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.
"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
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."
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."
-- 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,"
"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
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
Robyn A. Friedman is a freelance
writer based in Florida.
-- Posted: Dec. 14, 1999