Things To Know Before Selling Your Accountant Practice

Checklist For Choosing The Best CPA For Your Small Business

A small business bookkeeper plays some of the most significant roles in your company. The accuracy they have when performing their accounting tasks can either make or break your business. For this reason, it is crucial that you are very selective when choosing a bookkeeper for your business. To help you out, our knowledgeable team of small business CPAs have created a checklist of things to consider when hiring a bookkeeper. Read below to learn more.

1. Is this person an actual CPA? Or are they just a tax accountant?

Tax accountants focus their training on dealing with how much taxes a business should pay. Although this can be advantageous in some ways, your small business has more financial responsibilities than just taxes; this is where hiring a Certified Public Accountants comes into play. The National Association of State Boards of Accountancy requires small business accountants who wish to become CPAs to undergo at least 150 semester hours of education, at least 30 hours of advanced accounting education, and at least 24 hours of business-related education. This rigorous training makes our team of small business CPAs experts in almost all business financial processes like bookkeeping, tax planning and preparation, and financial advisory.

2. Have they been a CPA for at least a decade?

CPAs receive one of the most comprehensive trainings in all professions. Nevertheless, nothing can beat experience when it comes to handling business financials. Some principles, such as vendor communication, critical reports per industry, and more, are not something you can learn in accounting school. Hence, you need to choose a bookkeeper that has at least a decade of experience in your specific industry.

3. Does this firm have great online reviews?

Bookkeeping providers often brag about how effective their bookkeeping processes are. However, there is no better source of information on the quality of a bookkeeper’s services than their past clients. Online reviews are quick and easy ways to find out what makes a bookkeeper great and what areas they are lacking. Some of the best sources of online reviews are customer driven sites like Yelp and Google. Utilizing these reviews will allow you to see how clients view that CPA’s services. So for example; your goal is to grow your business so you need a CPA that specializes in small business financial advisory. As you are doing your research online you find a firm that says they have virtual CFO services, but they have reviews that say that they do a decent job at their financial advisory services but tax preparation is their expertise; this allows you to know that is not the CPA for you before you waste valuable time and resources.

4. Do they have experience doing extensive bookkeeping setup and cleanup projects?

Most businesses, once in a while, have to deal with terrible bookkeepers. These bookkeepers can muddle your books with unnecessary data, making it almost impossible to use. On the other hand a lot of small business owners try the DIY approach with their bookkeeping tasks. This often leads to two results; they get overwhelmed with managing these tasks so they stop doing them all together or they are simply doing these tasks incorrectly. This is a huge issue, because at least 65% of our new clients need us to clean up their books in order to stabilize their business. This means that 65% of people were at risk of making financial decisions based off of incorrect financial metrics. This can have a huge impact on your ability to scale your business. So, when you decide to hire a small business bookkeeper for the first time or if you are replacing the current bookkeeper you have, make sure that they can reorganize, and clean your books effectively. Otherwise, you’d be better off settling with your previous accountant.

Why do small businesses have problems finding accountants?

Typically, many small business struggle to find an accounting firm because they

  • Can’t identify exactly which financial services they need,
  • They don’t know where to find the best accountant for their needs, or
  • They don’t have the proper budget for an accountant.

However, these issues can be combated with the right plan.

First, identify your specific financial needs and what your financial gaps are. Do you need bookkeeping or tax planning services? Do you need someone with definitive knowledge or experience in a given industry?

Next, decide which type of accounting service you’re in the market for. This can mean the decision between a local or remote accounting firm, a bookkeeper or a CPA, or a QuickBooks certified expert.

Finally, since you can expect to pay an accounting agency $500 to $3,000 every month, decide which type of accounting services fit into your business’s budget.

Choosing your accounting date

At Avenue Business Services we can advise businesses in the Whiteley area about choosing the best and most tax-efficient accounting date. Here are some of the issues to consider.

Q. Can I select any date for my accounting year end?

A. Yes

The choice of a year end accounting date is for the business owner to decide.

Under the current year basis, the taxable profit for a particular tax year is determined by the accounts that end in that year.

Thus, for 2020–21 tax, accounting dates will vary between 6 April 2019 and 5 April 2020. So what is the best date to choose?

Sometimes, compelling commercial reasons relating to the nature of the trade will dictate the most appropriate accounting date. Otherwise (as in so many tax matters), there is no easy answer – it all depends on the particular circumstances. There are several basic considerations:

Overlap relief

The system is designed so that, over the life of a business, tax is paid on no more and no less than the cumulative profits of the business. However, unless your accounting date falls between 31 March and 5 April (inclusive), there will be some element of double counting, or overlap, in the first full tax year on the current year basis.

Overlap relief will be held in reserve for use when the business ceases (or on an interim change of accounting date). One concern is that, because of inflation, overlap relief will be worth less in future years than it is at present.

Bunching of terminal profits

The converse of the overlap situation is the ‘bunching’ effect of profits when a business ceases. The assessment for the final tax year will be based on the profits right back to the accounting date in the previous tax year. The earlier in the tax year the accounting date falls, the longer will be the period of account relating to the final assessment.

Thus a cessation date of, say, 31 December means that the final tax assessment will be based on a period varying in length between 9 months (5 April accounting date) and 21 months (6 April accounting date). This effect may be lessened to some extent by overlap relief, but the overall distortion is illustrated in the example set out below.

Partnerships

Partners are each deemed for tax to have an individual business so the points already mentioned for new businesses and those ceasing apply equally to partners joining or leaving a continuing partnership.

Pattern of profits

If profits do not vary significantly from one year to the next, the accounting date will not affect the assessable profit for each tax year.

Where profits show a trend, the rule of thumb is that (all other things being equal) it is beneficial to have an accounting date early in the tax year if profits are rising, and late in the year if profits are falling.

External factors

Of course, all other things are not equal, and in evaluating the advantages and disadvantages of particular accounting dates there are a number factors to be considered, including:

  • interest rate movements
  • the effects of inflation
  • changes in rates of tax
  • changes to the tax system

No one can say how these will change over time, and so, not surprisingly, businesses tend to be swayed by the short-term advantages, which have at least some degree of predictability.

Timing of payments on account

It is as well to remember that the date for the first payment on account falls just over two months before an accounting date of 5 April, but nearly ten months after an accounting date of 6 April. Thus, with an accounting date later in the tax year you could pay too much tax on account where profits are falling, and this is a further factor affecting cashflow.

What Do Small Business Accountants Do Anyway?

The increasing role of small business in the American business landscape and more powerful and accessible information technology has changed the role and importance of the small business accountant.

Why do you need an accountant? Some small businesses make due with a bookkeeper – someone to perform the tedious task of recording financial information and cranking that data into the necessary formats, like P&L statements and tax forms.

But a good small business accountant does much more than just record transactions and passively generate documents-they actively analyze, interpret and convert that data into actionable business intelligence.

Based on where you want to go with your business, they should be able to tell you how to get there. If your accountant is just showing you the financial tracks of where you have been, you’ve made a bad choice and you’re missing out on a great opportunity to receive good business advice.