Following on the heels of our recent blog post – 5 Signs Your Current CPA is No Longer the Right Fit for You – it seemed like our next blog post should be focused on the factors to consider when hiring a new CPA.
Depending on how long you’ve been with your old accountant, the accounting market today may look a lot different than the last time you shopped for CPA services. To help get you up to speed, we’ve developed 5 questions you should ask your prospective accountant.
5 Questions to ask your prospective accountant
1. How do you charge for your services?
Many firms are still billing based on the traditional model of time-based billing. In this setup, your monthly bill can vary throughout the year. You may experience lower bills in certain months followed by spikes in billing for busier months (e.g., a bigger bill for July with the extra work on 2nd quarter payroll filings). You’ll want to confirm if the corporate tax return is billed separately from the monthly? Another key question is how does the firm handle / charge for calls and questions? Some firms have switched to fixed fee arrangements that include recurring services like monthly accounting and annual tax return preparation. When comparing hourly vs fixed fee providers or comparing between fixed fee providers, it’s important to understand what’s included versus what’s extra so that you can make the best comparison between different providers.
2. How does the firm provide tax planning services?
Many traditional firms follow the Magic 8 Ball approach to tax planning, which means bring your stuff in after the end of the year; then your provider either creates or cleans up your accounting information and then prepares the tax return, hoping for a good result. Even some firms offering planning services are still fairly reactionary to your needs – you have to call your CPA, tell them you’re having a good year, and ask before year end to meet end to discuss if there’s something you can do to save on taxes. Other firms have developed truly proactive models for tax planning, which starts with an initial tax plan at the beginning of the tax year, then monitors your progress throughout the year, and finally reaches out to you before year end to discuss the tax planning opportunities they’ve identified. If this proactive tax planning approach is combined with a fixed fee arrangement, you’ve reached an ideal point where you’re not afraid to reach out to your CPA throughout the year and ask for advice. Tax preparation firms with a proactive tax planning processing may cost more than strictly reactionary providers, but they will likely generate ongoing savings that will more than make up for the extra cost of their services.
3. Do you offer accounting services?
This question may require you to dig a little deeper with more probing questions since there’s a lot of different approaches to delivering bookkeeping and accounting services. In the pure bookkeeping service side of the market, there’s a relatively low barrier to entry – there’s no special licensing requirement and a provider can even work nights and weekends out of their house as a second job. Many of these bookkeepers don’t have tax and financial management experience so those considerations often aren’t reflected in their work. Some of these bookkeeping providers may provide a good level of service while others can be unreliable and don’t know what they are doing. On the other end of the spectrum, you will find large CPA firms that have rolled out “Client Accounting Services” to a lot of fanfare, with cool buzzwords like CAS, outsourced accounting, virtual bookkeeping, back office outsourcing, and fractional CFOs. For many of these firms, accounting services aren’t the core focus of what they do and have only been rolled out in response to industry trends, enabling them to check the box that they offer these services. There’s also a big difference in how bookkeeping and accounting providers approach their work. Some providers may follow an old school approach that is relatively technology adverse (e.g., QuickBooks Online is a bad thing), relying on manual data entry to record your accounting activity. These providers often don’t allow you to touch or see “the books”. Other providers are a lot more innovative, using QuickBooks Online and add-on solutions like Dext, Bill, and Melio to create an interactive accounting system that the client and the firm can both use. Some firms really embrace advisory services, offering you insights into your business’ financials and even offering to consult with you on key operating processes like accounts receivable and accounts payable. The key point to remember is that there is a huge variety of bookkeeping and accounting firms – make sure to ask the relevant questions to help you find the best fit for your needs and how you want to work with your new accountant.
4. How can I communicate with you and what is the expected response time if I reach out for assistance?
There’s a lot of variation in how accounting and bookkeeping firms approach customer service. For instance, some may rely an IVR phone system to answer your call while others may not answer your call and will require you to leave a message for a call back. Others may even require you to email and open a support ticket in order to receive support. Additionally, some firms may offer tiered response times depending upon the service level you have selected. There may also be differences in the setup for the team that serves you – many will offer a dedicated team while others may be setup with a pool of people that service your account. The key point is to understand what type of service model your potential providers use and make sure that model aligns with how you want to work with your tax and accounting service professional. A mismatch in this area will create a frustrating experience for you.
5. What is the unique offering that an accounting or CPA firm brings to you?
Some firms may have very specific niches based on industry or type of business (e.g., bars and restaurants). Other firms may have a specific focus on the size of businesses they serve (e.g., small business with $1-5 million of revenue and 5-50 employees). Others may have a focus on very specific, technical areas (e.g., accounting and compliance reporting for Federal government contractors). It’s relatively easy to build a website and create marketing materials promising special talents and unique niches. If you are hiring a provider based on these traits, you need to perform due diligence to ensure that this provider can really deliver the level of services and expertise they’ve promised.
At Diamant Accounting, we work collaboratively with our clients to help them end the financial chaos in their business, save on taxes, and proactively look for opportunities to grow their business. We provide innovative technology and accounting solutions along with Fortune-500 caliber insights to our small business clients using a small team and a high-touch, in the trenches approach. We’re as comfortable talking with car mechanics as we are with CEOs.
Contact us today for more information about how we can help your business.
