If you have a small business, the quality of your accountant matters. The right accountant can be a big help. The wrong accountant can cripple your business. What kind?
If you are starting or running a small business, finding an accountant should be as important as finding a good lawyer. But lawyers are easier to find than accountants. When you need a lawyer, there’s only one thing to do: start calling lawyers and asking if they will represent you. What lawyer you pick matters much less than what accountant you pick.
That’s because a good lawyer can do only a few things for you, for example help you write contracts and sue people who don’t live up to them. Whether that’s worth the fees is something only you can decide. With an accountant it is different; accountants can provide lots of services at different prices. And with most accountants, pricing is complex and opaque.
With most lawyers there are basically three pricing levels: low, medium, and high (though really there are many more than that). With most accountants there are two pricing levels: whatever the market will bear for very high-end services, and whatever the market will bear for basic accounting services — so-called “entry-level” services.
If you are choosing an accountant, it helps to know what kind of service you will need, because different accountants specialize in different things.
The most important distinction is between tax accountants and business accountants. If you are opening a business, or buying one, or just want advice on how to structure your business, you need a business accountant. He will not only do your taxes, he will advise you on the best tax strategy for your business. There are rules about how much money you can invest in your company before it has to be treated as a corporation rather than a partnership or sole proprietorship. The accountant will help you figure out whether there is any point in forming a corporation to hold title to your company’s assets; if so, he will help you decide what kind of corporation; how many shares; who should own them; and what they should be worth.
If your company is big enough that its tax return has to be audited by an independent accounting firm, the business accountant will arrange that too.
If the only thing you need is help with taxes, choose a tax accountant. You’ll pay less; but he won’t help you make those decisions about structure and investments.
What do you look for in an accountant? The short answer is a good accountant looks a lot like a good doctor. They want to make you feel comfortable, to give you confidence that they know what they are doing and will handle your affairs responsibly.
In other words, you want to find an accountant who can earn your trust.
When you talk to accountants, pay attention to how you feel. Do you feel comfortable with them? If not, look elsewhere.
One of the reasons people hate dealing with accountants is that they don’t deal directly with the person they need to deal with. You call the accounting firm and ask for the person who handles small business taxes, and instead of talking to her, you talk to her assistant. But there is no reason why this should be so if the firm has good client service:
everyone should be ready and willing to talk to you about your tax questions or any other accounting questions you might have. The best way for them to do that is not only by having one person at each level who deals with clients but also by having others available as backups. If someone ahead of her in the chain points out that something is wrong, the client gets taken care of immediately; otherwise she might have had to wait days or weeks.
If you have a small business, choosing an accountant is a big deal. You need someone who will not only do the required work but also be helpful in making your business better.
The worst mistake you can make is to go for someone cheap. If you value your time at all, the vast majority of accountants cost more than you think; the cheapest way to get your taxes done is to do them yourself, and unless you’re getting some specific tax advantage like deducting a home office, it’s usually worth paying a little extra for an experienced professional. (Ask for references and check them.)
You don’t want an accountant who will make decisions for you; if anything, you want one who will gently push back on decisions you’ve made. You want someone who understands the business and what makes it unique; there are all kinds of specialized businesses (like restaurants) where accountants tend to think everyone works like everyone else.
The best accountants I know personally are:
- Slow: they never seem to be in a hurry and don’t mind spending time to really understand what’s going on and what has happened in the past.
- Business oriented: they understand that their role is more than just numbers
Good accountants are hard to find, and it is usually worth taking some time to find the right one. I know you’re busy, and no one likes filling out tax forms (especially if you’re pretty sure your accountant isn’t going to like the way you filled them out). But this is an area where it really pays to spend a little time up front.
The first thing to figure out is whether you need an accountant at all. If you have simple finances–no investments, no rental property, just a job and a checking account–you probably don’t. Paying someone to do your taxes is about as much fun as paying someone to clean your house–you can do it yourself with some hassle, or pay someone else with more hassle. Many people are tempted by the idea of using an online service.
If your finances are simple enough that you can honestly answer “yes” to all the questions–you have only one employer, you have no unusual deductions, etc.–it might be worth trying one of these services first. It’s not hard to put together a tax return yourself; most of us have done our own taxes at least once.
A good accountant is like a good plumber. A good plumber never advertises. If you ask people for recommendations, it turns out they don’t have any. And when you ask why, it turns out that their plumber is so good that there’s nothing to say. “He’s just the best plumber.”
The problem with this analogy is that in most cities there are many more plumbers than accountants, so even if your plumber is amazing, you can still get a recommendation.
But finding an accountant or tax adviser who is the best at what they do and who will work for you rather than for the IRS is very difficult. There are two reasons for this. First, most accountants are not nearly as good as they think they are. Second, most of the things people think of as “accounting” aren’t done by accountants at all.