How to Work With Your Bookkeeper & CPA

Transcription

1 No matter how big or small your business, it will have bookkeeping and tax needs! To begin your journey on how to work with a good bookkeeper and CPA, you must first understand the accounting needs of your business. All small businesses require: Bookkeeping. The day-to-day recording of monies paid out and monies received in by the business. It includes money your company owes to vendors, employees, tax agency or any other individual or entity and money owed to your company from customers or any other individual or entity. Tax Preparation. The preparing and filing of income tax returns to the governing bodies at various dates throughout the calendar year. The types of tax returns you are required to file is based upon how your business is setup and the types of products and services offered. Your business may have additional accounting and bookkeeping needs than the ones mentioned above. For example, if you are a private company with investors your company s accounting needs may include an annual audit report, or; if your have physical offices located in several states your company may be subject to sales tax in those states. To determine how those additional accounting needs will be met, the next step in appreciating those needs is to understand the roles and responsibilities of all involved parties. Typically, a small business will need a: Bookkeeper to manage the day-to-day transactions and provide you with reports and/or information pertinent to the running of your business, and a; Certified Public Accountant (CPA) to advise you on your tax position and prepare tax returns. Let s take a closer look at both of those roles and how they interact with your business. A Bookkeeper keeps financial records that track a company s expenditures, profit and loss, cash flow and other financial activities. Most small businesses have one general bookkeeper, also known as a full-charge bookkeeper. 1

2 Full-Charge bookkeepers verify and enter the details of the company s financial transactions. They then summarize these details into reports and balance the books. When the books are balanced, it is possible to tell at a glance how much cash has been spent and how much has been received, what the company owes and what is owed to the company, and whether the company has made a profit or suffered a loss. In addition to keeping records, bookkeepers may prepare payroll, certain tax reports, and customers' monthly invoice statements. When hiring a Bookkeeper here are some things to consider: Are you looking for a bookkeeper, administrative support or both? It is important that you are clear about what role you are looking to have filled. In the past small businesses tended to combine bookkeeping and administrative duties into one role or job description. There is no right or wrong answer but it is your responsibility to be very clear about what role you are looking to fill. Remember a bookkeeper is not a trained administrative assistant and an administrative assistant is not a trained bookkeeper. In-House employee versus outsource bookkeeping firm? Many business owners debate over whether to hire their bookkeeper as an employee or to go with an outsourced solution. Here is the rule of thumb I recommend to the small businesses I work with: when the bookkeeping for your business is more than 30 hours per week it is usually more cost effective to hire your bookkeeper as an employee. Having said that, the downside is that you are hiring one skill set to perform the bookkeeping for your company. When using an outsourced solution the advantages include obtaining the right skill mix for the right amount of time needed for your company s bookkeeping needs. Outsourced firms usually employ bookkeepers and controllers and that is a huge benefit for your business! Your company receives a combination of the right skill mix for the right amount of time and also the experience and best practices of working with many different types of businesses. What can you expect when working with a bookkeeper? Your bookkeeper is responsible for ensuring your bills are paid on time, invoices are sent promptly, employees are paid accurately, bank balances are reconciled, etc. They are key component of your business team and are to be treated as a colleague who brings a ton of value to your organization. 2

3 Many business owners expect their bookkeepers to be able to fix their cash flow problems. This is outside of the scope of normal bookkeeping services. It is important to know that if you do not have a process in place or there are blockages in your current process, your bookkeeper is not going to magically change that. Your bookkeeper is responsible for ensuring that your bills are paid on time, invoices are sent out promptly, employees are paid accurately, etc. To create a system that works for your company, you will either have to develop that yourself or hire a consultant to help you do that. How does a Bookkeeper charge for services? If you are using an outsourced solution for your bookkeeping, ask specific questions about how they charges for their services. Do they charge by the hour or do the offer flat rate fees? If flat rate fees, what specifically is included? It is important that you have a good understanding of how your bookkeeper charges for services. A clear understanding upfront helps to eliminate confusion down the road. Also, it s important to not undervalue the services your bookkeeper/bookkeeping firm brings to your organization. Too often freelance bookkeepers are treated as employees, expected to solve solutions that are outside of their job description and at the lowest rate possible. A CPA is an accountant who has passed certain examinations and met all other statutory and licensing requirements of the state(s) they practice in. CPAs typically specialize in tax preparation when they go into practice for themselves and are fully schooled in all aspects of accounting. All CPAs do not specialize in all areas of business, making it important for you to ask the right questions when determining which CPA is the right match for you and your business. When hiring a CPA here are some things to consider: What area of business does the CPA specialize in? CPAs can specialize in specific areas of accounting just like doctors specialize in various aspects of medicine. Being a small business owner you should be seeking a CPA who enjoys working with small businesses and understands their tax needs. What size businesses does the CPA like to work with? This is an important question because you want to make sure that the CPA enjoys working with your sized company. Small businesses encompass many sizes from the Mom and Pop to Fortune Frustration will occur when you are working with a CPA who likes working with companies that are larger or 3

4 smaller than yours and can manifest in many forms. From not being able to reach your CPA when needed to fees larger than your budget can afford. What can you expect when working with your CPA? Are you looking for a tax advisor or just someone to prepare your annual tax return? Is your CPA proactive? Do they encourage you to meet with them regularly throughout the year to maximize all tax planning opportunities or do you only hear from them on April 10th, 5 days before your tax return is due? It is important for you to determine what role you expect your CPA to fulfill in your business and communicate that to them. How does your CPA charge for services? Ask specific questions about how your CPA charges for their services. Find out if you will be charged each time you pick up the phone to call them or do they operate under a flat rate fee? Can your bookkeeper call them with questions about your company? Are you charged the same rate if a junior associate is performing the work? It is important that you have a good understanding of how your CPA charges for services. A clear understanding upfront helps to eliminate confusion down the road. Creating the right financial team to support your business makes all the difference. Take the time to understand and identify your accounting and bookkeeping needs and then use those needs to guide your working relationship with your CPA and bookkeeper. 4

5 Checklist To successfully work with your Bookkeeper you ll need to a system for all workflow that affects financial transactions. A system is plan that you follow each time you perform that task. You don t have to think, you simply follow the plan. Answer the questions below to help you create the bookkeeping plan for your company. 1. Create the structure within which your bookkeeping is performed by selecting the frequency and day on which those tasks will be completed. Accounts Payable Daily Bi- Semi- Other Accounts Receivable Daily Bi- Semi- Other Cash Receipts Daily Other Payroll Bi- Semi- 5

6 2. Define what reports you would like generated and on what frequency. Unpaid Bills Report A/R Aging Bank Reconciliation Profit & Loss Cash Flow Forecast 3. Define Your Accounts Payable Approval Policy. Select One I will open, review and initial all vendor invoices prior to being entered onto the accounting file. I will review and approve all vendor invoices as I am signing the check. To properly do that, attached to the check will be the original invoice. Other Select One All vendor bills are to be according the vendor payment terms All vendor bills are to be paid 30 days from the date received in our office All vendor bills are to be paid on the 15th and the 30th of the month Other Select the Options that Apply Credit Card balances for all credit cards are to be paid in full each month Credit Card balances for the following credit cards are to be paid in full each month: Pay the minimum amount due for all credit cards each month Pay the minimum amount due for the following credit cards each month: 6

7 4. Define When Your Invoices Will Be Issued to Customers Select One Invoices are issued as soon as work is completed Invoices are issued once a week on {specify day} for all work completed through the previous week Invoices are issued according to contract terms Other Once you have your system framework in place you ll also want to: Jan 15th, Apr 15th, Pay your estimated tax payments when they are due: Jun 15th and Sep 15th. Meet with your CPA each October for tax planning. Review your year-todate September Profit and Loss statement and together, identify your tax strategy for maximizing deductions (i.e., funding retirement plans, purchasing equipment, etc.) and minimizing the amount of taxes due. When you are proactive with your planning, more options are available to you. Give your CPA ample time to prepare your tax return. It is important that your CPA have enough time to prepare your tax return and review the return with you. Yes, you need to review the return to make sure that it makes sense. Remember, extending your taxes because you have not received all of your paperwork is okay. Keep your CPA informed of any major life changes. Keep your CPA in the loop of what is going on in your life. Major life events such a buying or selling a business, getting married/divorced, having a baby can impact your tax situation. By keeping your CPA involved you are proactively protecting your money. If you would like to learn more about working with a virtual bookkeeper, we offer a FREE 30-minute consultation to assess your bookkeeping needs and determine if Third Hand Bookkeeping Service is the bookkeeping resource you need. Linda Siniscal, owner of Third Hand Bookkeeping Service has been servicing small business owners since Linda is a Certified Bookkeeper with the AIPB and a Certified QuickBooks ProAdvisor. Third Hand Bookkeeping Service can assist clients on both the MAC and PC platform. 7