If you are a business owner, you probably have an accountant.
The relationship you have with your accountant is very important. Your accountant prepares and helps you to interpret the accounts for your business and ensures that you comply with various regulations re reporting and taxation.
If this relationship is not providing you with the advice and inputs that you need, then you need to think about changing. However, if you change you don’t want to end up back in the same situation – just with a different accountant.
I have been working as an accountant in practice for many years and, in that time, I have taken on several clients who left their previous accountant because of problems they encountered.
Let me explain to you what are the most common problems that have been reported to me and let me tell you how you could avoid or at least minimise these.
Little or no explanations for your results
You may have been expecting to see a certain profit but when your accounts are complete the results are different – usually not as good as you expected.
You look for an explanation. You want to understand your business and to know what you can do to improve your results.
Your accountant can’t provide the explanation. They just tell you that this is the answer we got and they can’t provide any other insights.
How to avoid this
Speak to existing clients of the accountant you are considering moving to and ask how the accountant has responded in similar situations in the past.
Give the accountant a couple of scenarios that you have had and ask what may have caused those. You will learn a lot from how they approach answering these questions.
Little or no advice is given
Some accountants are reluctant to give advice. I had one client who asked his previous client if he should renovate his offices. The accountant simply replied “That’s up to you.”
Technically, that answer is correct but what the client is really asking is “how do I make the decision.”
You need to be able to ask your accountant for help with major decisions. Additionally, your accountant has access to all of your financial data and if he/she spots something that could help, you want them to tell you.
How to avoid this
When you meet with the accountant that you are considering moving to, have one or two questions that you can ask so that you can get a sense of how the accountant will reply.
You can also speak with other clients to see if they are provided with relevant and useful advice.
Too much contact is with junior staff
In many firms, the principal can be very busy and often delegates the interaction with a client to employees.
While its normal, and more cost efficient, for junior staff to do the number crunching work, you want your accountant to share his/her expertise and experience with you.
At a minimum, the principal should review the file, should become familiar with your situation and should provide analysis and advice.
Junior staff are unlikely to have the experience or the confidence to deputise adequately for the principal.
How to avoid this
When engaging with the accountant, ask with whom you will have interactions and clarify the purpose of the interactions.
Again, find out what happens with existing clients of the same accountant – not clients of his/her partners.
When the accountant is issuing the letter of engagement, you could consider asking that this letter be used to specify the type and nature of interactions that you will have with the accountant and his/her office.
Too much jargon
Many clients report that their accountant is no good at explaining things to them. The clients give up asking because they don’t get the answers that they need.
Typically, what is happening is that the accountant is so familiar with the material that they unconsciously use jargon which is not readily understandable by most clients.
How to avoid this.
Test the accountant by asking him/her to explain something to you. Bring a situation that you had previously or something topical for you now and discuss this with the accountant.
Ask existing clients how they rate the explanations of the accountants.
Hidden commissions or biased advice
Many accountants earn commissions on sales of life and pension products or tax based investment products. They can also earn extra income by acting as resellers for software products. These practices are more common with larger firms.
These accounting firms may have associated companies that sell software or financial services. They may appear to be independent but the shareholders could well be partners in the accounting firm.
If your accountant is recommending something to you, they should disclose any fees or commissions earned that could bias the advice they give.
If they are a tied agent for a particular life and pension company, that should be disclosed as this relationship likely means that they will not have researched the whole market when selecting the product offered to you.
If they are connected to a company selling a product of service that they recommend, then they should disclose that.
How to avoid this
Don’t be afraid to ask the accountant if they are earning any fees or commissions on any product they are recommending.
Consider asking them to operate on a fee rather than commission basis.
Consider asking them to include a statement in their letter of engagement relating to transparency around fees and commissions.
Recommending systems that suit only them
Some accountants want their clients to use accounting or payroll software that they already use themselves.
On one level this is fine, as it delivers efficiencies to the accounting firm.
However, if the software does not have the functionality that you need then it may not be the best fit for your business. For example if you want to use cloud systems but they only work with desktop systems then their proposed solution is not a good fit for you.
How you can avoid this
Ask upfront, if the accountant has any preferences for which software systems they like clients to use and ask how flexible they are around this.
Do a system evaluation before you buy the software and implement any software to make sure that it’s a good fit for you. I have an article on selecting accounting software called “How to choose accounting software”.
A friend or business associate may have recommended a particular accountant to you because they were very happy with the service. However, you may have different needs from your accountant.
For example, your friend may have PAYE income and a rental income portfolio. You on the other hand have an engineering business.
Your friend will be looking for basic accounts and tax advice. You could be looking for support with budgets, product costing and maybe business planning.
Your friends accountant may or may not be a good fit for you. Pretty soon after starting to work with this accountant you will know whether you have made a mistake or not.
How to avoid this
Understand what sort of client base the accountant has.
Does he/she specialise or have sufficient experience in your particular sector?
Consider asking some questions along the lines of how do you handle particular situations unique to your sector. Consider asking if they can outline their experience with your sector.
Lack of contact during the year
Many accountants have little or no contact with their clients other than the few days or weeks when they are working on your accounts.
This may suit some clients but most clients will require some accounting inputs during the year.
Issues arise where it would be helpful to talk to an accountant. You may have questions that you would like to ask. There may be legal or technical changes that you should be made aware of.
Not having contact could lead to sub-optimal decisions or non-compliance with certain requirements.
How to avoid this
Talk to existing clients and establish what sort of contact they need and get.
See if this is covered in the engagement letter. If not, consider including something around this.
Unexpected Fee Notes
Sometimes clients ring up with queries that they think are minor and the accountant should be able to answer off the top of their head.
On the other hand, the accountant sees a more complex issue and undertakes some research and investigation to make sure they are giving the best answer.
The result is that the accountant invests significant time and then bills for this time.
The client may not be aware of the amount of time that has been input and is very surprised when a large bill comes in.
How to avoid this
Its normal that the costs of responding to minor questions would be covered in the annual fee but issues that take more than 15-30 minutes to address may be charged separately.
In the engagement letter, include something to specify that the accountant will flag when something is going to trigger a separate bill.
You can then have a discussion to see if it your request is something that justifies that fee.
Also, check with existing clients of the accountant to see how queries are dealt with.
Why is AccountsPLUS different.
Over the years while working as an accountant, clients have often commented that I am very different to other accountants that they have worked with. When I try to drill down to understand what they mean a few common responses come up.
They tell me that they can understand me. They say that I give advice about improving performance and profitability. They can see that I want them to understand the accounts. They comment that I have a better understanding of their business because I am more hands on than other accountants they worked with.
I think it comes from my background and experience. I relate well to non-accountants because I qualified first as an engineer and I had no experience with accounting before starting to train as an accountant.
Then I went into industry and my role involved supporting management to understand the financial impacts of their decisions. I could see the difficulty they had in understanding accounting information, but I knew that this was down to the way the information was presented.
I also have significant experience working on projects to improve profitability. I can see how the accounting data can be used to drive the business and I try to use business software to organise the most relevant data and make it available to management.
Bottom line, my background is very different from most other accountants.
In many ways the accountant-client relationship is a project. You need to have a good project definition up front.
You need to identify what you expect from your accountant and then have a discussion to ensure that your accountant shares your understanding.
Be very careful to do your homework before you decide to hire an accountant for your business. You are likely to be working with your new accountant for several years and the relationship needs to be excellent.
If after reading this article, you feel like you need to change accountants but are not sure what to do, I have an article on changing accountants that might be helpful – How diffcult is changing your accountant.
Over to you
Have you been experienced frustrations when working with your accountant? What type of problems did you face?
I would love to you hear from you, so please leave a comment below.