It's that time of year — again
The following column was submitted by Kevin Christman, who has a background in accounting and serves as a volunteer business mentor with SCORE's Tip of the Mitt chapter.
So it is that time of the year again that most businesses owners dread — tax season. The time of the year when many business owners’ stress levels increase dramatically.
As a practicing CPA for many years, I know firsthand the process involved in working with small business owners in preparing their annual income tax returns. It can be a very stressful time for them, especially if they do not have a good working relationship with their accountant.
The worst thing that can happen to a business owner is being surprised at how much taxes they owe on their tax return, especially at the last minute. How does this happen? Maybe the business had a very profitable year compared to the prior year, which generated significantly more taxable income. If the business paid their current year estimated taxes based on the prior year — which is quite common — there is going to be a shortfall that will have to be paid. How could this have been avoided? Communication with your accountant throughout the year and keeping them in the loop on your situation. The tax bill is not going away, but at least you will be prepared. Also, you may have been able to take some action during the year to reduce your tax bill. Unless you communicate with your accountant, they cannot help you.
There are many factors that determine the level of involvement of an accountant in a business. Maybe the business needs them to just prepare the annual income tax return and possibly financial statements. Or, they need assistance with bookkeeping or payroll. Whatever their needs are, it is critical that there be open and collaborative communication. A business could have the most talented and knowledgeable accountant on their team but if they are not comfortable with the relationship they need to address the situation.
Maybe the situation is strictly a communication problem that can be repaired. If this is the case, you need to discuss your issues with your accountant. Remember that they cannot read your mind and they may be having the same frustrations. If after you meet you decide that you need to make a change, at least you have given your accountant a chance to explain their side of the story. I realize that the conversation may be uncomfortable but it is necessary.
So now you are ready to move forward — with your current accountant and a new and improved relationship or needing to hire a new accountant. Assuming you are in the latter situation, how do you find that great accountant to become a trusted member of your team?
I would suggest that the best way to choose an accountant for your business is to ask around. Find out who your friends and business colleagues are using. Word of mouth is a great way to identify trustworthy candidates for your business. You might also consider asking other members of your professional advisers team (banker, attorney, insurance agent) for their recommendations.
Once you have identified which accountants you would like to consider, you should meet with them to discuss the possibility of joining your team. Most accountants will meet with a potential client at no cost. Among the questions you should ask are:
1) What types of clients do you work with including size of the clients and types of industries? Some accountants have experience with specific industries.
2) What is their staff situation? Who would be working on your account, including the income tax return? Some firms, depending on their size have a team of professionals assigned to a client.
3) What is their fee structure? How do they charge for preparation of a tax return and for other services? Most accountants should be able to quote you a fee or a fee range for preparation of a tax return
4) What do they expect from you in the relationship? This is an important question to ask upfront. Both parties need to know what is expected of each other to avoid potential problems down the road.
Having an accountant that you trust and have open lines of communication with can go a long way toward relieving the stress of a business owner during income tax filing season. Also, they are crucial in contributing to the future growth and profitability of your business.
To request an appointment for SCORE's free and confidential mentoring services for small businesses, call (231) 347-4150 in the Petoskey area or (989) 731-0287 in the Gaylord area, or go to tipofthemitt.score.org.
This article originally appeared on The Petoskey News-Review: Kevin Christman: It's that time of year — again
