Do’s and don’ts of sourcing an outside accountant
As a business owner in the PHCE industry, you need accurate and timely financials you can trust.
Outsourcing your accounting is a great way to offload some of the stresses and responsibility of managing another department, but you need to be careful to hire the right accountant and then to carefully review their work.
If you’re one of the many companies out there using an outside accounting service to handle your bookkeeping, are they making sure your books are in order and accurate, and then providing you with a breakdown of information at the end of the month? Is your trial balance being tied out at the end of the month?
There are some great accountants out there. These accountants are working with the company to make sure they’re providing and booking the best possible information they can. They’ll also point out any issues they see and provide recommendations to improve reporting or operations.
There also are a lot of accountants out there who don’t do a great job, those who are providing only the bare minimum for their clients. These accountants’ primary focus is getting the bank accounts reconciled and tied out. Once that’s done, there’s very little effort that goes into the review and closing process.
A few things to consider
If you’re an owner looking to outsource your accounting or are wondering if you have the right accountant, there are a few things you should know.
The first: Outside accountants aren’t consultants. If you hire an accountant or accounting company to close your books and prepare your financials, they aren’t reviewing your information to make recommendations. They’ll only do what you tell them.
They might ask some questions or raise some concerns if what you’re asking goes against standard accounting practices, but making recommendations to improve your information and business is not their primary focus.
If you want an accounting firm or accountant to make these recommendations and review your information, you’ll have to specifically ask them to do it. A lot of accountants or firms have a consulting or advisory package in their pricing, but it requires some additional time on their end, so they want to make sure the company agrees to the work.
These accountants are questioned about their bills, so they’ll try to do the minimum amount of work necessary to check all the boxes and keep your bill down. For this reason, they tend to get in and out of your books as quickly as possible. It’s especially important you review their information and ask clarifying questions about anything that doesn’t look right.
Check and double check
If you’re not checking the work of your accountant, especially an outside accountant, you’re doing yourself a disservice.
The most common issues I see pop up are on the balance sheet. There are a lot of transactions that get tucked away in balance sheet accounts which aren’t reviewed. When we start working together and going through those accounts, I’m often told the accountant handles the balance sheet, but when we check with the accountant, they tell me it’s not part of their offering.
These issues can easily be eliminated by becoming more familiar with your balance sheet numbers and reviewing them each month once your books are closed. Ask your accountant about any balance changes that seem out of place. This will help ensure all your revenue and expenses are properly accounted for in any given month and that your balance sheet ratios are going to be accurate.
They don’t have a vested interest in your company the way you do. An outside accountant or firm is hired to close your books and produce financials. Your job is to use that information to manage your company. Be very specific in what your expectations are to any outside accountant or they might leave out certain processes you wish were in place.
I’m not putting down outside accountants, suggesting you can’t trust accountants or suggesting all companies hire an internal accountant. Outsourcing the month-end close and financial prep can be a great route and there are a lot of great accountants out there who can do a great job for your business.
I’m trying to make sure everyone is on the same page by reminding companies that accountants are not consultants. They only will do what they’re asked and hired to do.
So, if you don’t know what services they’re providing your business, let them know and plan out their work together. Ask them for suggestions regarding the work they should be doing that will best suit your needs. Review consistently, make more informed decisions and never be afraid to ask questions about specific numbers or processes that don’t look right.