How to evaluate the performance of your accountant

It is hard to think about evaluating someone that you have given your most sensitive business and personal information (your financial records) to; but an objective view of the services your outside accountant is providing to you is important to do periodically; here is why and how:

Here are some of the red flags you need to be aware of:

Tax Surprises. Your accountant calls you after working on your taxes for two months and tells you on a Friday afternoon that you owe the government an extra $100,000 because you made more money than anticipated, and by the way, it is due next Tuesday. Every decent accountant should look at the information after every quarter to give you feedback and updates.
Answers to common questions. Your accountant can be a great resource in how to handle specific issues with accounting, taxes, and planning; but if you are charged every time you talk to them – it is disempowering. Find an accountant that is willing to spend a few minutes with you on the phone as part of his on-going service that you are not charged for.
Co-dependency. This issue arises when your accountant wants a consistent flow of monthly income (from you) and you cannot print out your month end results until there are adjustments made to: deprecation, inventory, cost of goods, sales tax or payroll taxes withholdings. If this is happening to you, you need to ask your accountant if your current bookkeeper or controller can learn how to make these adjustments (with your accountants oversight); if they say “yes” then ask for a specific time frame to complete it. Over the course of six months the accountant should have your inside person trained.
Re-vamping Your Chart of Accounts. Some accountants will look at your books and make a recommendation to set them up differently. Sometimes there is a good reason to change the layout of your system; however many times the recommendations are made so they are able to send you a larger bill. I know of a business owner who changed accountants based on a recommendation from a banker and the bill for accounting services for that year exceeded $67,000 – much more than any added benefit the owner received and was in fact $37,000 higher than the previous accountants highest annual charge.
Mistakes. If you find that your accountant has to correct previous work and you get stuck with the bill for that work. Or if there are multiple changes in journal entries or adjustments that don’t seem to make sense – follow your instincts and find out what is happening. Your goal is not to have your month end financial statements changing as the year progresses. This is easy to go with QuickBooks because there is nothing to keep anyone from making a prior period adjustment after you think that month is closed out.
Response time. How long should the turn around be for: 1) Preparing monthly financial statements – 10 to 30 days from the time they receive the data, Example – if your accountant prepares your monthly financial statements for you and your bankers – you should get the information back in 10 to 20 days from the time you send the information in. You want to get your financial information as soon as you can. If you send January’s info by February 15 and it takes 30 days to get the statements back to you, you are now looking at January financial results on March 15. Would you drive your car with a speedometer that had a 30 minutes delay on the freeway in a work zone? 2) Receiving year-end financial statements- 30 to 60 days depending how quickly after year end your accountant gets you the data and 3) common questions answered – within 24 hours.

Dealing with your accountant is just like dealing with any other vendor. Ask yourself these questions to see if your accountant is performing to your standards: Does what they recommend have a purpose and what is the ROI (return on investment)? Do you feel good about the changes they are recommending? How will these changes make money for you? Are there any outside circumstances that are pushing you to make these changes? There are many great accountants out there, get one that will work for you to maximize your profits and respond to your questions in a quick and knowledgeable manner.

This entry was posted on Friday, March 26th, 2010 at 10:00 am and is filed under Balance sheet, Business Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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