IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Eric Moore of Accounting Solution Partners (www.asp-nw.com):
Signs it May Be Time to Fire Your Accounting Firm
Shrewd business owners understand the benefits of outsourcing accounting functions. Utilizing an accounting firm maximizes business value by improving financial reporting accuracy and timeliness, allowing for better strategic planning, and reducing tax burden. However, these benefits depend on a solid working relationship with an experienced accounting firm. When there is a poor fit or the firm is performing inadequate work, its value is likely lower than expected. In extreme cases, business objectives and strategic growth plans can also be stymied.
If you notice any of these critical issues, it may be time to fire your accounting company:
- Inadequate Financial Acumen
Financial expertise is the core benefit that an accounting firm should provide for clients. The best partner will utilize extensive financial knowledge to provide significant business return.
- Outdated Practices
If an accounting firm is using outdated practices or relying on old tax law, it is an immediate red flag. While many business owners outsource their accounting functions to avoid needing to keep up with these types of changes, understanding at least high-level differences is crucial for auditing an accounting company’s work. If reviewing financial reports and tax filings uncovers anything suspicious, the business owner should immediately begin asking questions.
- Generalized Strategy
In some instances, an accounting firm may not be using antiquated practices or assumptions, but its approach may be too generalized. Failing to customize methods to fit a specific industry is another reason to start searching for a new accounting firm. Like any other business function, an accounting approach should be industry-specific to maximize return. Otherwise, revenue can be negatively affected as a result of items like missed tax deductions and improperly calculated costs. Finding an accounting company that specializes in a certain industry or is accustomed to working with specific types of companies is the best way to increase business return.
- Missed Tax Deductions
Depending on the role your accountant, they may or may not file taxes. Whether an accounting firm specifically employs tax accountants or not, their staff should be able to help reduce a client’s tax burden with preparation of tax information for tax compliance and tax planning.
An accountant should proactively present tax-related strategies instead of waiting for ideas and questions to come from the business owner. Unfortunately, being reactive instead of proactive is the top complaint among business owners of their accountants, which makes it a key reason that many look elsewhere.
- Insufficient Long-Term Planning
One of the biggest advantages of working with an accounting firm is the strategic planning component. Time-constrained business owners leverage outside financial professionals to prepare for the year ahead and keep the organization on track to meet long-term goals. Short-sighted or insufficient planning can signal worrisome flaws in your financial firm’s approach Larry Bertsch explains, “A good accountant plans ahead for the whole financial year… If your accountant is often scrambling to put out fires instead of preventing them, then it’s time to look for someone else.” Instead of suffering costly setbacks from a pattern of poor planning, find an accounting company that will align their strategy with organizational needs.
- Minimal Business Return
Annual accounting expenses for a small business are generally less than $10,000. But regardless of the cost, the hiring company should recognize a five or ten-fold return. Analyzing historical financial documents and adjusting for independent changes can aid in determining the degree to which an accounting firm’s actions are affecting profitability. If the investment to hire an accounting firm only breaks-even, another firm can likely yield significantly better results.
- Poor Customer Service
Regardless of the industry, a service provider should deliver excellent customer service. This is especially important for financial services, which require a close working relationship to achieve maximum organizational benefit. If an accounting firm cannot be trusted to provide a positive experience, they should not be trusted with something as important as business financials and tax filings.
- Slow Response
The best accounting firms will always answer correspondence in a timely manner, even during tax season. Returning emails and calls is just as important as meeting contracted deliverables. An accounting company should communicate as freely as if it is an in-house team. If delays occur or problems arise, they should be communicated immediately to keep business owners informed throughout the process. Slow or nonexistent communications can indicate that an accounting firm has taken on more clients than it can manage, which intimates the quality of work being performed.
- Lack of Transparency
An accountant’s work should never be shrouded in a veil of mystery. Murky actions can conceal errors, or worse, fraud. A business owner should comprehend exactly what an accounting firm is doing for the organization on its behalf. Transparency should extend to practices as well as products. The accounting firm must be able to explain both decisions and deliverables. This explanation should match an owner’s knowledge-level to provide a thorough understanding. Using lofty language to confuse business owners is a tactic that unscrupulous professionals can use to justify mistakes or dishonest actions.
- Timeliness Issues
Reports should be generated regularly to keep business owners informed about the current financial state of the company and influence ongoing financial decisions. Similarly, reconciliations should be performed periodically to maintain positive cash flow. Additionally, tax returns should be filed on time, unless extenuating circumstances necessitate filing an extension. If an accounting firm is having issues with the timely completion of these essentials, it is a surefire sign to start looking elsewhere because it indicates a lack of planning and ineffective execution of duties.
We understand the conflict and frustration that happens and how difficult decisions can be when its time to fire anyone, regardless of whether an employee, vendor or accounting firm.
If you have questions relating to the content of this article, Eric Moore of Accounting Solutions Partners would welcome the opportunity to answer them. Mr. Moore can be reached at (425) 492-1901 or firstname.lastname@example.org.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.