Dollars and sense Featured

7:00pm EDT November 25, 2009

You might not think of your accountant as some sort of bean counter, better suited for the Dark Ages than for the Age of Information. Most folks, after all, recognized the error of that thought years ago.

You also might not think of that same accountant as a trusted business adviser. But you should.

Gone are the days when your accountant would just sit down with the company ledger and crunch numbers. An accountant is able to offer so much more now, especially in this economic state.

Need to evaluate your inventory turnover, to analyze what is selling, what is not and why? An accountant can do that.

What about an examination to make certain that all available credit lines are being used or that capital needs are being met? An accountant can do that, too.

And, of course, there are taxes, an area where there has been so much evolution that one industry expert says he estimates the number of allowable tax incentives and minimization techniques has more than doubled during the quarter of a century since he analyzed his first set of financial reports. Another expert says the number has more than tripled during that period. Whatever the actual amount of exponential growth, there is no doubt that accounting is more complicated, and more important, than ever.

“Clients need to stay even closer with their accounting firms more so now than in the past,” says Pete Wellman, assurance partner, Ernst & Young LLP. “The issues and the challenges are probably trickier than in an up market, and I think it’s even more important that companies view their relationships with their accountants on a more holistic basis, not as just a compliance relationship.”

Talk with your accountant

The key to developing a business relationship with your accountant is communication. Nothing is more important, just ask an accountant.

“Your accountant should be part of the inner circle when you’re contemplating major transactions to make sure that you have a team approach,” says Mitchell Less, partner-in-charge of audit practice services, Grant Thornton LLP. “Your accountant should have a relationship with your attorney, and perhaps your banker, in order for them to know one another so they can work together strategically.”

Without some level of constant and consistent communication, your accountant cannot know the full spectrum of activity within your company and, in turn, might be unable to offer constructive criticism and potentially prosperous ideas and suggestions. The more communication between you and your accountant, the more opportunity and the higher the possibility you will receive a far more favorable result.

Many industry experts recommend you plan to get together with your accountant for at least three or four formal meetings per year, though multiple variables might swing that number higher or lower, including the size of your business, the challenges you are facing now and expect to face during the course of the next year, and the strengths and weaknesses of your internal financial team. Others recommend more casual meetings or phone calls in order to communicate on a regular basis.

Whether you meet in the boardroom or at your favorite bar, take advantage of that time to ask your accountant important questions, like how can you best utilize your accountant? What should you do internally? Externally? And what are your priorities for the next year?

A high level of communication with your accountant can also lead to you becoming more comfortable around each other. Your accountant should be familiar with the folks on your upper management team, and you should be familiar with the folks who play top roles for the firm.

“It’s important for the accounting firm to have relationships with the executives at the highest level of the company, so that the accounting firm has a clear view through the eyes of the business and the related risks and opportunities,” Wellman says. “The more we understand the business from the eyes of the very top management, the more we can add value.”

Take advantage of financial opportunities

The reason so many accountants prefer to be so involved is because the more information they know about you and your company, the more areas they will be able to explore in order to save dollars and cents. And saving dollars makes sense.

“If you want the best out of the relationship, it’s important that the client provide knowledge on their business [and] that you understand their business model,” Less says. “Where are they today? Where do they want to be five or 10 years from now? We need to gain a good understanding of what the hurdles may be in terms of the company achieving those goals.”

But the burden of trimming the budget lies not only with your accountant — you need to do your part, too. So be organized, be prepared, be proactive and be accessible.

Just consider the average audit. If your files are scattered around your office, stacked in piles that are toppling over, an audit performed by your accountant might last far longer than it should. In order to avoid a heftier bill, keep your internal financial team on a schedule to update your books regularly, perhaps even every day. Exorbitant costs for an audit — or even just a review or a compilation financial statement — are normally only incurred when you are not organized and prepared.

“Attention to detail as the process is moving forward is typically the best way to prepare for an audit, to do it right the first time,” Less says. “That’s much more cost-effective than for an auditor to look back over an entire year and help you find the error.”

If you are particularly strapped, you might even consider consulting with your accountant and other business advisers to consider altering the end of your fiscal year from the end of the calendar year to the end of another quarter. That would allow your accountant to work with you less during the peak months of January through April and more during the off months, when rates are far less expensive. And though such a shift is filled with internal and federal paperwork, the potential savings of such proactive measures can reach more than 20 to 30 percent.

There are even extreme situations where you might be able to save hundreds of thousands of dollars because you and your accountant are both accessible and open to conversation.

Several years ago, one industry expert was working with a client who had installed defective materials in a sewer and storm drain system, and the client lost thousands of dollars. Though the client was able to file a claim against the manufacturer, the expert was also able to find a case law that allowed for the property loss to carry back 10 years, a far longer retroactive period than the standard two or three years. The result? The client received $500,000 in large part because the expert had been involved in the situation from the start and because the two sides were accessible to each other.

“There may be many companies that think we are approaching the bottoming out and they don’t want to miss out on opportunities to capitalize on low prices,” Wellman says. “It’s more important now than ever for them to reach out to their accountants.”