Having an effective accountant is a critical part of any small business. Unfortunately, hiring one is one of the most hastily-made decisions that small business owners make. Too many times, they choose the accountant that already does the personal taxes for the owner, not one that knows their industry or even fits well within their company.
This can be dangerous, especially if that person does not have the background required to work with small businesses. By getting the right accountant, the owner can focus on running the company and making the most informed decisions based on the information he or she is receiving.
Unfortunately, many owners see their accountant as a nuisance exclusively associated with paying taxes. The truth is that a great accountant can do so much more. If your current accountant isn’t helping your team as a whole, it’s time to let him or her go and bring in someone new who can really help. Here are seven signs that an owner needs to fire his or her accountant.
1. They Don’t Explain the Financial Statements
One of the biggest issues that many small business owners face is that they don’t understand their own financial statements. That’s because they never learned how to read them. This is not uncommon because except for business school, there is no formal way to learn this skill. Unfortunately, some accountants don’t help the situation. They would rather keep the owner in the dark due to some misguided way of maintaining job security.
If this is the case, find an accountant that will explain your financial statements to you in a way you can understand. They should also teach you how to use the reports in your accounting program so you can get information for yourself every month.
2. They Don’t Know a Specific Industry
The accountant needs to know the company’s industry and be familiar with how business is done in that sector. Many times, there are specific industry tax codes or tax breaks that apply. Before hiring an accountant, get references from their clients that are in similar industries. Discuss with them in detail how that accountant has made a difference in their company.
3. They Don’t Help Maximise Deductions
In the end, the owner signs off on his or her tax return and must be comfortable with the treatment of deductions for their business. Some accountants are too aggressive while others are too strict. Get enough information from the accountant to make an educated decision. Give them examples of tax recognition and deduction methods that the company has used in the past. Get permission to talk to owners in similar industries to see if they take advantage of specific deductions.
4. You Get Better Advice Elsewhere
If an owner gets better advice from another person or an article with information that he or she should have heard from their accountant, it’s time to start looking for a new one. A telltale sign is when the owner starts bringing suggestions to their accountant and hears, “That’s a great idea!” when the accountant should have brought it up to the owner themselves.
5. You Aren’t Getting What You Paid For
Small business owners need to look at the overall value they are receiving for their accounting expenses. If you’re worried about the cost of every minute you talk to the accountant, then you aren’t getting the value you deserve. In most small businesses, accounting expenses should not exceed $10,000 a year, and the value should be ten times that.
6. They Always File Tax Returns Late
If the company always files their tax return late because the accountant does not have time to complete it, now is the time to move on. If your accountant can’t provide you with a quarterly financial statement analysis in a timely manner, this is another signal.
7. They Don’t Return Phone Calls in a Timely Fashion
One of the things that I admire about my accountant, Randy Sylvan of Clifton Larsen, is that he always gets back to me within a few hours—even during tax season. If your accountant’s customer service stinks or he or she can’t get paper work filed in a timely manner, then it’s time to move on.
What is the best time of year to fire an accountant? Do it right after taxes are due. This enables the new accountant to start with a new fiscal calendar year. If things just can’t wait, then do it at the beginning of a quarter.