Wednesday, July 20, 2011

How To Toolbox

How to choose an accountant

Look far down the road

There is no shortage of certified public accountants who want to win the business of a young tech startup and then ride along with the client as the company grows. The challenge for the startup is in finding the right accountant.

Hank Galligan, assurance director and practice leader in BDO Boston’s software and technology practice, and Todd Berry, assurance partner and practice leader in the firm’s life sciences practices, shared advice for tech startups:

As a startup or emerging growth company, the management team should always be thinking of their needs a couple of years into the future when selecting an accounting firm. Some of the questions that should be addressed in the selection process are:

• What will your company look like in the future and where will your operations be and who will be your clients (local, national, global)?

• What will your accounting firm need to be able to handle for you (complex accounting and tax issues)?

• Are you hoping to get acquired by a national or global company and if so will due diligence efforts go smoother if the name on your audit report is recognized?

• Are you planning on going public and, if so, do you need someone that actively plays in the public company market place? Or are you going to stay real lean in your accounting and finance department and need a smaller firm that may be used to acting almost like a part time CFO?

• Can you see yourself having a good relationship with the accounting firm partner sitting across the table from you?

• Are you confident that the person is going to rally the firm’s resources to bring you the assistance you need at a given moment and/or get you in touch with contacts within his/her network to assist you?

• Does the accounting firm have a focus in your industry?

• When looking at the fees, one should focus on the “total cost over the life of the arrangement” and be wary of heavy discounts in the early years.

• Will the firm be able to grow with you?

The national view:

“You want to get a firm that’s experienced in similar-size companies but also similar industries,” said Jim Metzler, vice president of small firm interests at the American Institute of Certified Public Accountants. “The better CPAs are the ones that ask all the questions of the business, versus the business asking all the questions of the CPA.” Once the basic information — background, education, etc. — is covered, a company should take an accountant through a line of situational questions, “Questions like, ‘What’s the toughest situation you’ve had with a client, and how have you worked the client through it,’” Metzler said.

Beyond the interview, a good place to determine if a CPA has the competence or skills your company needs is a peer review.  Most states requires a CPA firm to have a peer review, according to Robert Colson, a national accounting consultant and Grant Thornton retiree.

The search for an accountant should also start with determining your company’s specific needs, Colson said. If your company needs an audit, you’re limited to strictly a CPA firm, Colson said. If a small business has accepted state funds or has participated in an incentive program from the federal government, an audit may be necessary.
However, small businesses may require a host of other financial advice — such as keeping books straight, implementing a cost-accounting system or preparing tax returns — that may call for a bookkeeper or consultant, but not necessarily a CPA, Colson said.