Your accountant can be one of your most critical business consultants and partners —saving you money or, if you make a bad choice, costing you plenty. Choose your accountant wisely.
After reading this article you will know how to:
- Identify criteria for choosing an accountant
- Understand an accountant's portfolio
- Understand fee arrangements and shared accountabilities
While you may have a business manager on staff who regularly tracks and reports important metrics such as aging accounts receivables, an accountant helps put data into a comprehensible snapshot of your practice's current and future financial status. In addition to preparing tax statements, accountants can provide seasoned advice that saves money on taxes, bank loans and other important matters. This professional's job is to supply you with unbiased opinions about your practice's financial direction, opportunities, alternatives, potential pitfalls and — importantly — do it all in clear, non-technical language.
Determining whom to hire as your accountant is the first step. Gather names from colleagues who serve as owners of their practices, or query your local hospital's medical staff office and local chamber of commerce. Don't immediately hire the first one you find; this is an important business decision — perhaps, one of the most vital business choices you'll make — so take your time looking around. Considerations should start with the accountant's:
- Credentials (look for current certification, a certified public accountant [CPA], for example, as well as a commitment to ongoing professional education);
- Location (periodic face-to-face meetings with your accountant shouldn't require a 100 mile road trip, unless you prefer having a remote, "cloud-based" accountant, that is); and
- Software (incompatible financial software could slow important interactions with your accountant and, perhaps, cause you additional expense).
Your accountant can be one of your most critical business consultants and partners —saving you money or, if you make a bad choice, costing you plenty. Here are keys steps to take as you narrow down your choices:
Look for relevant expertise. Given the unique nature of your business, it is vital to find an accountant who has knowledge and experience about medical practices and your unique business challenges. Unlike most businesses, you provide services almost exclusively on a pre-payment basis, getting paid months after you perform a service. An accountant who understands the cash flow of medical practices can help you navigate through business challenges and, importantly, minimize your tax burden in a compliant manner.
Consider the cost. Although price should never drive your entire decision-making process, the cost of services is important. It never hurts to negotiate the fee, particularly if you are just starting out in practice. Don't rely on verbal offers, however. Get accountants' fees in writing, and compare them. Focus on the entire package: credentials, location, expertise, philosophical approach, and pricing of services. It will be a worthwhile investment of time to find the right business partner.
Check references. Like other professionals who sell their services, most accountants will appear quite capable at first glance. However, not all accountants are equal. Of course, an interview is important but don't make it easy for someone to pull the wool over your eyes. With the keys to the most critical aspect of your business — your finances, that is — this decision is as important as choosing the right practice partner.
Therefore, it's critical to check references (both the ones the accountant provides but also references you can obtain from friends and colleagues). You want to be sure that you are hiring the right person for the job. Once you narrow your candidate pool to one or two finalists conduct a background check of the educational, professional and personal references.
Select the services you want. Your accountant is the go-to person for preparing financial statements and tax returns, but that's not all they can offer. Many medical practices turn to their accountants for general business advice, tax planning, bookkeeping, accounts payable administration, payroll, and even financial management where the accountant serves as a virtual chief financial officer for the practice.
Many accountants also offer investment management and management consulting services for billing, collections and other areas. Some may have expertise in business development, important if you are considering an expansion or a different employment arrangement. These services can provide a significant benefit to independently owned practices, particularly small ones that are challenged to locate and retain part-time or contract advisors. An accounting professional can be a valuable partner if you are seeking financing to purchase new equipment or, perhaps, wade through an audit.
Consider a retainer. Many accountants charge by the hour, which can be very expensive in the long haul. If you wish to use your accountant in an expanded role, consider negotiating a bundled monthly or quarterly rate (often referred to as a "retainer"). Be aware that many retainer arrangements are simply a monthly estimate with the potential for extra charges if more work is required than anticipated. Unexpected charges are among of the most common reasons that professionals and their clients part ways. Your accountant should provide you a quote for all of his or her services.
Assess opportunities for assistance with financial controls. Experts agree that medical practices are prime targets for employee fraud, and your accountant can serve in a valuable prevention role. Even a limited bi-annual "fraud" review by your accountant can be enough to prevent a dishonest employee from taking advantage of you. Plus, your accountant may have some terrific suggestions to ensure that internal fraud is averted.
There is, perhaps, no longer single business relationship that has the potential to pay off more than your accountant. An accountant who just reviews your annual tax returns and produces quarterly reports won't get you very far. Look for an accountant who will proactively advise you about ways to save your hard earned money. They may suggest changes in your corporate structure or a leasing arrangement that saves you money, taxes or both. In other words, a savvy accountant does more than count beans. Good accountants keep you in business; great accountants can ensure that your business grows and develops in concert with your vision.
Pearl: Avoid Internal Fraud
Medical practices are prime targets for embezzlers. Your accountant can advise you on prevention steps which might include reviewing payroll and accounts payable records to spot fake identities or sham vendors; using a lockbox for daily deposits of time-of-service cash payments; separating duties so that several pairs of eyes are on cash receipts from the time they are received to when they are deposited; and auditing contractual adjustments to spot a false adjustment that ends up in a dishonest worker's pockets.
Pearl: Reading Glasses
Carefully read the engagement letter you sign with your accountant. It will outline the scope of work, your responsibilities and the accountant's, the period of the agreement and the fees. This agreement also may specify who at the accounting firm will work on your account — especially valuable to know when working with a firm that employs many accounting professionals. Plan to review and, if necessary, revise this engagement letter and its terms annually.
Pearl: Four or More
Accountants typically offer one or more of the four functional areas: tax advice, auditing, accounting and record-keeping and business advisory services. Given the unique nature of the medical practice industry, consider choosing an accountant that offers all four. A single accountant may be able to accomplish all of these services; however, an accounting firm may be a better alternative to ensure the breadth and depth of the expertise you need. Even if you are not sure that you need the full array of services an accountant can offer, it is likely that your medical practice, like all businesses, will eventually need assistance in all four areas.
Pearl: Record It
Create and maintain a detailed record-keeping process. If you hand your accountant a shoebox full of receipts to sort out, expect to get a giant bill for the time it takes to go through it all. You may already have a great sense of what you need to do each day, but work with your accountant to understand exactly what must be accomplished on a daily, monthly and annual basis. Get those expectations in writing, and ensure that your staff understands how to meet and maintain them. Your efforts will pay off in the end when your accountant can put his or her unique expertise to work for your practice's financial future, not sorting your paperwork.