When you’re running a small business, having a strong and trusting relationship with your accountant is essential.
After all, this is the person who’s not only keeping an eye on your financials; they’re also keeping you from running afoul with the IRS.
So how can you ensure you’re getting the most out of that relationship?
You and your accountant need to be on the same page, and asking the right questions will help you both do what’s best for your business.
Start with the basics.
If you’re just starting out or looking to switch accountants, there are some important questions to ask first.
Basic questions about education and certifications may seem obvious, but you should also ask about past experience and request references (Has this accountant done work in your industry before? Are they familiar with the specific tax and reporting requirements applicable to it?).
Ask about what services they provide – an accountant who can help you grow your business will be able to provide budgeting and cash flow management advice as well as business and strategic planning.
If you’re thinking of going with a firm, make sure you’ll have a single point of contact who will get to know your business inside and out.
Then get the details.
Once you have chosen an accountant, stay involved with their work and make sure you know what’s going on beyond the red or black line at the bottom of your Profit and Loss Statement.
If your accountant were to disappear tomorrow, you should be able to understand your business’s figures and overall financial health.
An important starting point for discussing your figures and understanding your business’s financial standing is comparing your business to industry standards (part of the reason to go with an accountant with experience in your field).
Gross margins and net profits can vary drastically from one industry to another, and a 10% annual net profit for a clothing shop has a very different implication than a 10% annual net profit for a private practice physician.
Instead of just asking if these figures are “good” or “bad,” you should ask your accountant to show you relevant industry benchmarks, and if your business isn’t measuring up, ask where you’re losing money and how you can shore up those numbers.
Knowing how your accounts differ from your competitors is a great way to identify areas for improvement.
You should also understand the numbers specific to your business. Ask to see a breakdown of your offerings to identify which products or services bring in the most profit.
If you sell a product, know exactly what is included in your cost of goods sold, the cost that’s slashed from your gross income for each and every item you sell.
Find out what your breakeven point is, and use this number when deciding prices or making marketing decisions (from offering discounts to spending on advertising).
Don’t forget the big picture.
Remember to ask “big picture” advice questions too: Are you making wise investments? How can your business cash flow be improved?
If you’re in growth mode or if you owe a particularly high tax bill this season, be sure to seek their advice about small business loans and the right amount to borrow.
Overall, how financially healthy is your business, and would it be able to survive a bad season? A bad year? A recession?
Whenever you have a concern or feel you don’t understand something, don’t be afraid to ask “why.”
You won’t be overstepping your bounds or asking too much – a good accountant should be there for more than just plugging numbers into spreadsheets.
After all, your accountant knows your business’s finances better than anyone else (except perhaps you), so they’re in the best position to answer these questions – as long as you think to ask.