Working with Accountants: What to Ask? What to Do?
Understand your accounting needs before speaking to an accountant
A professional accountant should be able to provide a retailer with specialized knowledge, expertise, and skills to improve the organization of their financials, implement or maintain sound management of records, help the business claim everything that it can when tax season rolls around, and act as a financial advisor when it's necessary or beneficial to the business.
The following are a few things to consider before your search for a professional accountant begins:
First, identify your needs as an organization
Make sure you conduct a thorough examination of your business to understand where an accountant's help might be needed, and where you may be able to do the work yourself. Understanding your accounting needs saves you time and money.
Determine your timeframe
It's wise to approach an accountant well in advance of the time that you're going to need their services. If your tax return is being requested by the Canadian Revenue Agency, flexibility will not be your greatest asset.
Identify your accounting needs
Figure out whether or not you'll need an accountant to prepare, compile, review, or audit your financial statements, prepare income tax returns, or assist in tax and financial planning. Understanding whether your accountant will ever need to meet with a representative from the Canadian Revenue Agency, a banker, or a lawyer is also important. Stating these needs will help you and your accountant prepare.
Understand your own knowledge of accounting
It's important to assess your own accounting skills before speaking to a professional. This way, you'll know if your accountant will need to explain and help you understand fundamental concepts.
Determine how accessible you'll require your accountant to be
Figure out where you and your accountant will be meeting and how often. Choosing the most convenient, cost-effective way to meet with your accountant is definitely a wise decision. Keep in mind that the more your accountant is required to travel to meet with you, the more the billable time will increase.
Strategies for Building Successful Relationships with Your Accountant
Darin McLean wears two hats: the hat of a certified management accountant and that of a retailer.
McLean is part owner of Mills, the popular lady's fashion store on Spring Garden Road in Halifax, Nova Scotia, along with a retail wine store, Chicken Burger franchises, and other retail operations.
McLean's insider knowledge of the retail and accounting worlds gives him a unique perspective concerning the ways retailers can build successful relationships with their accountants.
Choose an accountant with a mind for retail
"Some entrepreneurs have a fear of accountants," says McLean.
Part of this fear stems from the scope of accounting — accounting is a major part of the business, and choosing an accountant is a big decision. Another part of the fear stems from the costs of accounting — it's a cost that doesn't always show an obvious return.
"The money," McLean assures retailers, "is well justified."
To see a return on an investment in accounting, McLean recommends that retailers hire an accountant who is involved in small business and management, and someone with a mind for retail.
"Somebody who understands retail can bring retailers more value at a lower price," says McLean.
Accountants with a mind for retail:
- Help retailers avoid information overload. Most POS systems generate torrents of information. A retail-minded accountant digs into the data and retrieves the details that matter.
- Add value by breaking down the business by category, sales, salesperson, and so on specific details about the retail business that drive profitability.
McLean recommends that retailers hire an in-house accountant, if they can afford it. A staff accountant gives access to quick information and deeper insight into the business and the books.
Next, meet regularly with your accountant
Retailers who only visit their accountant at the end of the year do themselves a disservice.
"You need to manage costs accordingly. You need to get information immediately," says McLean. "Eleven months later is history. It's too late."
Rent and salary are a retailer's two biggest concerns. Rent is static but retailers can control wages on an almost weekly basis if necessary — but only if they know to make these adjustments.
Remember to build books that build the business
Retailers should work with a retail-minded accountant to craft books that build the business.
A retailer's books should:
- Identify gross profit and margins at the end of each month
- Track salary costs for the period and relate these costs to sales
- State profits and losses by location and department
- Break down sales by category and margin
- Itemize expenses with as much detail as possible (including rent, wages, credit card fees)
- Include a separate income statement for each store
- Measure performance against prior months and years
- Correspond to how the budget is broken down
- Monitor receivables and payments to ensure the retailer has control of the cash flow
What if I'm Audited?
Auditing: it could happen to anybody. It could happen to you. So what do you do about it?
Always be prepared for an audit — operate as if you will be audited. And if the auditor does call, remember to:
- Call your accountant and get them involved from the first call. Don't answer any questions without first consulting with your accountant.
- Ask what years the auditor wants to review — provide only what they ask for.
- Be ready to share financial records for the last six fiscal years.
- Discuss tax adjustments with the auditor.
- Treat the auditor with courtesy and professionalism.
Adapted from "Working with Accountants: What to Ask? What to Do?" by the Retail Council of Canada (www.retailcouncil.org). Used by permission.
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