Making the right choice of tax accountant can be critical to the success of your business. Here are some key items to consider when making your choice.
We are often asked by clients to recommend a tax accountant, however, choosing your tax accountant is such a personal choice, that we prefer to help clients make their own choices rather than point them in a specific direction.
It’s important to take the time to do this carefully, and there are a few things you’ll want to consider. You'll need to think about issues such as
- The accountant's location,
- The division of workload between you, your bookkeeper and your tax accountant
- The type of accounting software they use.
- How much you'll have to pay the accountant, and
- Whether they can help to reduce your business taxes.
As well as having an experienced, reliable and capable person looking after your taxes, you need to make sure that you can actually work with the accountant and if you actually like them. The right person will save you time and money year after year. So here are some things you should consider when you’re choosing a tax accountant.
Table of contents
What is the difference between a bookkeeper and a tax accountant?
Interview at least THREE potential tax accounts
What is the difference between a bookkeeper and a tax accountant?
A bookkeeper is often referred to as an Accountant. However, the two professions each have different roles in the accounting process. Businesses require accurate and timely accounting information to make informed business decisions. This information is prepared and documented by bookkeepers FOR tax/advisory accountants.
You can learn more about the two roles here
Does location matter?
It used to be important to have your tax accountant located nearby. But today, more companies are collaborating online, using cloud-based technology to manage their business. Also, video calling is now almost the standard across the industry. Location is now less of an issue than it has been in the past.
The decision about where to find your accountant really comes down to what suits you best. Depending on how you want to handle the finances, your accountant could really be based anywhere in the world. For example, if you’re happy to collaborate via email, phone calls, video-conferences, or secure accounting software, then you could be in New York and they could be in London. If your accountant can be anywhere in the world, you don’t need to make compromises based on their location. You can find someone who really understands the specifics of your business and is willing to work with you, the way that you want to work.
On the other hand, you may prefer face-to-face contact and find it useful to have someone who's office you can go to. If this is the case, then you’ll need to limit your search to accountants who work nearby or are willing to travel to your premises from time to time. Keep in mind that face-to-face meetings take longer and will, therefore, increase your costs.
Wherever they happen to be based, make sure they’re an expert in the tax laws that apply to your business.
Qualifications
In Australia, tax accountants need to be registered with the Tax Practitioners Board. The TPB ensures that the accountant is suitably qualified, has adequate insurance cover and has not been disqualified. You can verify your tax accountant's credentials here.
Experience
You’ll need someone with experience preparing tax returns and financial documents for companies of a similar size and revenue to yours. If you use Xero you should look for someone who is a Xero expert and who uses Xero Tax to prepare tax returns.
Xero Tax uses the data in Xero to prepare your tax returns. If the tax accountant does not use Xero tax, they need to export the data from Xero and import it into their system. This is time consuming, increases the cost of preparing your tax returns and increases the risk of errors.
What type of clients do they currently have?
Are their clients similar to your business? Similar size to yours?
If you can obtain a list of clients, do some research to determine how long they have been around for, what industry they are in, have they grown over time.
How long has the practice been in business for? How long has your accountant worked for the firm?
How many accountants do they have on staff? Can other accountants cover for your accountant if they are away, or if they leave the practice?
Has the accountant ever been in business themselves? Someone who has run and owned a small business will understand your situation much better than someone who has never been there. Not many tax accountants have been in business for themselves, yet they are providing critical financial advice to business owners. Find one that has been in business for themselves.
Attitude
Some accountants are forward looking and others are not.
Some accountants are entrepreneurial and others are not.
Some are focused on growing your business with you, while others are just concerned about ensuring that you are compliant with tax laws.
You will need to gauge the attitude of your accountant and make sure that their attitude is aligned with yours and where you want to take your business.
A good question to ask a tax accountant during the decision making process is what they could suggest to save your business money. This will help you understand their attitude.
Always bear in mind that there is a big difference between tax avoidance (usually legal) and tax evasion (usually illegal). You need a tax accountant who knows the details of tax law so well that they'll save you money in legal ways, but not one who takes things too far and risks causing your business to operate illegally.
Be very careful about this, because ultimately it's you, the business owner, who'll pay the penalty if the law is broken.
What is the cost and how do they bill you?
There's no single, universal method that accountants use to charge by. Some will charge by the hour, some might charge a monthly retainer, others could charge a percentage of your turnover. You will need to work out what method works best for you and take this into account when making your decision
Make sure you get a written proposal from all the accountants you interview, then go away and compare them carefully. Consider a range of scenarios – one fee structure may make sense while your business is small, but could become less attractive as it grows.
Nothing is set in stone. You could ask for a combined method of charging, or a sliding scale based on turnover, or any other of a wide variety of possibilities. The accountant might not agree to your proposed fee structure, but if you don't ask you'll never know.
Reviews
Sometimes it is not possible, but it does not hurt to ask for details of some existing clients. Finances, and as an extension of that, your accountant, is a very personal thing. As a result, some accountants are very protective of their client's privacy and will not disclose client details.
However, you can gauge a lot about the type of clients, how happy they are and what type of work the Accountant does with their clients from the accounting firm's social media pages.
By checking the accountant's LinkedIn page or other online networks, you can get an idea of how strong their professional network is, if they been in business for themselves, if they are enthusiastic and interested about their work. Are they someone you want to be associated with?
If you happen to know someone who uses the firm, you may be comfortable enough to ask them about the firm and specifically the Accountant you are talking with.
Be sensible when you contact someone though. Don't weigh them down with dozens of written questions to answer.
A ten-minute telephone call is likely to tell you far more about your prospective accountant than a three-page form full of bland written answers provided by the firm.
Interview at least THREE potential Tax Accountants
Most people tend to go with the first Tax Accountant that they talk to. This is a BIG MISTAKE.
Tax Accountants vary significantly in what they offer, what they charge, how they work, how focused they are on your business, and a myriad of other aspects.
As with anything else in life, don't automatically accept the first offer you receive. Arrange things in such a way that you can compare a selection of accountants with each other. Then it will be easier to determine which one is best for your business.
An interview can be a powerful way to see how well you're likely to be able to work with a person. And a series of interviews will not only help you better define the type of accountant you need, but also gain you valuable free advice. This may even help you determine your own business requirements more clearly.
Below are 20 key questions that you can use to form the basis of your interview questions.
Trust your Gut
You're running your own business, you have experience, and you’ve got a pretty good idea of what you're doing. It’s also likely that you get along well with people, since that's an important part of being successful in business.
So make use of those skills. Intuition is just another word for the unconscious processing that goes on in our minds. It's not magic – it's thought that takes place below our conscious level of awareness. Used in the right way it's a powerful business tool in itself.
When you meet a tax accountant for the first time, consider your intuition. Alongside logical evaluations such as location, pricing, experience and references, ask yourself if you could trust this person with the intimate details of your business (and often your personal life. If you think you could work with them for the foreseeable future then that’s great.
But if your gut feeling is saying no, you should probably walk away. Your unconscious mind may have picked up all sorts of cues (such as verbal stresses and body language) that it doesn't like. Intuition isn’t always correct, but when it comes to choosing something as important as a business accountant, don’t ignore it.
Don't forget to include your life/business partner and your bookkeeper in the process. Ask them what their gut is telling them.
20 Key Questions
- What are their qualifications?
- How long have they been in business/been a tax accountant?
- What is their preferred software?
- Do they use Xero Tax for their tax returns, or do they export your data to another system?
- Is the Accountant happy to work with your bookkeeper, business coach and other advisors?
- Do they prefer to meet online or face-to-face?
- Do they have backup, for if they are away or leave?
- How much will it cost to do your tax returns each year?
- How do they bill you? Hourly rate, fixed fee, monthly retainer, annual invoice, etc.
- Do they encourage a pre-end of financial year tax planning session?
- Do they check out with the Tax Practitioners Board?
- What type of clients do they currently have?
- Are their clients similar to your business? Similar size to yours?
- What suggestions do they have to save your business money?
- Have they ever owned and run their own business?
- How enthusiastic are they about their work?
- Are they someone you want to be associated with?
- What does a quick Google search tell you about them?
- What does your life/business partner think about them?
- What does your gut tell you?