Your accountant is the person most likely to know your business backward and forward. He is also the person least likely to tell you what you want to hear.
The most important thing for you to do is to ask questions. You can get a long way just by asking questions. Often, you’ll want to know why he is recommending something; sometimes, when he tells you what you don’t want to hear, it will be worth asking him whether he has any suggestions for how to do it differently.
But if you really want to make use of his expertise, go further than that. Interview him like a journalist would interview a scientist in an article about global warming or string theory. Ask him what the consequences of doing nothing are; ask about alternative solutions; ask about threats that people don’t usually think of (like hackers) and opportunities that people don’t usually think of (like someone stealing his away). And then decide for yourself what you think he should do and whether you agree with his reasoning for proposing it.
If you’re like most business owners, you probably don’t think of your accountant as a source of business advice. You see him or her as someone who keeps the books and prepares tax returns.
If you want to start taking advantage of your accountant’s knowledge of business, you need to set up an interview to find out what he or she knows that you don’t. To do this, you may have to overcome some shyness about asking questions. If so, here is a trick: prepare a list of questions beforehand and ask them all at once at the end of the meeting instead of taking up time with chitchat first. That way you’ll get through the list faster and won’t interrupt the flow of ideas.
When you interview your accountant, be sure to ask what he or she thinks are the biggest issues right now for businesses like yours. What are the main challenges? Which problems are most likely to crop up in the future? What changes could be coming? By asking about these things now, you can make sure that your accounting system will be ready to deal with them when they happen.
Accountants are often viewed as boring bean counters, but they can be invaluable sources of advice. They live in the world of business reality, not just the theoretical one found in business school. If you want to understand how your company is doing financially, you need to understand the language of finance, and that means sitting down with your accountant for at least an hour.
I’m not saying you should ask your accountant for stock market advice; but he or she will be able to give you a clearer view on what kinds of investments make sense, what kinds of financial structure you ought to have (corporation, partnership, sole proprietorship), what you are paying for office space, what kind of tax structure is best for you now and in the future, etc.
What if I have no accountant? You don’t have to have an accountant. Just pick up the phone and start calling around until you find someone who will talk with you candidly about your company’s finances.
It is a good idea to get to know your accountant. Don’t make the mistake of thinking that because they are an expert in tax law, they are also an expert in business matters. They might be one, but it’s more likely that they aren’t.
In the normal course of business, you will have to make some decisions about what kind of legal entity you want your company to be. You will need a bookkeeper or a controller or a chief financial officer or a chief operating officer or a chief executive officer, someone who can deal with the government authorities and with banks and creditors and so on. And you will need an accountant, someone who knows how to do your taxes.
And it doesn’t hurt to have someone who can help out when you run into tricky accounting questions, such as when you decide whether something belongs on the balance sheet as an asset or a liability.
When you have questions about anything accounting-related, start by asking your accountant. But don’t stop there. If they give you an answer that sounds wrong — especially if it sounded wrong to you — ask them why they said what they did. If you disagree with them, tell them why; if their answer wasn’t complete (but don’t assume this), ask for more details
If you’re not an accountant, and you want to know what’s going on with your money, the last person you should ask is your accountant.
It’s not that accountants are dishonest. They’re not. It’s just that if they tell the truth about your business situation, you will fire them. Accountants are trained in how to make business expenses look larger, and how to make tax deductions look smaller, than they really are. That doesn’t mean your accountant is lying when she prepares your taxes. She may honestly believe that it is in your interest to misrepresent the financial situation of the business you own together.
Your accountant will be more reliable in telling you what’s going on with your personal finances. But even there, things are more complicated than most people realize.
Personal finance is a challenge for anyone who cares about truth, because money is slippery. The numbers are hard to pin down. And their relationship to reality is indirect at best. When it comes time to pay the rent or buy gas for the car, money talks louder than truth.
When you decide to start a company, or expand your business, you hire an accountant. You want to know whether the business will succeed, and if so how soon. But you also want to know what you can do to help it succeed. So at the same time you hire an accountant, you should hire yourself.
If your accountant is any good, she will be very busy for the first year or so, because she will need to figure out your company’s tax situation. After that the company will be established enough that she can start spending more time with you. At that point, sit down with her and discuss what your goals are for the business – what revenues would be good to achieve in a reasonable time frame? How much money do you need? What is the best way to get there? What are the risks? How do they affect your choices?
One of the most important discoveries in history was this: if you want to have good ideas, you must have many ideas.
Many ideas are better than one big idea. They may also be less ambitious, but that’s not the point. The point is that when you have many ideas, some fraction of them are likely to be good. No matter what you’re trying to accomplish, if your strategy is to come up with one big idea and follow it all the way down, you’re unlikely to succeed.
This goes for accountants too. If your accountant tells you that the only way to save money is to hire an outside firm to do your audits, ask her how much she charges for her services each year. Then ask her how many hours she billed last year. Now divide one by the other and see what fraction of her time she spent on your account last year. If this number is less than 20% then think twice about whether you need an outside firm or not.
Doing your own audit can’t possibly cost as much as paying someone to do an audit who spent less than 5% of her time working on it. It won’t be as good as having someone who does nothing but audit work (highly unlikely), but it will probably be pretty