By William J. Lynott

The relationship between a plumbing and mechanical contractor and the person who does the accounting and taxes is far more important than many owners and managers realize. In any small business, the right accountant functions almost like a partner. Chances are you look to your accountant for advice and help with business and management decisions, so it’s crucial that the relationship be comfortable and trusting.

“Accountants are more than just individuals who do your yearly taxes,” says business consultant and author Maria Marsala, Poulsbo, Wash. “The right accountant can advise you on a long list of other services, which may include advice on your accounting system, financial performance, estate/tax planning and retirement. Accountants are a crucial part of a business owner’s team, along with a banker and a lawyer.”

Here are seven tips to help you find the person who is the best fit for you and for your business:

1. Do a careful search for prospects.

While you may be lucky in going with a recommendation from a friend, you should do your homework first. “The best way to locate a compatible accountant is to ask around the community,” says CPA and tax advisor Genevia Gee Fulbright, Durham, N.C. 

Ask bankers, insurance agents and other small-business owners in your community, even other contractors. “If it is not a direct conflict,” Fulbright says, “consider using the same CPA. The information you share with your accountant is strictly confidential, and licensed accountants are bound to strict nondisclosure requirements.”

Vincent G. DiAntonio, CPA, J.D., Hass & Co., Media, Pa., notes that one of the most important factors in selecting an accountant is the quality of the customer service provided.

“This is reflected in everything the accountant does from how quickly the client gets a return telephone call to the accuracy and reliability of the advice provided,” he says. “Sometimes a recommendation from a friend is the best way to find a good accountant since some do not advertise. Many, in fact, acquire new clients solely through word of mouth. That gives them a strong incentive to provide quality customer service.”

2. Verify your prospect’s credentials.

“Some individuals working as bookkeepers or accountants have no formal license or education in accounting,” cautions Navin Sethi, CPA and tax manager with Rothstein Kass, Walnut Creek, Calif. “That’s why you should do a thorough investigation before you hire an accountant. The best way to protect yourself is to hire a certified public accountant.”

In order to earn the CPA credential, an applicant must meet the requirements of the state or jurisdiction in which they practice, as well as pass the national CPA exam, Sethi explains. Some states may require a CPA applicant to have some practical work experience before receiving his license.

Once licensed, CPAs must take specified amounts of continuing professional education courses annually to retain their license to practice. The benefit is working with a professional who is required to keep up-to-date on the latest and best accounting methods, just as plumbing and heating contractors must keep up with new technology and installation methods.

3. Be sure to check references.

Checking an applicant’s references is one of the most important steps in the hiring process. While it may be rare, even professionals can misrepresent their backgrounds and credentials or simply leave out important information.

Checking references takes a little time, but human resource professionals know it’s a simple step that could save you from hiring someone who is woefully unqualified.

4. Find out if you’re comfortable with the person.

Fulbright emphasizes the importance of the chemistry between you and your accountant. “Make sure you have clear goals for your business and that your prospective accountant understands them,” she says. “Go to lunch, have a conversation. That will help you to decide if you’re both on the same page.”

Every expert interviewed for this article agrees with the need to have an at-length personal interview before hiring an accountant.

5. Use the 60% rule.

Keep in mind a wide range of specialties are open to CPAs, from individual taxes to large corporate clients to small businesses, and everything in between.

“Look for a CPA who has 60% of his business coming from small-business owners like you,” Marsala says. “He’s more apt to keep up with the laws regarding clients he deals with most often.”

If your business is incorporated or is an LLC, you want to make sure the person specializes in corporate accounting, including financial statements and audits, she adds.

6. Consider your special needs.

If you have or are anticipating unusual accounting problems in your business, you should look for an accountant with specialized training or experience.

“If you are in need of an outside audit for your business, additional designations such as a certified fraud examiner would be helpful,” Fulbright explains. “If you need a business appraisal or valuation, someone with an accredited business valuation designation or certified valuation analyst designation would be an advantage.”

Perhaps you have limited experience in personal financial management and would like to explore the possibility of increasing your investment portfolio. “An accountant who also is a certified financial planner would be a good choice when you need investment/portfolio advice,” Fulbright notes.

CPA Carol Katz, Baltimore, Md., notes the biggest problem many small-business owners have is taking the time to evaluate their businesses.

“They are so busy running the business and keeping up with the paperwork that they do not allow enough time to plan ahead,” she says. “You should always consult with your accountant before entering into any significant business or financial transaction. Undoing a poorly thought-out transaction or removing assets from an entity without causing unnecessary taxes can cost much, much more than the time spent on a planning meeting and document review.”

Sucession planning is another issue where an accountant can be of help.

“The nature of small businesses requires owners to consider succession planning,” DiAntonio says. “Generally, succession planning consists of either transferring the business to the next generation, or selling the business outright to a third party or an employee. This will often be one of the most significant life events of a business owner and should be planned appropriately by a trusted advisor.

“Typically, a CPA who knows the business and its assets can bring additional value to a potential sale or transfer. Also, once the business is converted into cash or a revenue stream, a financial planner can assist the client in maintaining and growing the client’s wealth.”

7. Don’t be afraid to make a change.

Despite your best efforts, it’s always possible you will find yourself working with an accountant who simply isn’t right for you and your business. If you should find yourself in that position, you should not hesitate to look for a replacement, our experts say. Your accountant is too important to your success for you to compromise.

Business owners should continually review where they are in the life cycle of their professional careers. “They may need to change the business form of the entity as it grows,” Katz explains.

Some entrepreneurs may need tax-savvy ways to bring in family members to whom the business will eventually be transferred. If there is no succession planned, there probably should be a proposed structure for eventual sale of the business, including buy/sell agreements among partners.

“If the accountant used when the business was small no longer seems effective, then it may be time to move to another with more expertise,” Katz says.

Finding the right accountant for your business may take a special effort, but the time you spend on that job may well prove to be among your most profitable investments.

Should your business accountant do your personal taxes?

Because some business owners believe that using the same accountant to do both business and personal tax work may not be appropriate, we asked our experts for their opinions.

“I would certainly advise that only one accountant be used for both business and personal purposes,” CPA Carol Katz says. “This is because the two are invariably intertwined. Year-end planning for a business impacts personal tax situations and vice versa.”

She adds that as a practice grows, the accountant can advise and assist with additional services, such as pension planning, estate planning and buy/sell planning.

“There are very real economies gained by having one accountant serve as both the business accountant and the owners’ personal accountant, especially if the business is operated as a sole proprietorship, S corporation, partnership or LLC,” CPA Vincent DiAntonio Jr. notes. “Since the income tax burden for these types of entities is usually borne solely by the entity owners, decisions made at the business entity level almost always have consequences (especially tax consequences) on the personal level.”

He adds that coordinating such business decisions with the owner’s personal situations is extremely important. Having one accountant simplifies this process.

Author bio: William J. Lynott is a veteran freelance writer who specializes in business management as well as personal and business finance. His work appears regularly in trade publications and newspapers as well as consumer magazines including Reader’s Digest, AARP Bulletin and Family Circle. Visit his website at www.blynott.com.