How to Choose an Accountant
There are a number of issues to consider when choosing an accountant. Some issues will be more important than others, depending on your situation. This article explains things you need to be aware of when you choose an accountant.
Location used to be an important factor when choosing an accountant. These days however, cloud accounting software enables an accountant to work with your financial data anywhere in the world. So, you now have a much wider choice of accountants, and can choose one that really matches you and your business.
Some business owners still prefer face to face contact though. If you are one of those then it’s probably best to find an accountant within a 10 kilometre radius of your business. That should allow enough accountants to choose from, while minimising travel time. Some accountants are able to travel to your business premises or home.
In Australia there is no qualification necessary to be called an “accountant”. However, most people who call themselves accountants would have at minimum a Diploma level qualification, and more commonly a Bachelor degree (usually a Bachelor of Business/Commerce). Some accountants do additional training such as another undergraduate degree in law/economics/finance, or postgraduate qualifications.
It is not compulsory for an accountant to be a member of an accounting association, however most accountants are. Accounting associations set minimum education, training, and ethical requirements to be a member.
There are three main accounting associations in Australia:
· CPA Australia (“CPA”)
· The Institute of Chartered Accountants (“ICAA”)
· Institute of Public Accountants Australia (“IPAA”)
CPA and ICAA have higher membership entry requirements than the IPAA. Traditionally, most CPAs have been “in house” accountants working for companies, whereas Chartered Accountants usually worked for public accounting firms. However, some CPAs work in public practice firms and some CAs work as “in house” accountants.
To prepare tax returns and give tax advice, an accountant (or someone in the firm) must be a registered tax agent.
Most accounting firms offer compliance services such as preparation of financial accounts and tax returns. These services are called compliance services as every business must lodge an annual tax return, and usually that requires financial statement preparation as well.
Many firms also offer other services such as bookkeeping and business advice. Some firms can provide financial advice if they are registered to do so. Most firms tend to have referral relationships in place with qualified professionals who can provide services the accountant doesn’t, such as legal/banking/financial services.
Caution: be careful of accountants that promote themselves as business advisors. Such accountants wouldn’t like you to be aware of this, but most accountants are not naturally good business advisors. Accountants are still primarily technicians. The natural role of an accountant for many hundreds of years (in fact since accounting was invented) was to keep accurate business records.
Since the introduction of computerised accounting, there has been a growing awareness within the public accounting industry that computers may one day make accountants redundant. Consequently, there has been a general move to promote and market accountants as “business advisors”, and thereby attempt to sell clients more services, regardless of the clients real needs.
It is true that most accountants learn about business in general and different types of businesses through completing work for their own clients. However, it is not the same as being a business owner and solely responsible for business decisions. Success in business is much more than figures, it involves a lot of hard work, good decision making, marketing/sales, budgeting, dealing with people etc. Accountant’s claims to be business advisors who can help you “grow your business” are often marketing nonsense and only fool the gullible.
The only accountants who can genuinely claim to be business advisors are those that are successful business people in their own right. That means they have established their own successful business (which could be their own accounting practice). Even accounting firm owners who buy an existing accounting firm to get started, can still lack business skills such as marketing or even raw “drive”. To put it simply, there are no shortcuts to becoming a good business person. Every successful business person works hard, makes lots of mistakes and always keeps learning.
Most accounting firms charge by the hour. Hourly rates can vary but most accounting work is usually between $100 to $300 an hour for most suburban accounting firms, depending on the complexity of the work and the size of the firm. Larger accounting firms usually charge more towards $300 an hour, however they also provide a greater range of services and can service larger business clients.
Some firms have “fixed fee” services. In reality, the “fixed fee” price for services is usually worked out by how much time it would take the accountants to provide a particular service. The advantage of fixed fees for clients however is that the client knows they will avoid any nasty bill surprises.
If a firm charges by hourly rates, you should get a quote for how much your fee is likely to be. Realise that accounting firms do not like surprises any more than you do, so usually they will quote within a price range. It is not always straightforward to give an accurate quote and clients can have more complicated situations than at first seems apparent. No accountant likes giving a quote then finding out a client has complications that make the work take longer.
As a general rule of thumb, it should not take longer than four weeks for an accounting firm to do your annual accounts and tax returns. If a firm consistently takes longer than that, they are probably understaffed or disorganised and they probably do not deserve your business.
Your accountant should respond to your queries within a few days maximum. The accountant may not be able to answer complex queries fully within a short time, but he or she should at least acknowledge your query and not leave you wondering. Better accountants usually respond within 24 hours or sooner.
Speed of response to your queries is important as when you’re a business owner you need to focus and get on with your business and not be bogged down waiting for answers.
Cloud (online) accounting software has dramatically improved business bookkeeping and accounting. Most progressive accounting firms enthusiastically recommend cloud software such as Xero or Myob for small to medium businesses.
Some firms have adopted paperless offices and streamlined their procedures. It’s a good idea to ask your potential accountant about their use of technology, as efficient use of technology by an accountant will keep your fees down and help them to do your work quicker.
Some examples of of technology that you could evaluate yourself might include whether the accountant uses:
· Xero or Myob cloud software to prepare your accounts and tax returns
· electronic signing and storage of documents
· online booking system for appointments
· easy online video or text chat
Accountants by nature tend to be introverted, analytical, and better at dealing with data than with people. When data is involved, it’s preferable to have someone who is accurate and detailed. However, the downside is that many accountants can lack communication skills. Some accountants develop communication skills as they gain more confidence and experience; others recognise that to get ahead, good communication skills are essential and must be learnt if they don’t come naturally.
Good communication skills are not always important for compliance work such as financial accounts and tax returns. Some business owners simply want the necessary work done so they can focus on their business. And despite what some accountants say many micro and small businesses are not complex and simply require accounts and tax returns to be lodged.
However, if you’re a business owner who wants to understand more about the financial side of your business, and/or if you have a larger business, then you will benefit from an accountant who can explain complex concepts simply.