Category Archives: Accounting

CHOOSING AN ACCOUNTING PROFESSIONAL FOR YOUR SMALL BUSINESS

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Every business needs an accountant. Small startups are usually run by one person who has great ideas but needs help executing them. It’s important to get a quality team together at the beginning to support the business and set it up for success. A savvy business owner understands that investing in quality accounting services will provide a good return, boosting the business to the next level.

You may be tempted to do everything yourself. If you have any kind of business training, or are an organized person generally, this might be acceptable. But if the business is growing fast and you are spending all your time serving your customers, the needs of YOUR business may be neglected.

Serving your clients, or creating your products, should be a priority. However if you aren’t generating invoices, then cash isn’t coming in. If you don’t have time to review the vendor bills, and wonder if you have the cash in your account to cover your expenses, you may damage your relationship with your vendors.

The firm or individual you choose should care that your business grows and succeeds.  Hiring the right accountant from the start can make a huge difference. The following tips will help you choose the professional that is the best fit for your business.

  1. Don’t think you can’t afford it. Depending on the size of your business, and the amount of work you are willing to do yourself, initial bookkeeping setups can be as low as a few hundred dollars. A CPA or bookkeeper’s office should be happy to take your call and answer a few questions free of charge. This should at least lead to action steps you can take on your own if you choose to do so.
  2. Don’t make cost the primary decision maker. Cheaper isn’t always better. You may be tempted to hire the least expensive professional you can, but that can be a huge mistake. The fees may be low because the service isn’t top quality. The accountant you choose should be considered a partner in your business success. They should be interested enough in your business to ask questions to understand it, and offer tax planning and perhaps marketing tips to help you succeed.
  3. Be sure you have a thorough understanding of the fee. Make sure your accountant clearly states what they will do for you and how much it will cost. If you feel the fee exceeds your budget, ask if you can do some of the work yourself. If your accountant advises against it, ask them why. They should be looking out for your best interests, regardless of the fee.
  4. Ask if there are any fee discounts. Accounting and tax preparation is largely a referral based business, and some professionals offer referral discounts. For example if you refer a friend to your accountant and that person or business becomes a client, the accountant may give you a partially discounted fee.
  5. Don’t be shy to question anything you don’t understand. While your accountant is a professional and isn’t in the business of teaching you to become one, it is still important to understand the work that’s being done. A good accountant is happy to answer all questions and explain their work.

You should demand top quality service from any accountant you choose. Your phone calls and emails should be answered promptly. All questions should be answered to your satisfaction. Even if your accountant only does work for you annually (such as prepare your tax return) they should check in with you at least every few months to see how things are going.

During the year, tax laws may change.  You will want to know if these changes affect your business. If they do, it is crucial to have time to do something about it before year end. It is the job of the professional you hire to keep up with changes in the financial and regulatory landscape, so you can focus on running your business.

TIPS FOR DEALING WITH SALES OR PAYROLL TAX AUDITS

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When business owners hear the word audit, it seems to stir up a variety of unpleasant emotions. These include fear, dread, annoyance, sometimes even anger.

While it’s true we must comply with audit requests, there are times when the auditor may ask for inappropriate documents. There have also been cases when an auditor presents him or herself in an unprofessional manner. The head of the accounting department must determine if the auditor is a competent professional and can be trusted with sensitive company documents.

Recently, I was involved in a payroll audit. It started out normally enough, with the auditor sending a request list to the client.

The client contacted me concerned about some of the items requested. The client did not want to send electronic copies to the auditor using email, as it didn’t seem secure.

Normally, auditors have a secure portal where documents can be uploaded. This is a common practice, however in this case it wasn’t clear this was an option.  In the end, the client requested that the auditor come to the business and perform the audit. That way, the records could remain on site.

That was when things went bad. The auditor showed up and was unrecognizable as a professional person due to his unkempt dress. Although he provided identification, the first impression was very bad.

The audit proceeded relatively normally, until he asked if he could make copies of the payroll records to take with him and review later. In addition, he seemed unfamiliar with payroll and the various reconciling items on the payroll register.

The accounting manager was very concerned.  However, she was afraid that if she denied these requests or made any trouble, the company might be punished by the entity conducting the audit. I advised her that the actions of the auditor were completely inappropriate and she should ask him to leave the premises immediately.

After the auditor had gone, I advised the accounting manager to contact his supervisor and explain the situation. I stressed that doing so immediately was very important, to show that the company was willing to cooperate, but they had concerns with the process.

The situation was resolved without further incident. A new auditor was assigned, and another date set to complete the audit.

Below is a list of tips that will help you experience a smooth audit:

  1. Always speak to the auditor on the phone regarding the requests. This will help you get to know the person you will be working with, and any concerns you have with their demeanor can be dealt with prior to the start of the audit;
  2. If the auditor is requesting electronic documents, find out if they have a secure portal where the documents can be uploaded. If not, an audit on site is preferred;
  3. If the auditor is requesting sensitive documents (like payroll records) be sure they cite the code which gives them the authority to do so. If security is breached, then they are responsible for any negative outcomes;
  4. When the auditor comes to your business, make sure they have proper identification. If they provide something that doesn’t satisfy you, you are well within your rights to call the main office and express your concerns;
  5. If the auditor requests something that makes you uncomfortable, go with that feeling. For example, if they want to copy records to take with them, that is a huge security risk. Any requests you feel are unusual should be questioned;
  6. Finally, if the auditor is acting inappropriately in any way, ask them to leave the premises. Immediately communicate with the main auditing office and explain your actions.

Generally, auditors are very understanding and sensitive to the time involved in conducting the audit. They want to make it as easy on the business as possible.

Your first responsibility is to the company you work for, and the employees of that company. The auditor needs to show respect for the business, and your time. If you don’t think that is the case, you must speak up with confidence and authority.

 

THE BEST (AND EASIEST) WAY TO MARKET YOUR SERVICES

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In a service business, no matter who you are dealing with, your first question should always be this:  “How can I make this person’s life easier?” This will go a long way in differentiating your service business from all the others.

How can you over-deliver?  Train yourself to provide so much value that your client can’t help but say “wow!”

For example, any accounting firm can prepare taxes. What makes yours special? Your clients need to know what makes you best suited to understand their pain points.

You never want to use your client’s goodwill with you for the sole purpose of increasing the fees of your business colleagues through referrals. This is particularly bad if they offer absolutely nothing of value to your client.  This attitude will eventually destroy your business.

Your client should always know that if they have a question or problem and they pick up the phone and call you, that you will have a solution. They know your network is extensive and filled with quality experts. Even if you don’t have the expertise to solve the problem, you can tap your network for the answer.

And your network is only happy to oblige, because you have surrounded yourself with people just like you, people that always over deliver, many times without expecting anything in return.

But I have to make money, you say? Yes that is true. Part of making money is establishing yourself as a trusted expert. This takes time and repeated exposure to your target market.  One of the easiest ways to do this is for others to market for you. Satisfied clients are only happy to talk about you and recommend you to others.

This is the value you receive when you do extra work for your client, not expecting payment for every phone call or meeting.

Remind yourself of all you have to offer when setting fees for your services. Quote your prices to reflect your value, and you will be more than happy to assist your clients with the extras.

Clients shouldn’t have to put up with bad service.  I don’t tolerate that in my life and I try to help people learn not to tolerate it in theirs. As a business person, your time is valuable. Don’t waste it on a poor service provider. If a service provider is doing something that bothers you, tell them. If they don’t fix it, ask yourself how much they really care about you, your business, and your success.

 

TAX DEADLINES – DON’T LET THEM STRESS YOU OUT!

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With tax season in full swing, it’s easy to get stressed out by the never-ending stream of deadlines. Implement a system to organize your filing deadlines. This will allow you to focus instead of stress out.

Just because there’s a deadline doesn’t mean you have to wait until a few days prior to start the filing process. Wouldn’t it be nice to get done early, leaving the few days prior to the due date for emergency projects?  Here is a simple system that you can start using today.

  1. Today – two weeks or more before the deadline.  Make a list of all the returns that are due. How many of those returns are simple and can be completed in a day? They go in one stack. The rest will be extended by default. For the ones that need to be extended, you probably need information from client.  Spend a few hours emailing or phoning your clients and asking for the information you need. Email is better as it acts as an easily printed record for the file. Once all the clients are contacted, those returns go in a stack. Put a reminder on your calendar to revisit the stack in a week.
  2. Day two – get started on the returns that can be completed by the due date. You will still need to contact the client, but the requested information should be fairly easy to obtain. Spend today on those returns only. Set aside break times to answer email and return calls. Information should start to come in on the emails and phone calls you did yesterday.
  3. Day three through five – continue on with the simple preparation returns they should be almost done.
  4. Week two – one week prior to due date. For clients who haven’t contacted you yet, contact them again, maybe this time with a phone call, if prior contact was email. For those that have responded, get started on the extensions.  As you complete them, email or call client and advise of tax due, if any. Finalize the simple returns you started in step three and deliver to your clients.
  5. Mid-week two – do final follow-up for clients who haven’t contacted you. By this point most everything should be done.
  6. End of week two – for all clients who still haven’t gotten you anything, one more attempt. No response at this point shows lack of respect. You may want to reconsider keeping these clients, they don’t sound ideal.

It’s now a few days before the due date and everything is done. You have time to clean up the loose ends.

Keep a written schedule and calendar reminders to tell you exactly what you need to do every day.  The reminders can start a month or more prior to the due date.  Focus, schedule, and follow through – the keys to de-stressing your tax season.

YOU DON’T HAVE TO BE AN EXPERT NEGOTIATOR TO GET WHAT YOU WANT FROM IRS

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I had the pleasure of calling the IRS the other day. I expected to spend a fair amount of time on hold. They changed their hold music to tell me they were streamlining and improving IRS service by reducing the number of issues they could talk to me about. I was imagining if I had called a normal business and was greeted with such an announcement. I would take my business elsewhere. But the government has no competition. So I guess their policy is if you want something you’d better hope it falls within their new parameters.

Finally a lady answers and proceeds to tell me she can’t talk to me because I don’t have the proper paperwork on file. I explained that I faxed it in two weeks ago, and she said I must have faxed it to the wrong place. Then she said it probably went to right place but they didn’t process it because it had the wrong name, concluding with “ma’am I don’t have a Power of Attorney on file” as if that was somehow clearing up the problem.

She let me put her on hold while I faxed it again.

I was really irritated at this point, but I couldn’t lose my cool. When she got back on the phone I said I faxed it and I had the fax confirmation, which caused her to chuckle. Then she hemmed and hawed and said, “Can you hold for a minute while I shut the blinds, the sun’s coming in and I can’t see the computer screen.” There was my opening to establish likeability. While on hold, I formulated a quick plan.

When she came back on, the first thing I said was “the sun, wow, you’re lucky, I’m in Washington State, and we sometimes don’t see the sun all winter.” That was all it took.

She spent the next five minutes telling me all about her visit to Seattle. I listened, and asked questions, but let her talk, making no attempt to steer conversation back to the issue I had called about. After five minutes, we were friends.

The issue I had called about was fairly innocuous; the company had an incorrect name on file with the IRS. She told me I had to send a letter to advise of the name change, and she gave me the basic idea of what to write. However, because we were now friends I received some special insider advice.

First she told me the letter needed to be brief. She said they got letters from attorneys representing their clients before the IRS that were up to 19 pages long. She told me when she got letters like that; she tended to ‘not do anything about them. Then she said the Power of Attorney they had on file wouldn’t be updated, and if I wanted to talk to them again about this company, I would have to send another one in. I said that was fine. Then she told me how I could get around that by sending a copy of the Power of Attorney in with my letter, and attach a sticky note on it to forward it to POA processing. I said, “Wow, that works?” and she assured me it did. So a small favor, but a favor nonetheless.

I got off the phone, drafted the letter in less than five minutes and my problem was solved. Plus I had a new friend in the IRS office.

I’ve used this same technique on much more complicated issues. I’ve been able to get the IRS to abate penalties, reclass incorrectly applied tax payments, and even talk to me about tax notices without the proper paperwork on file, all on simple phone calls.

So you see, sometimes it doesn’t matter what the rules are, it matters who you know, and if they like you.

The key is to find a common bond, in this case it was a shared knowledge of a place. However it can be the job (we’re both just trying to do our job) or how the day is going (I’ve been chasing down problems all day, it sure would be nice if this one would be an easy fix so I can cross it off my list).  Just about anything you can think of can be a common bond. Remember not to grow impatient while waiting for the bond of likeability to develop.

Yes, I was on the phone a little longer than I wanted to be. But then again, my normal hold time with the IRS is forty-five minutes. In that context, a fifteen minute phone call was a steal!

HOW TO WRITE PERSUASIVE LETTERS THAT RESULT IN TAX REFUNDS

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It’s inevitable that a state, local, or even the federal government will have money that lawfully belongs to your company.  There is really no incentive for them to return it, so it’s up to you to communicate persuasively to get what you want.

Although most business is conducted by email and phone, sometimes the best approach is a letter. This is usually the case with tax disputes. Keeping everything in writing is good proof, keeps a record of the timeline, and is a great way to make a strong case for your position.

Below are the five parts required of a persuasive letter:

  1. The introduction; which is a restatement of their position;
  2. Your explanation of the correct result and how you arrived at that result;
  3. The ‘don’t ask, but tell’ portion, where you state exactly what you want;
  4. The offer of help; you are available for questions and are happy to provide additional information;
  5. The gratitude; thanking them for taking the time to read your letter.

Before I start to write my letter, I spend a lot of time reviewing the correspondence received from the other party. It’s critical to understand their position.  There can be many reasons a government thinks your company owes money, some of them totally innocuous.

This researching process can take hours or sometimes days. If I’m spinning my wheels I put it aside and do something else for a while. With today’s complicated returns, it is sometimes very difficult to find the problem. Once you find it, and you are convinced it is a mistake on their part, continue on to the next step.

The research you do to find the problem supports the most critical part of the letter; the explanation of the correct result (item two). It must be clear, concise, and easy to understand. If it draws on for too long, the person reading the letter will truly have no idea what’s going on and will likely reject your request out of hand.

After the explanation, you move on to the ‘don’t ask, but tell’ portion. Write exactly what you want. Don’t suggest it, don’t imply it, and above all, don’t provide options. Just state what you want. Using the phrase ‘respectfully request’ softens the blow a little bit. This is where you don’t mince words.

Finally, you indicate your willingness to do whatever it takes to resolve the matter. You are happy to answer questions, provide more information, or fill out any additional forms required.  Include your phone number in the body of the letter.

End with a polite thank you. The person you are corresponding with is the link between you and the desired outcome. It is important to establish a cordial relationship in your letter, as you may end up speaking with them on the phone later on.

One final tip – keep the letter brief. If it is longer than one page, it is too long. If you are struggling with making it shorter, consider including additional attachments as further explanation and proof. It may be easier to understand when it is presented in that manner, and referring to the attachments in your letter will only take a sentence or two.

With practice, you will become an expert at collecting money in seemingly impossible situations.  This is a respected skill that will always be in demand.

 

SERVING THE INTERNAL CUSTOMER

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In business, internal customers are all the people you interact with that are not the external customers. This includes co-workers, supervisors, and others who work in the various departments of your company. They must be treated just as respectfully as you would treat the external customer.

Generally, most of the people you work with will be professional and courteous. This makes it easy to treat them as you would an external customer. In the normal course of your work, you should have many chances to interact with them. You want to be sure that every interaction is positive, and that you leave a good impression.

Office politics sometimes makes us feel like it’s ok to treat some of our co-workers with disrespect. They may not be well liked, or your supervisor doesn’t like them, or maybe they aren’t that nice to you. Don’t fall into that trap.

Treat everyone as if they are potential customers. This can be especially difficult if they are rude to you. Don’t be sidetracked by your emotions. Keep on topic. If you are personally attacked, don’t even respond. Try to steer the conversation back toward the issue at hand. If that doesn’t work, tell the person you are no longer able to discuss it, and leave the area.

After an incident like that, it is natural to want to talk to someone about it, just to vent and get it out of your system. It is better to talk it over with a friend or a close co-worker, not your supervisor.  Your supervisor doesn’t have time to listen to your personal rant, and it reflects badly on you. It could cost you opportunities for advancement and additional responsibility, as it shows a lack of maturity on your part.

There are times when it may be appropriate to discuss an unpleasant interaction with your supervisor. For example, if you are disrespected by an executive from another department. Then it is reasonable that your supervisor would want to know about this, as there is very little you can do.

It reflects well on you when others feel confident looking to you for leadership.  Once you become more familiar with the company culture, you can immediately direct them to someone who can help. Or if possible, solve their problem right away. Even if it’s a phone call or email they could just as easily have done, you will be the hero if you take care of it. They will remember it and tell others, developing your reputation as a problem solver.

Be someone others can count on. It will open doors for you.

 

GAINING EFFICIENCES BY UPDATING OBSOLETE REPORTING TOOLS

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As companies grow and mature, so do the tools they use for financial reporting. Many times this growth results in a very busy accounting department. It seems they can barely hold things together on a monthly basis, let alone innovate and improve. But unless innovation occurs, trouble awaits.

I’ve seen cases where spreadsheets that were created 15 years ago are still being used for current reporting purposes. In some cases, no substantial updates or changes have been made to these reporting tools. They’ve just been patched and linked together to the point that nobody understands where the numbers come from. If there’s an error, there’s no way to find it. The result is incorrect information being presented to management, excuses made, and lower level employees made to scramble to try and make it right.

Make some time every month to review at least one of your reporting processes. You may have to scrap the whole thing and start again. I remember a cash flow matrix that was prepared at one of my former companies. It took someone four hours per day to prepare it. Nobody knew how to read it, only that it all had to equal zero on the last page. I scrapped it and recreated an entirely new spreadsheet. We ended up tracking our cash flow even more efficiently, and it only took an hour a day.

You can’t be afraid to make wholesale changes like that. It does take time, and it can be frustrating. It will feel like you’re wasting time and should be doing more important things. Don’t let those thoughts crowd out the true purpose; to learn, innovate, grow, and always provide top-notch reports to your end user.

 

ALWAYS SERVE THE CUSTOMER

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When we think of the customer, we often only consider the external customer. But everyone you interact with in your organization can be considered your customer. Everyone should receive the same level of high quality service from you. This post is about the external customer, the buyer of your company’s product or service.

Being in accounting, we are somewhat removed from the external customer, with the exception of Accounts Receivable. We get caught up in our routines and processes. If contacted by an outside customer, we take it as an interruption to our day. In our minds, we think, well, I’ll have to try and work this into my day, but it isn’t a priority. This is not excellent customer service.

You wouldn’t have a job without that external customer buying your company’s products or services. If a customer calls me I return the call the same day, in no case make the customer wait longer than 24 hours.

They may have what I think is a ridiculous demand or a complaint about something that has nothing to do with accounting. The last thing I want to do is tell them I can’t help them. Even worse is to tell them to call back and ask for someone else, or transfer them to another department never knowing if they got what they needed. I am their connection to the solution.  A customer will remember clearly that when they called your company, the first person that answered the phone took care of them. It reflects well on everyone.

I listen to them, find out what they want, then take the initiative to contact whoever I need to contact within our organization to handle the request. If I can take care of it, I do it right away.

No matter how much extra work it is to take care of a customer request, it should be a high priority. It should be done quickly, and if takes several days or weeks to complete, keep the customer updated on its progress either by email or phone. It is important to assure the customer that you are taking care of the issue.

I specialize in sales taxes and I know that customers are very sensitive about their invoices being correct. If errors are found in a customer’s receivable account, be pro-active and correct them. For example, there can be errors on sales tax charged on customer invoices. They are usually discovered when filing the monthly sales tax returns. If a customer is owed a credit, make sure it gets on their account.  Even for small amounts, have Accounts Receivable issue the credits and advise the customer. This keeps the level of trust the customer has for your company very high. The customer knows you are always looking out for their best interest.

You never know when you may need help from your customer. Establishing this trusting relationship will be valuable and can serve you well in your ongoing interactions with external customers.

 

THE IMPORTANCE OF ACTIVELY MANAGING YOUR STAFF

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Taking the time to train and mentor your staff can’t be overlooked. There are some people who are self-motivated and naturally ask for more work, get more efficient, and take on more responsibility. Those are rare people. The rest must be trained, helped, and encouraged along the way. But they can shine just as much.

When you hire someone, you are responsible for helping them succeed. We all make bad hiring decisions at one time or another. But if things don’t work out right away, don’t become negative and look only at the problems. Try to seek out solutions.

This starts with having a meeting with your employee. Don’t go into it in attack mode. Have a list of compliments countered with constructive criticism. Couch it in a helpful tone.  For example, for an Accounts Receivable clerk, you might say this: “I noticed you come in early every day and get customer emails answered, which is great. Our customer comes first. But the cash receipts don’t get entered by the 3pm deadline. Is there something I can do to help?  Does something need to be changed?”

You are only going to find solutions by listening and understanding the other person’s perspective. Someone else may be distracting them from their work. Maybe they weren’t properly trained. There could be some personal problems. Get to the root of it.

The two of you should come up with a plan to make improvements. It is critical to get the employee involved in making the plan. Shared responsibility gives them motivation.  Have specific goals and deadlines. Plan to meet every week to see how things are going. When people have a stake in making things better, it gives them a feeling of freedom and empowerment. This is a far better motivator than money.

A person invested in their job will be the first to speak up if they sense a problem because they feel a duty to do things well. You have shown them that you are a good listener and have an open mind. And because you showed that you care and want to help them get better, they will of course come to you and seek out your advice.

I always try to train my staff so well that they could replace me. My relentless efforts to do this have never resulted in me being replaced. Instead I end up going to an even better place. I am seen as the big picture person, the thinker, the solver of problems.

Some people fear losing their jobs if their subordinates are smarter or know more than they do. In my experience these are the kind of people you want to support you. It will allow you to expand your learning horizons, take a longer vacation, or maybe even keep shorter hours. It all works because you know in your absence all critical tasks will be handled.