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Hire a good accountant or your numbers will crunch you

John Mohelsky knew he would need an accountant three years ago when he formed Phoenix Lighting Inc., a Little Falls, N.J., lighting analysis and design company.

He hired a buddy who was a certified public accountant.

Bad choice.

"That was definitely not the way to go," says Mohelsky, who serves as the company's president. "He didn't have small business experience. There's a big difference between big corporations and small corporations -- the laws may be the same, but the advantages and disadvantages of making decisions are different."

As Mohelsky realized -- fortunately, before any serious mistakes were made -- choosing the right accountant can mean the difference between success and failure for small businesses that need advice on everything from taxes to financing to succession planning.

When Mohelsky switched accountants, he learned how valuable the right person could be. His CPA just saved him $1,000 on a disputed tax penalty. "It looked like we were doomed to pay it," Mohelsky says. "He wrote a letter and got it dissolved."

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More than a number-cruncher
What can the right accountant do for a small business?

  • Tax planning -- Accountants do much more than just prepare tax returns. They should be involved in the planning stage of any new business and can offer advice on choosing a business entity, setting up bookkeeping systems and negotiating leases. Once a business is operational, an accountant is still needed to prepare annual information returns, do quarterly reviews and offer advice. "Your accountant's role has changed from somebody who would take the records and prepare the information to someone who's a reviewer of the information -- more of an adviser," says Mike Jeffries, an accountant with Bedard, Kurowicki, & Co. in Flemington, N.J.
  • Business planning -- A good accountant can take on the role of general business consultant. "The accountant is, based on various polls, the most trusted adviser of any business," says Steve Milner, an accountant with Squar Milner in Newport Beach, Calif. "You want to get in a new line? An accountant will tell you why it makes sense or doesn't make sense. You have a problem with cash flow, internal controls, inventory pricing? You're going to go to the accountant and ask for his or her help."
  • Networking -- Accountants are a great source of referrals. An accountant may have one client who is seeking financing and another who is looking for a good investment; the accountant can put the two together. Accountants can also refer other professionals, such as attorneys, insurance brokers or bankers, to small business clients. They may even refer customers.
  • Personal tax planning -- Often, personal tax issues are closely related to and affected by business tax issues. "I needed an accountant to set up the business," says Gary Herbstman, president of Byte Solutions Inc., a computer consulting firm based in Boca Raton, Fla. "But he has also helped me set up retirement planning."

Finding a good accountant
How can a small business owner find a good accountant? Experts suggest looking for the following qualifications:

  • Proper experience -- Choose accountants who specialize in small business issues and have experience representing other companies in your industry. "There are certain industries where someone who does not have specific experience in that industry probably would not be the best choice," says Jeffries. "Like auto dealerships. Experience in the industry gives somebody a leg up in terms of knowing the nuances of what goes on in the business."
  • A comfort factor -- "You need to make sure that you feel personally comfortable with the accountant, because you're going to have a relationship," says Milner.
    "A personal relationship is important," says Jeffrey Levy, a principal of Leads for Life Inc., a Metuchen, N.J.-based marketing firm. Her ideal accountant? "Someone who's going to answer your questions, someone who listens to you and your needs, someone who is reliable."
  • Firm size that's right for the business -- A sole proprietor probably should not engage the largest accounting firm in the state to handle tax work. "Choose someone who fits the size of your firm," says Jeffries. "If you're in business by yourself, you don't need a large firm. Try to choose somebody who's about the same size as you."
  • CPA vs. non-CPA -- Business owners are frequently confused as to the meaning of the certified public accountant (CPA) designation. A CPA has a minimum level of education and experience and has taken tests to prove competency. While certain situations demand a CPA's involvement -- such as an audit or loan application -- other tasks such as bookkeeping, preparation of tax returns or write-up work can be handled efficiently by a general accountant. "CPAs have passed a rigorous exam and have to get continuing education every year to keep current," says Jeffries. "But that's not to say that someone who does not have a CPA designation could not be a good financial adviser."

Referrals, interviews, references
To choose an accountant, business owners should follow the same procedure as with any other vendor: Seek referrals from people you trust, interview prospective accountants and check references.

Jeffries suggests that business owners ask potential accountants pointed questions about their business, their industry, and how he or she would handle hypothetical situations. "How that person presents himself in the interview should give a pretty good indication of what he can do," he says.

Fees for accounting services vary greatly and depend upon the size of the firm, the experience of the accountant and the area of the country in which the firm is located. "Where the write-up work and the tax return can initially be prepared by someone at $65 to $70 per hour, the consulting work is typically done by the partners of the firm, and their rates are going to be about $150 to $300 per hour," says Milner.

As a business grows, accounting work such as routine bookkeeping can be done in-house by employees to save money. "If you are starting a business, get an outside CPA first -- one you can trust," Milner says. "If they are good and trustworthy, they'll tell you there's going to be a point when it's too expensive for us to do this stuff for you."

Mohelsky almost learned the hard way how important it is to select the right accountant. "Look for an accountant who brings not only expertise in number crunching, but consulting and business planning -- a full package," he suggests.

Levy agrees. "Choose the correct accountant. If your accountant is not listening or giving you the right advice, then you're going to have a much harder time achieving your financial goals."

Robyn A. Friedman is a freelance writer based in Florida.

-- Posted: Dec. 14, 1999

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PLUS: Outsourcing your accounting services
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