If you came out of tax season feeling like you left money on the table, it might be time for a new certified public accountant. More than just an accountant and a tax specialist, a CPA steers and guides business owners through complex financial hurdles. Whether you hire in-house or outsource the work, finding a CPA is only part of the equation. It’s up to the business owner to create a culture of responsible financial reporting, practices and owner-to-accountant communication if the CPA is going to succeed.
CPA services: hire or outsource?
More than 20 years ago, Don Chandler served a customer who would wind up changing his business and his life. The customer was an accountant, and he soon counted Chandler among his clients. Two decades later, Chandler is president of Spa Brokers with six locations around Colorado — and he still uses the same CPA, who works out of his home with his wife.
More than just a reliable number cruncher and tax filer, the CPA
became a teacher.
“I learned from
him how to do most of the things he used to do,” Chandler says in reference to
tasks like generating profit-and-loss statements, balance sheets and journal
entries. “I used to obtain a
line of credit through a bank to purchase inventory. The bank required constant
statements and a new balance sheet every few months. I don’t need the bank
anymore — we now use a credit card — but watching him deal with the bank in
those days is how I learned.”
Chandler’s situation disproves a common misconception that
independent contractors like a CPA can’t provide the level of commitment you
get with a full-fledged employee.
That relationship is much of the reason Chris Curcio, CEO and president of Ohio-based Litehouse Pools and Spas, opted for hiring an in-house accountant rather than outsourcing to an accounting firm.
extremely fortunate to have an experienced CPA who wants to work part-time,” Curcio
says. “When you must
outsource, you are sharing time with an employee and you must deal with the
fact that outside companies have turnover. When they lose someone, you have to
teach the new employee about your business, and the loss of institutional
knowledge is time-consuming and expensive. A direct employee cares only for
your company and isn’t confusing you with someone else.”
Turnaround time for accounting processes is also a major reason
to hire in-house.
“An outside CPA might take a week or 10 days for monthly reporting,” says business advisor and educator Bill Ringle, founder of System Ringle. “There’s no reason an in-house accountant shouldn’t turn that around in five days.”
In the world of business, that gap can make all the difference:
Ringle says speed is one of the biggest reasons to hire in-house. “You close the books once a month
and reconcile accounts,” he says. “Payments
should have been received, invoices sent out. Business owners need to know how
they did in the prior month as soon as possible so they can make any needed
adjustments in terms of sales and revenue. If something’s wrong, they can’t
wait until mid-month when they could have taken corrective action sooner.”
benefit of having in-house [accountant services] is the ease of communication
and speed of work since we are not one of many clients, but the client,” Curcio
Get your CPA’s back with a bookkeeper
Ringle believes outsourced CPAs do their best work when they have
support from inside the business. That’s largely because CPAs tend to be
specialists who only handle taxes; Ringle says he’s never met one who handles
larger business needs.
The solution for most businesses, Ringle says, is to hire an
in-house bookkeeper to track, compile and maintain financial records and
documents — the key word being bookkeeper, not an administrator or secretary. “You need someone who has
accounting knowledge and is familiar with your software,” Ringle says.
The smallest companies might not need an internal bookkeeper,
Ringle adds. On the other end of the spectrum, larger companies — usually
around $10 million a year in revenue — will likely need to hire a controller
who performs services like cost accounting, analysis of new product lines and
even IT in some cases. In between a controller and nothing is the Goldilocks
option of a bookkeeper.
having a paralegal instead of a lawyer,” Ringle says. “A bookkeeper has taken some courses, maybe
has a degree. They’ll know how the balance sheet works; they’ll understand
The most important questions to ask potential bookkeepers,
however, are if they’re experienced with your particular software and if they’re
experienced in projecting cash flow.
“I almost never
see smaller businesses tracking or projecting cash flow,” Ringle says, “which is much more important than
profitability or sales because when you run out of cash, you’re finished.”
This type of work is likely to be a heavy lift for an admin who
isn’t a trained bookkeeper, and the difference can mean everything in terms of
your CPA’s performance.
“I see messed
up balance sheets or P&L reports all the time,” Ringle says. “It’s tremendously helpful for CPAs to have
a clean QuickBooks file. The problem is, QuickBooks is so user-friendly that it
accepts wrong information plugged into the wrong section or that isn’t
organized properly, which an admin or secretary wouldn’t know. They’re usually
just plugging in data. Then when it gets handed off to the CPA, it’s a mess.”
Beyond the bookkeeper model
While Ringle suggests hiring an in-house bookkeeper for all but
the smallest businesses, Chandler gets by without one — and he hardly qualifies
as a small-time upstart.
“I have one
in-house accounts receivable employee and one accounts payable employee who
also takes care of HR and manages the AR person,” Chandler says. “I use my [outsourced CPA] to prepare
monthly sales tax documents, personal property tax documents, corporate and
personal income taxes.”
To stay on track without a bookkeeper, Chandler has to run a
tight ship. The business puts all the money it collects into a single deposit
account. When it pays bills, it pays out of its checking account.
“No one can
write a check out of the deposit account as a safety net,” Chandler says. “When we reconcile, it’s easy
because all deposits are in one account and all checks are in another. The HR
employee makes sure every month that the checks cleared in the bank, that no
one is writing any more checks and that no one is taking money out.”
But hiring an in-house CPA on a part-time basis has served Curcio
well over the years.
typically will work in the office just two to three days per week, it is enough
even for our company size with 15 retail locations,” Curcio says. “If you can find a local CPA or
experienced accountant who you can hire on a part-time basis, you will likely
pay less than using a firm regularly and have much better control and clarity
of your business.”
So, where does a CPA come in?
Jamil Toubassi, owner of Flint Hills Spas, operates two stores in Wichita, Kansas. He outsources his CPA needs to one of the “top five to seven largest accounting firms here in the Wichita region,” Toubassi says. “They do a little bit of everything.”
Toubassi, who figures he’s “one location away” from hiring an in-house CPA, pays a variable
hourly rate, depending on which member of the accounting firm handles a
“If it’s a
partner, it’s one rate,” Toubassi says. “If it’s an accounting clerk, it’s another rate.”
He’s in communication with his accountant, or with the team
there, almost weekly — his geographic location makes a good CPA’s services an
absolute must. Kansas, after all, has more counties than any state in America.
“The sales tax
is very complicated here,” Toubassi says. “It can change just a few miles out of Wichita.”
Curcio, on the other hand, does not use his accountant for
federal, state or local income taxes.
focus for us is managing property taxes, payroll taxes, worker’s compensation,
major account reconciliations and preparations of all financials and
reconciliations for our outside accountant for our annual tax preparations and
review,” Curcio says. “She
reconciles accounts monthly and we can have access to needed reports quickly.”
While Toubassi relies on his CPA firm to perform crucial and
complex sales tax services, he also leans on them for little things.
“If I need help
or I can’t figure something out, I call,” Toubassi says. “If I’m not sure about tax implications of
a particular sale or preparation of financial statements, I call. I was
recently struggling to find last year’s volumes of a particular product in
QuickBooks, and I called them to help me.”
Chandler, too, turns to his CPA for issues both large and small.
“We meet once a
year, but we call on the phone throughout the year,” Chandler says. “We plan at the end of the year to
make sure we pay in enough for estimated taxes and that we posted expenses in
the right accounts, but we also call for smaller clarifications. I buy the
staff lunch every Friday. Is that a gift? A meeting? Training? How do I write
that off? Did I post it in the right account? Should I capitalize on a
particular expense? Is a major overhaul of a showroom written off as
maintenance and repair? These are the conversations I have with my accountant.”
Toubassi, who personally handles entering things into QuickBooks,
generating invoices, reconciling and paying the bills, does a “light dive” into his financials every month
and a “deep dive” annually in
July or August to make sure he has a clean six-month statement.
“We might see
an opportunity to grow the business,” Toubassi says. “As we learn more about those
opportunities, we’ll usually bring in the accountants if nothing else to act as
a sounding board for things we should consider.”
Lean on your CPA, but stand on your own two feet
Chandler relies on his accountant, but whatever he can do
himself, he does.
the company needs to be able to look at the books, the profit/loss statements,
the balance statements,” Chandler says. “If you don’t, you won’t care enough to do everything and you’ll get
Chandler’s keys to success are discipline and consistency.
“We pay the bills every week instead of every month,” Chandler says. “If something falls through, you don’t have to think back a month to who created the purchase order. If customers charge tubs on their credit cards, the company debits your account for the [transaction] fees. If you’re not on top of your bookkeeping, you might see $10,000 taken out you weren’t expecting.”
Toubassi concurs that in-house diligence and discipline are key —
and your ability to keep up can be a good indicator as to whether you need
“It’s all about
being on a schedule and a routine,” Toubassi says. “If you haven’t reconciled the bank
statements in eight months or it’s interfering with higher opportunity costs
like selling or growing, have someone come in and do it,” he says.
The right CPA for your company will have experience with
companies of similar size and ideally in an industry similar to hot tubs.
Beyond that, a CPA’s ability to perform at the highest levels depends heavily
on the processes, staff, division of labor and communication coming out of your