Over the years I've spoken to many business owners and I'm part of several business groups. Time and time again I hear complaints about why accountants cost so much money, and how to best save money on accounting fees. Want to know the secret to lower accounting fees? Use your accountant correctly. It's simple.
Qualified accountants have worked hard to earn professional accounting designations, they have years of work experience, they complete annual professional development courses, and they need to follow a bunch of other requirements to keep their licenses valid. Good accountants use all of the above to provide you with good value for money. They answer your tough questions, they help you with your accounting, and they help you save tax. So......what's the problem? The problem is that all of the good stuff is hard to deliver if accountants are only focusing their time and energy on the basics.
The help reduce your business accounting fees, and to help you get the most out of your accountant relationship, consider these 5 tips:
1) Utilize or get a Bookkeeper
Bookkeepers are essential for your business as they keep track of invoices issued to customers, the payments received, invoices to be paid, and the proper allocation of each expense. An excellent bookkeeper should understand your business and be able to correctly allocate expenses, ensure proper coding of taxes, and make sure books and records are up to date. Business owners can do their own bookkeeping but delegation of this work ensures the best utilization of the owner's skills and experience.
So what goes wrong? Higher accounting fees are very correlated to the quality of your accounting records. If you have poor bookkeeping, your accountant will be forced to fix things, and therefore you'll pay more in fees. Usually business owners "think" their records are fine, which means they don't necessarily see the value or the need for additional costs.
2) Have a System for your Invoices / Receipts
Every business has expenses but some businesses don't have a good system for keeping track of their receipts or invoices. Contractual agreements, invoices, and receipts are important to confirm the validity of expenses and to provide support for the accounting treatment of financial transactions. They also help if there is ever a tax audit or your accountant needs to verify any information. There are many tools to help automate your process for managing your invoices and receipts. If you are unsure of the best options to keep track of your invoices, receipts, and other supporting documentation, talk to your accountant and get some options that will work best for your business.
So what goes wrong? Paying your accountant to organize and understand your financial information is a waste of money. Get organized to reduce the time your accountant needs to spend on your file.
3) Separate Business Expenses from Personal Costs
Rule number 1 when running a business is to properly separate your business expenses from anything personal. Business owners should not be using personal bank accounts or personal credit cards for anything business. Unfortunately, this happens more often than not which creates a huge mess. Even at the start of the business, the business should have its own bank account and a dedicated credit card. It is easier to manage and record transactions when business expenses are separate from personal expenses. Business owner-managers can get reimbursed for reasonable expenses such as office use, phone, meals and entertainment, and travel. It is important to know which expenses are reasonable and which are not, and your accountant is the best to discuss these expenses.
So what goes wrong? Having your accountant try to separate personal costs from your business expenses is not a good use of their time. In fact, it's a total waste of their time, you'll end up paying more, and you need to do better.
4) Make Sure to Discuss Fees Upfront
Just like getting plumbing help or a renovation done, make sure you ask your accountant what they think their fee will be. Your expectation of the cost could be very different from what they plan to charge you. If this is the case, ask if there are things you can do to help reduce your costs, maybe your records aren't as good as you thought. Alternatively, there may be complexities in your business that they work through that you aren't even aware of. Accountants like numbers and the good ones will be upfront with you about what they expect their fees to be.
Other thought: If you feel like your accounting fees are going nowhere but up, and you already are pretty organized with a good system of bookkeeping, perhaps you need to explore other accountant options. For example, larger accounting firms have a wide breadth of services, usually fancy offices, and generally have lots of overhead and marketing costs. If you are a smaller business with pretty basic needs, and you don't want to pay for all the bells and whistles, just quality accounting and tax work, consider looking for smaller, more boutique accounting firms to help you.
5) Pro-Actively Reach Out to Your Accountant
If you have a question or concern about your books and records or a special transaction, don’t be afraid to reach out to your accountant. They are there to give you support and advice when you need it. It is far easier and usually cheaper to do something right the first time, rather than do something wrong that has to be fixed later on. If you don't get a response from your accountant right away, be patient, good accountants are usually pretty busy. Consider making an appointment or picking up the phone and calling them directly.
Other thought: Even though good accountants are usually busy and might not be immediately available, you shouldn't ever feel ignored and underserved. If your accountant doesn’t respond to you or you are unsure of what is going on, it might be time to find someone who can offer you more support.
Getting Out of a Compliance-Only Relationship
Accountants are usually very experienced and knowledgeable business people, however, if your accountant is just strictly helping you with taxes or year-end financial statements, you might be stuck in a compliance-only accounting relationship. If you feel that you are only getting compliance-type help without the added value of expertise and insights on your business management, growth, or transactions, consider asking your accountant more questions when you talk next. If your accountant doesn't really want to help in this regard, or at least entertain your questions with some advice or feedback, even if they don't know the best answer, maybe it's time to see if another accountant may be able to better serve you.