of the provider, they are also key in helping the provider understand the business
- Don’t Hire a Squid – Your small business accounting service provider must have a method and a clear strategy for how they do their work and serve you. There are too many providers with enough experience to call themselves professionals but without enough creativity or bandwidth to push the limits of what is possible for you the client.
An active, dynamic (don’t read flashy, flamboyant or flighty) professional who is always striving to improve what they do and how they do it, is going to keep pace with the ever-changing rules in accounting.
They will also be more likely to explain what it is that makes them unique and sets them apart from their less ambitious counterparts.
- Don’t Hire a Multi-Service Accounting Provider – Entrusting your business finances to others can stretch our ability to trust to the absolute limit.For good reason too, small business owners are frequently victims of fraud and embezzlement. As such it is crucial that there be a separation between your bookkeeping practices within the business.
Furthermore, it is critical that there be a formal separation between bookkeeping and tax accounting.
For one thing, bookkeepers will be less likely to try and hide malfeasance when they know a highly qualified third party CPA is going to be evaluating the books on behalf of the owner.
Likewise, mistakes that occur in bookkeeping (and bookkeepers are human) that would otherwise either be missed or covered up if the same provider is handling both services, will be caught and corrected when a separate CPA is overseeing the books.
Business owner, there is nothing easy about hiring a bookkeeper and CPA to help you manage the growing finances in your growing business.
But then there is nothing easy about owning a small business anyway.
So, just accept the fact that there are some things you must DO right and Must NOT DO when outsourcing these critical functions in your business.
Why Outsourcing Small Business Accounting Services is Crucial for Success & Survival
I’m not a bookkeeper or an accountant and I don’t provide small business accounting services to business owners.
What I do provide is 22 years of experience as a serial entrepreneur and employer and I can tell you that the accounting services you engage will determine your success and maybe even your business’s survival.
Within months of starting my first company, I was given two pieces of accounting advice that I have never forgotten. One for its wisdom, the other for its folly.
The Best Small Business Accounting Service Advice I’ve Ever Received
The first bit of advice was given to me by a mentor, a grizzled electrical contractor, and veteran business owner. He had nearly lost his company at about the 5-year mark because his CPA had been severely underestimating his yearly tax liability. When the IRS finally caught up with him, they demanded all 5 years worth of unpaid taxes. They barely survived.
I will never forget the intensity in his eyes as he wagged his finger at me and finished his story with, “So you find the best CPA you can whether you think you can afford him or not!”
The Worst Small Business Accounting Service Advice I’ve Received
The second bit of advice was given by a well-meaning relative who did the books in a family business. In this case, I was told that doing my own books was a great way to save money and that all I needed was a Quickbooks software package and the book “Quickbooks for Dummies”.
In other words, in addition to estimating, sales, scheduling, measuring, managing, and installing (roles that already required 10+ hours of every day) I should casually undertake yet another critical function in the business. A function that is a full time dedicated position in many small businesses.
This was bad advice for two reasons. One, even if I’d had the time to actually learn Quickbooks and bookkeeping, I simply didn’t have time to actually do the bookkeeping! Two, doing bookkeeping and accounting, would not have utilized, much less optimized my time, as a highly productive contributor to the business’s output.
Why Small Business Accounting Services Should be Outsourced.
- Stepping over dollars to save a dime
You see, as an owner, you too possess a unique and dynamic multiplier effect in the business when it comes to making the sale and keeping the promises made to clients…so much so that your business would lose 10 times the revenue and profit potential compared to what you would save by doing your own bookkeeping and taxes. Outsourcing your accounting services frees you up to do the work that sustains and grows your company, enabling you to pay for such services with plenty of profit left over!
- Accurate and timely books in the business
Your business is an engine, its made up of many different and important parts and functions. As the owner, you are the oil that enables it to run smoothly and as such you spend a lot of time “inside” the business. While this is an advantage in the business from an operational perspective, this can be a problem from a financial perspective…meaning you may be too close to the action to really have a grasp on the true financial state of the business…leaving you to operate off your gut, credit card, or daily checking account balance. An outsourced small business accounting service is a critical function that provides you with actual financial information that enables you to objectively assess the “true” financial performance of the business and when necessary make adjustments. The sooner you have that critical information in hand, the sooner you can make decisions that keep you in the black.*Read Bad Bookkeeper Horror Story – What you can learn*
- Strategic Tax Accounting
In the last 22 years, I’ve had a great CPA, an above-average CPA, and a mediocre CPA. Had I ever attempted to be my own CPA (tax preparer) there would have been a 4th category: terrible CPA. You want and need a great CPA because they will serve you well in 3 ways. Number one, they will work with you to develop a strategy for minimizing your tax liabilities in the short term and long term. In other words, they help you plan during the year, updating and adjusting forecasts so you can make decisions prior to December 31 that favorably affect your taxable income. Mediocre and above-average CPA’s (in my experience) simply wait on you to fill out an “organizer” so they can do simple calculations to determine what you owe, oftentimes after its too late to do anything about it. Number two, great CPA’s will aggressively research and creatively apply the law to the maximum benefit of your company. Every dollar not sent to Uncle Sam or your state is a dollar you can reinvest in your business’s future or remove from the company for your own personal needs and wants.
The other CPA’s will take a safer approach (for them), that minimizes their perceived risk and status with the tax officials. Number 3, great CPA’s will know the law well enough and have a track record of zero “altered returns”. This means that while they may have had clients who have been audited, they have successfully defended their tax filings, and tax officials acknowledged the accuracy of the return in question, letting it stand. A CPA with zero audits may be mediocre and playing it too safe. A CPA with a few audits that were successfully repelled is going to strike the optimal balance of keeping you out of trouble with the IRS while keeping more of your hard-earned money.
As a business owner, you are unique. You have stepped into the unknown and acquired skills that you had to learn on the fly to keep your business viable. And truth be told, you could absolutely learn to do your books and even file your taxes.
It’s not a question of if you can. It’s a question of if you should.
As for me, I’m glad I took the advice of my old friend and mentor and outsourced the best accounting services I could find and afford.
This decision has enabled me to focus my time where it makes the biggest bottom-line impact on the business, have timely and accurate financial statements so I can better manage the business, and ultimately find a CPA that saves me 2-3x more than he charges for planning and preparing my taxes!
You can do this too if you outsource your small business accounting services!
About the Author:
As a 27 year stone industry veteran, I have created these stone industry businesses: www.crowleysgranite.com, www.fabricatorsfriend.com, www.noliftsystem.com, and www.aaroncrowley.com. The CPA firm that I use is Doty Pruett Wilson PC and have used Quickbooks accounting software for years.
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