Mistake One :: Hiring a Bookkeeper and Expecting Accounting Services
Bookkeepers can be extremely valuable to a business. They are a significant help when it comes to paying bills, invoicing, and data entry. However, if you are a start-up or growth stage business, you need more than that. Accountants provide tools, such as monthly reporting packages and analysis, that enable business owners to better understand their model. Moreover, accountants many times offer insight into process improvement. These tools are critical to improving profitability and efficiency.
Further, bookkeepers cannot always account for transactions in conjunction with Generally Acceptable Accounting Principles (GAAP). Why does this matter? Well, to take your company to the next level, you may need third party funding down the road. Banks and investors, alike, typically require financials on a GAAP basis.
Mistake Two :: Hiring the First Accountant a Friend or Acquaintance Refers
Simply, what works for one doesn’t always work for another. For example, Bob from down the street owns a successful financial planning group. Jenny just started an online clothing store. Bob has always been more than satisfied with his accountant and tells Jenny she can’t go wrong using his firm. Word of mouth referrals are the best, right? They can be, but that doesn’t mean you shouldn’t do your due diligence when hiring. It turns out Bob’s accountant didn’t have appropriate ecommerce, inventory and systems experience to meet Jenny’s needs. So now Jenny’s inventory is a mess and she is back on the hunt for an accountant. Moral of the story is put in the time to find the right fit.
Mistake Three :: Hiring an Accountant with only a Tax or Business Accounting Background
Every time I tell someone I am a CPA, they assume I do taxes. I don’t do taxes. In fact, I don’t even do my own taxes. As a business owner you are going to need a firm who can help you with the everyday blocking and tackling around the financials as well as one that can provide BOTH business and tax advisory services. If firm XYZ, Tax Specialists, is on your list of accountants to call, cross it off. The firm’s background is one dimensional and isn’t going to meet your needs. If you are calling firm ABC, CPAs be sure you ask if they have experts in both business accounting and tax accounting. In fact, ask to speak with someone from each field and understand how the business accountant and tax accountant will collaborate on your account.
Mistake Four :: Hiring an Accountant that Can’t Grow with You
There aren’t many businesses that start and hope to stay small. The goal is growth and profitability. When hiring an accountant, look for someone who has the tools and processes already in place to be in it for the long haul. Things to ask potential accountants before hiring:
- What systems do you use?
- What is the size range of your current client portfolio?
- What is the size of the accounting team? (If he/she is currently a one-man show, you may not want to consider for lack of bandwidth)
- Do you have a tax partner who will be able to provide tax and advisory services?
- Give an example of a client’s revenue growth under your tenure. For example, Client A was only doing $5K/month when the relationship began and now they are doing $500K/month.
- Have you worked with growth stage companies that have raised capital?
If the accountant can readily provide satisfactory answers to the above questions, he/she may be worth considering.
Mistake Five :: Hiring the Accountant that Provided the Cheapest Quote
Mistake Five comes back to the old adage “you get what you pay for.” We fully acknowledge start-ups and small businesses have budget constraints. And, we certainly aren’t suggesting hiring the most expensive accountant. However, you need to understand what the quote provides and what paying a little bit more may provide in both the short- and long-term. Go in with eyes wide open. Again, a list of things to ask:
- What do I get on a monthly, quarterly and annual basis for this price?
- By what date will you deliver the above services? For example, will you receive a reporting package by the 15th of each month to capture the previous month’s results?
- What is the price range of services the firm is currently providing? If the quote you received is close to the low end, chances are you will fall to the bottom of their priority list.
So after taking stock of the above, you are more than ready to hire an accountant that will help take your business to the next level. Happy Hiring!