It’s Friday morning, and as Jim steps out of his truck, he happens to glance at his watch, 7:38 am. A bit late today, he thinks. He goes into his favorite breakfast spot in town as he does every Friday for the past five years and as usual his friend, Dave has arrived early and grabbed their regular table by the window.
Over a plate of eggs and sausage, Jim and Dave catch up on weather, last night’s hockey game, the news they read in the paper about the mayor and council bumping heads again; the usual local gossip.
Over the last piece of toast and second coffee, Dave happens to say “At last, I got to see my accountant, and I found out my tax bill wasn’t as high as I thought it would be.” Jim’s brow furrowed as he looked over at Dave and said, “Wasn’t your business year end seven months ago, back in July? Are you just finding out about your business results now?”
Dave looked up and replied, “Yes, that’s normal for me. I hate taxes, as you know and not knowing any earlier is fine by me.”
“But don’t you have to pay interest on your tax bill as well? Are you okay with that too?” Jim asks.
“Besides, I’m not sure why you just found out how much tax you owed on your business when your year-end was seven months ago. Don’t you meet with your accountant quarterly to discuss business strategies, new opportunities, cash flow projections, compare your year to projections and of course, profit to date and the type of tax installments you should be making?”
“OMG Jim that was a mouth full, it sounds like you’re the accountant.”
“No, thank goodness that is not my job, I hire someone who is good at what he does and uses what he knows. Two years ago, I got behind on taxes. I was not sure about the financial side of my business and just kept my head down and tried to work harder. Then, Jerry who owns the two Canadian Tire stores mentioned that he had a great accountant and that I should check out his website, give him a call and go in for a chat. Best thing I ever did for me, my family and my business.”
Dave looked hard at Jim and said, “If you spend all that time with an accountant, your bill must be huge.”
Jim looked back just as hard or perhaps for emphasis even harder and said, “It is my turn to OMG you, my friend. Time with a ‘good’ accountant is not a cost; it is an investment in your business. One of the primary objectives of my company is to make more money and create security for my family. Help from an account, who is an expert not just in finances but business as well turned my business around financially. How do you think I could afford to buy new equipment and add that to the company last year? And what you don’t see is how I reduced my staff costs per average sale? It wasn’t just dumb luck. Directional guidance, planning, and implementation through discussions with my accountant/business advisor are what got me there.”
“Okay, okay,” Dave responded. “I can see you are pumped up and excited by the financial change in your business over the last year or more. If you say this is due to your accountant, what the heck does he do that was different from your last accountant, the previous guy was supposed to be good at what he did?”
Jim lit up and smiled. “Sorry, not trying to preach here but let me tell you about the differences. The last guy was good at forming financial statements and filing tax returns, but there were two issues I had with him. I will tell you about the first one quickly as they were the things I knew about and the ones that annoyed me all the time. The second set I will save for another day. The second set is the one I didn’t even know about, and they were even more rewarding and profitable for my business.”
The truth is, some good accountants could still mess up and hurt your business. To avoid such situations and find an all-encompassing financial professional, Harris CPA & Associates have compiled these five crucial points for you to keep in mind when hiring an accountant.
1. Communication.
Whenever I called my former accountant, I always needed to leave a message. He never answered his phone. He would take days to return my call and then start the phone tag game. For emails, as well, it always took days and sometimes a week or more to get a response. If I’m calling, I need an answer as it is almost always a numbers question and without an answer, I cannot make a quick decision. Slow decisions always cost you money.
My new accountant runs his accounting business as well as his business. He knows that communication is the biggest issue in business situations. A timely, open and constructive discussion is the first and most important skill in any business situation. So, when I call or email him, he always gets back to me right away and never longer than twenty-four hours.
2. Late reports.
The requirement to file reports is a mandatory part of a business. The most recognized is for government reports, whether it is CRA for taxes, payroll, GST/HST, EHT and of course, WSIB. Late reports can not only be expensive for late interest costs but penalties as well.
The government requires corporate tax returns to be filed within six months of the business year end. However, if there is any tax owing, they have to be paid within three months, even though the tax return does not have to be filed for six months.
HST and payroll which are considered trust funds by the government have much more stringent filing requirements and carry penalties and interest for being late.
My old accountant targeted having returns done within six months after year-end. It was always touch and go when meeting the deadline, and the information in them was so old, it had little value in planning and decision making.
My new accountant works on the three-month goal and often has statements completed well before three months, let alone six months. This means I have more timely information to help me make decisions.
3. Financial statements/results.
Two years ago, I didn’t understand the financial statements my accountant prepared. I didn’t know what they meant, and I was too embarrassed to ask. I have been in this business for the last twenty-eight years, and I was unable to understand my statements. Looking back at it now, it was such a disservice to my business and my family. I used to estimate and even guess how my business was doing based upon the money in my bank account. It was unfortunate that I did not find an accountant before this who took the time to ensure I knew what the numbers meant, the key ratios and items to watch and understand which would have made a big difference in my profit. After all, this is my family’s bread and butter and future.
My new accountant has not only educated me on the externally prepared financial statements, but he has shown me the internal reports and ratios to watch on a daily, weekly, monthly basis to truly know how my business is performing, but more importantly, what to do to make improvements quickly.
4. Fees.
When I sold my apartment building on George Street, I had a good capital gain. My old accountant prepared the forms to issue a tax-free capital dividend. However, my old accountant deemed this work to be worth more than his normal hourly rate as I was getting this great ‘tax-free’ dividend. The thing he forgot was that this was my money. I worked hard to make the sale, and the government set the rules for a tax-free dividend. All my accountant did was prepare some tax forms. He charged me $875 for something that should have been billed at $375.
That was the last straw that broke my back. I went shopping for a new accountant. I should have changed accountants much before this, but after being charged such a high fee, it was a big wake up call.
As long as fees are ‘fair’ and within an acceptable range and applied consistently, I know there is a cost for a good accountant and most will pay those fees. It is when I felt I was being taken advantage of that it became an issue. And of course, this goes back to the first thing we talked about – communications. For me, it has to be open, timely and constructive.
5. Work relationship.
I don’t think my personality and my accountant’s personality worked. I want to work with someone I like and gets along with me. I guess I wanted to be treated like an equal. My time is just as valuable as my accountant’s time. I don’t want to be afraid to call him because I may come across as stupid or be worried about the cost.
The truth is I have met accountants who have an ego that says, ‘I am better than most people,’ and this comes through in almost everything they say and do. I have met other accountants that are almost a stereotype of the old jokes about accountants being boring, stuffy, just interested in the numbers, and don’t like change. That’s not the kind of accountant I want.
I want a good accountant who is fun, mature and has real-life experience in the business world. I want an accountant who has real-world experience and understands very clearly how to face every day. I want a professional advisor who can advise me, not just fill in forms.
It took me a while to find that person, but it was well worth the time. That is the advice I give to everyone; do your homework, ask lots of questions and make sure you feel confident that your accountant is looking out for your business and best interests.
Mary came over with the bill, and as usual, Dave and Jim split the tab.
“Jim thanks for all of that. It makes me take another look at my accountant. Unfortunately, too many of those points ring true for me.” Next breakfast perhaps we can talk about your new accountant a bit more.”
“Absolutely Dave, see you next week!”
If you’re looking for a new accountant in Peterborough, ON, reach out to Harris CPA & Associates. We are a leading accounting firm offering business accounting, bookkeeping, tax preparation, income tax, tax filing, tax planning and other tax services. We help clients advance their business through strategic growth, decision making, business performance, business analysis, and compliance services.
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