As the tax filing deadline looms, at least for those of us who’ve filed an extension, you need to know how to find a good accountant.
Let me say from the start, it’s always better to keep your accountant. Changing is never a good idea unless you really need to. There are a couple of reasons you want to change infrequently:
However, I needed to find a good accountant, to make a change and this is how I did it.
First, it makes sense to understand the accounting industry so you know which parts are relevant to you. While I talk here about the United States, you will find similar statistics in your own country and the selection rules I’ll outline generally apply to you no matter where you live.
The accounting industry looks something like this:
Notice, the Big 4 accounting firms, the household names Deloitte, PWC, Ernst & Young and KPMG, represent a whopping 47% of all accounting, taxation and audit revenue. They are the full-service, international firms which dominate. Most listed companies use these firms.
At the other end of the spectrum are the sole practitioners. Here, I want you to imagine a lone middle-aged man in tiny suburban office or even a lone middle-aged man in an even tinier city office, a box! This is what most CPA firms look like in the United States, an amazing 30,745 of them.
In my experience, Australia, New Zealand and Singapore have the same industry structure. The Big 4 take most of the revenue. The vast bulk of the firms are one-man shows.
Now, why on Earth am I bothering you with all this analysis when all you want to do is work out how to find a good accountant. Well, simple. You need to find the firm that’s right for your needs or you’ll pay through the nose.
And that means finding one you can afford and one who has sufficient skill and experience to handle your taxation matters. Now, remember! The information I’m about to share comes from my own research. It’s a New York City centric investigation, expressed in 2016 United States Dollars. And it comes to you with simplification and assumption designed to bring the contrasts in sharp relief. A major assumption here is that you need personal and simple LLC (Australia: Pty Ltd, Singapore: Pte Ltd, New Zealand: Ltd) tax returns done, not complex cross border, consolidation or transfer pricing considerations.
With that tedious miscellany out of the way, here are the prices offered by the different tiers of the accounting industry:
Naturally, there are a million assumptions in all this and, at the upper-end, it will be vastly more depending on the complexity. This is a guide as to scale and proportion.
Now you have an idea of budget and what you get for that budget. This should really be enough for give you a sense of what bracket you fit into.
If you are the Chief Financial Officer of a listed company, you’ll use a Big 4 firm probably.
If you own a large privately-held company with international operations, multiple currencies and complex structures, you might look at a Top 100 firm or maybe Large.
If you own a mid-sized privately-held company, you have an interesting decision to make. If you’re buoyant about growth or ambitious, you might aim for a Top 100 firm. If you think you growth prospects are stable, you might want to stick with a Medium firm. Really, mid-sized companies are not serviced well by the accounting industry I think. That’s probably because there are not many mid-sized companies. Such companies are like teenagers: not adults, not children. They have unique needs and can vacillate up and down.
If you own a small business with revenue under $2 million and need only a partnership return and a personal return, perhaps you just need a Small firm.
If you are in any business, I do not recommend a sole practitioner. This type sole practitioner does standard personal tax returns with maybe 25% of their clients perhaps having a small business too. If you have just a tiny business, you will be at the upper end of his expertise and if he goes on vacation or is ill, you will be left high and dry. I’ll say it again, if you have your own business, I advise that you do not use a sole practitioner. Save sole practitioners for standard wage and salary earners.
My needs are for a small business. I therefore need a Small firm of 2 to 10 CPAs.
I need a New York State accountant for filing, not just Federal returns but also, New York State returns.
Obviously, I need an accountant close to me so I developed a list of 18 of them in the surrounding area.
Then I hit the phones. Unsurprisingly, twelve were sole practitioners. Of these twelve, seven didn’t answer their phone. It’s tax filing time. They’re so busy and can’t afford support staff. The five who did answer confirmed that they are too busy and would be happy to talk in 2017.
That left six. These six firms were Small. Most had two CPAs, either father-son or brother-brother arrangements. Interestingly, it’s a male dominated professional. All of these six firms answered.
Of these six firms, four were in White Plains, New York, a major downtown (Australia: CBD) area and two firms operated from two offices in more suburban locations.
I made an appointment to meet them all. As I’ve previously advised at Q&A: Keep legal costs in check, make a surprise visit to test accessibility. You want to see your prospective professional in their native environment. Are they disorganised? Are they carrying a glamorous office you’ll have to pay for?
In the end, I narrowed these six down to two firms.
The first, let’s call him The Polished Professional, was based in a magnificent corporate park in White Plains, New York. I arrived 30 minutes early. I was greeted without fuss and taken to a beautiful conference room. The view was breathtaking. I was in the treetops of a stunning park-like vista, with the colour of summer blooms of a manicured garden below. The conference room desk was polished, the decor immaculate. I was offered a cool drink while I waited. Soaking it in, I noticed it was quiet, like a morgue in fact. Other than the young man who greeter me, I could hear or see no-one. I counted 6 offices on my way through. There was no energy. But I mused, ‘check yourself Kenelm, you’re not looking for an atmosphere like the floor of the stock exchange. It’s an accountant’s office.’ My prospective accountant joined me, the consummate professional, smiling and extended a firm handshake. On talking, it became clear by inference that he had taken the time to read at least two articles on this website. From Q&A: Keep legal costs in check, he anticipated my early arrival. From Q&A: Keeping the books, he knew of my golden rule that entrepreneurs should not do the bookkeeping themselves. Rather than feel I’d let my trade secrets escape, I was deeply impressed. He had been in practice for 30 years, all the time in New York. His practice had a 5% international exposure, none from the countries I need. Being an Australian in the United States and my long history of international business, I need an accountant who knows his way around what the IRS requires by way of international disclosures: FBAR and foreign account filings. It became clear to me that he knew his way around the necessary filings and that I was in a safe pair of hands.
The second, let’s call him The No-Fuss Professional, was in an office he’d rented for many years located in a suburban downtown (Australia: shopping strip) in front of a railroad (Australia: railway). You walk in to a typical New York office. I was confronted by two businesses in the one suite: a bookkeeping service and my prospective accountant, not really knowing which was which. And the office was half gutted, as if contractors had abandoned a job. A man challenged me and I explained who I was after. He replied, ‘That’s me!’ Amidst apologies for the state of the office, I was shuffled into an austere but functional room. There was paper everywhere, not in a mess so much as orderly stacks which gave a kind of subliminal comfort. As the conversation unfolded, it became apparent that he was in partnership with another CPA located in the ‘main’ office elsewhere. Though the professional in front of me openly admitted his practice had little international requirements, his partner had at least one significant international client. I gained the impression that he was highly efficient at simple tax returns, and referred harder work to his other office. This was something to be careful of, though could be a workable solution to my needs. He sounds like a Sole Practitioner accountant in practise expertise, but with his son and with a partner who has international exposure. He was obliging, very obliging. I explained I need an accountant who can give my bookkeeper journal entries in a simple DR this and CR that transaction, and not charge for something this simple. No problem. I left feeling that he could handle my US matters easily but that I’d have to scrutinise the international aspects closely.
The Polished Professional quoted $5,500 for a partnership return and a personal return.
The No-Fuss Professional quoted $1,495 for a partnership return and a personal return.
Where once my taxation matters were complex, today I need simple. I chose the latter. The entire process of finding a good accountant took 3 days.
How did you find your accountant?
..... and now the follow-up results ....
The No-Fuss Professional completed my partnership return in 4 days, filing 3 days before the deadline with minimal notice from me. My bookkeeper needed advice on two technical matters prior to closing the 2015 books. This advice was freely and promptly provided. On receiving the partnership return, the end-of-year journal entries were neatly presented to me on a single typed page.
So far, so good!
The son of The No-Fuss Professional personally delivered my personal return in 3 days, filing 2 days before the deadline with minimal notice from me. Talk about personal service. And he did this whilst sporting a broken foot.
I'm happy with my decision and the transition to a new accountant.