Shopping for an Accountant

Your accountant should be in the business of helping you make money. How does yours stack up?

My husband and I decided to use a professional tax accountant to do our year-end tax filing for our service company. We were doing errands one day when we noticed a new sign going up in a little office plaza. That’s where we found Brenda.

Brenda had worked for the IRS for 10 years. Then she quit her job, and started to do what she wanted to do. She figured a good new career would be helping folks protect themselves from the insane jaws of the IRS. So she started preparing tax returns. She does absolutely bulletproof returns. Bring on the auditors. She knows their methods. 

Brenda offered to do all the data entry for us, but I realized that I needed to know the financials inside and out. For me, that meant doing it myself, until I understood it. With Brenda’s help and a solid accounting program, I could generate the financials. Then I could hand off the day-to-day data entry once I got it figured out and wrote the procedures.   

The real books vs. the pretend books

We got the accounting procedures started, but I still had to figure out how much to charge. A new year had begun. I took out the calculator and, using Brenda’s nicely assembled tax returns, I figured out how much it had cost us to run the company the past year. I did a break-even analysis of the data and found out how much it cost us, per man, per hour to operate our business.

Total costs of overhead + total cost of direct labor
Total number of billable hours 

I came up with something in the neighborhood of $42 dollars per billable hour for overhead and labor. Then I realized something very important. 

The break-even amount was using the real numbers from the previous year. That was the year in which we paid ourselves $30,000 (for the two of us!) and our top technician - a man who can fix anything on the face of this planet - made less than $20,000.            

Brenda was in charge of tax compliance. She needed the real numbers, the actual dollars taken in and spent. I needed to figure how much we were going to charge. If I used the real numbers in my calculations, I was doomed to another pitiful year. Just like last year! I took out a columnar pad and wrote down the pretend numbers. How much did I want to spend on ourselves and our wonderful team? I referred to the real numbers … on every line of the income statement I was scrimping. I beefed up my projected costs. And I created a selling price that would allow the coming year’s real numbers to look like my pretend numbers. 

We set our selling price for an hour of labor at five times what it was the year before. Brenda was totally supportive. In fact, she raised her prices too!  

A lot of accountants don’t get this. Your accountant might tell you, “You can’t charge that, you’ll price yourself out of the market!”  or “You’ll have to pay a lot of taxes on that kind of income.” If so, you might need a new accountant. To make the process easy for you, here is a handy checklist for shopping for a new accountant:

  •       His primary business goal is to help you make tons of money.
  •       She loves when you raise your prices. It means you will both make more money.
  •       He asks, “How can I help you get the kind of information you need to fine tune this company?”
  •       He offers to go over every line of the financial reports until you are sure you understand them.
  •       She understands that taxes are a cost of doing business and insists that your selling price is high enough to cover them.
  •       He offers to train your new data entry employees so that they get a clear understanding of the accounting program and basic accounting principles. At his place, on your nickel.
  •       She loves the “sailboat fund” idea and suggests you add $10 to every service call to contribute to the boat purchase.
  •       He makes a lot of money himself.
  •       She pushes you to start the fully funded profit sharing plan and look into ESOP options. 
  •       He or she smiles a lot, and has lots of experience confronting the IRS.

If most of these statements apply to your accountant, you have a winner!

About the Author 

Ellen Rohr is the president of Zoom Drain and Sewer LLC, and is a columnist for Huffington Post, PHC News, and a contributor to many business journals and trade magazines.
Contact her at www.ellenrohr.com.



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