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How Should the Business Owner Work With a CPA or CPA Practice?
Introduction
Many small and mid-size companies complain about their Certified Public Accountant (CPA). Their complaint centers on the fact that their CPA never quite learns their business. Is this necessarily a bad thing?
It depends on what you believe the role of your CPA should be, and in fact what the CPA feels there role actually is. It is this mis-communication that brings disassociation of purpose and leads to the business owner finding a new CPA.
Most, not all, CPA firms are built to provide tax and audit services. They do this by having a large number of clients, and a staff which may or may not have assigned clients. With a fair client load, the business owner who is expecting personalized and hand-holding service becomes disenchanted.
Analysis
Some firms offer financial advice and other services, but many CPAs have little or no Chief Financial Officer (CFO) expertise, other than as possibly the managing partner in the firm itself.
Since the business model is not suited to a weekly or similar visit, they never learn the specific in’s and out’s of their clients business. They don’t really know the cash flow management issues, the full profitability analysis (aside from the standard balance sheet/income statement ratios) and other planning issues.
Thus the CPA can’t act as a full-blown advisor, since they are not intimate with the inner workings of the company. CPAs are best used to gauge the company’s attention to Generally Accept Accounting Principles (GAAP) and Financial Accounting Standards Board (FASB) pronouncements, as well as IRS rulings then to provide CFO services.
Lastly, it is not the CPAs role to create your balance sheet, profit and loss statement and statement of cash flows, that’s the responsibility of your CFO. The CFO is there to forecast, the CPA analyzes what has happened.
Understanding the aforementioned makes the relationship between the business owner and the CPA easier. Picking the right firm is like picking any other advisor; expertise in the given industry if possible, personality of the point person at the CPA firm and of course, cost.
Bottom line
Understanding of where your business is poised to go also allows you to pick a CPA firm that can grow with you. There’s a big difference in just needing tax returns done, or needing annual reviews or audits. Based on your present and future (3-5 years) needs, pick a firm that has the resources to complete your filings on-time, with the least amount of disruption of your business.
Reviews are much less time-consuming than audits (and cost 1/3 less or more), but if you need to teach the auditor every year about your business, the non-cash expense of the review or audit just increased by many-fold.
As a business owner, you should have a CFO (at least part-time) that can interface and advise both you and the CPA firm and issues that need attention in real time, not after the fact.
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9 Comments
There are many constraints put on the CPA/Client relationship, and many of them are in place because of how the business gets started or how the CPA has developed the practice. Many CPAs, early in their careers, offer additional services to their clients in addition to bookkeeping, QuickBooks training, tax preparation and audit services. These CFO services or other consulting services are often shunted aside by the business owner/client with, "Just do the taxes, please." After a couple of years of offering valid services to their clients, the CPAs stop asking. That doesn't make them less able to offer the services, but they have been refused so many times that they get the message. Later on, clients become frustrated with their CPA not understanding their business (without ever asking the CPA) that they search for a replacement. Too often, clients bring that problem on themselves. Advice: Go talk to your CPA, or find a Small Business Development Center in your area, and start asking questions.
I have always worked with a CPA and count my current CPA as a good friend. Iam not afraid to ask for advice nor is he worried about making suggestions.
He is involved and I have always had a CPA who has been and who knows my expectations. They are not mind-readers and need to know the rules, if there are any - and there should not be in my experience.
They will only be as effective as you let them be and if you feel you cannot take this approach, find a CPA you can work with and talk to openly and often.
Well done John, your comment is spot on!
After providing accounting, tax and business services to business owners, both in the UK and New Zealand, for 30 years I concur that is the nub of the problem - they need and want help on the business side but just won't or don't want to pay. Even when it's free (I am a volunteer business mentor) they're often still not interested!
As their advisers we need to demonstrate the additional value we can provide to grow and safeguard their businesses as there are so many way we can help.
How Should the Business Owner Work With a CPA or CPA Practice?
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We have seen this issue many times and Waynes' comments are on point. Our observations are focused on direction and luck. To the extent an SME has a clear focus of their market and (anticipated) market presence, they can provide guidance to their auditor regarding aspects of the Income St. and Balance sheet. Timing, line item allowances/recognition and other industry specific issues can be discussed within the context of the overall plan of the client. Regular meetings, updates, inclusion in corporate policy discussions gives an auditor a sense of belonging as well as a better idea of your operational strategy.(It will also cost a little more in billable time)! Remember, they are fiduciaries so don't expect too much!
The luck aspect for an SME is in finding that niche CPA who works in and understands your environment. It's hard to ask a competitor for advice so touch and go and other third party (banks, vendors, etc.) references are usually how you end up with a firm. As you grow, replacing firms is an unavoidable, but necessary task. If you are successful, outgrowing your original (or 2-3) auditors is not a bad thing but, must be handled with delicacy! Give them advance notice, be clear about the reasons and ask for their help in finding a replacement. The reasoning MUST be apparent so hard feelings should be minimal. A strong internal CFO (maybe homegrown from the accounting/controller function, if you are lucky) will help in addressing your overall auditing/advisory needs. If you do not have a dynamic, growing business that is constantly evolving, many of these issues will not appear.
I provide strictly CFO services and I agree that business owners expect CFO services from their CPA, until the issue of price comes up, their expectation is that is inclusive with preparing a tax return.
Well done John, your comment is spot on!
After providing accounting, tax and business services to business owners, both in the UK and New Zealand, for 30 years I concur that is the nub of the problem - they need and want help on the business side but just won't or don't want to pay.
Even when it's free (I am a volunteer business mentor) they're often still not interested!
Speaking as the client, and as someone who trains folks on cummunicating (over the phone) and helps them with listening, I always told my CPA up front what my limitations were, what my needs were and what my expectations were.
I got a price and providing it worked for me - and I knew the time and money it was going to save me by having an expert on my side - there was no issue.
Maybe you guys need to know how to better communicate with the client? That came out wrong, but hope you get it?
Have a planning meeting once a year with your CPA and set out the services you expect over the course of the year. Clients all have different expectations and cost tolerances. The annual meeting is the place to communicate the services you require and determine the expected annual cost.
Don't expect services you haven't discussed or aren't willing to pay for.
In the past I have always worked with a CPA firm that I was not pleased with. About 4 years ago a friend of mine recommended me to New York CPA firm called Cohen Greve. They are based out of NY but have clients nationwide. I feel like I have had a good relationship with them and they have always catered to my needs. If anyone needs help,or a new CPA firm try http://www.cohengreve.com/.
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