Communication with your CPA

Clear communication and documentation are essential aspects of your accounting relationship. It helps your Certified Public Accountant (CPA) with accurate and timely information for decision-making. Communicating your needs and providing the appropriate information is critical to helping your CPA never miss a deadline. To help clients, prospects, and others, Tanner & Co has provided a summary of the key details below.

The Right Information at the Right Time. It is essential to ensure your CPA has the supporting documents needed to ensure timely month-end closes and that a deadline such as board meetings are never missed. A critical part of this process is providing your CPA with the necessary information well before deadlines. For example, providing view-only access to your bank statements, credit card statements, and payroll systems streamlines the process and allows your CPA to be more self-sufficient. Your CPA needs this to verify all transactions are accurate and have been entered into the accounting system. However, having view-only access also eliminates the risk of unauthorized transactions.  

Follow-Up. Once all the initial information has been received, your CPA may reach out with follow-up requests for additional support documents for complex or unique transactions to ensure all transactions have been accurately categorized. Prompt responses to requests and providing documents when available allow for timely deliverables from your CPA. Invest the time upfront when your CPA is new and learning your business, and they will become more and more self-sufficient as they learn your business. Timely data allows for informed and relevant decision-making,

Strategic Solutions. The right CPA can help you be more strategic with your business. They can help you set and meet financial goals. If you communicate your goals, they can advise you on how to manage your business more effectively. Your CPA can recognize trends and advise how best to move toward growth. They can communicate how to create realistic budgets, help you to allocate funds more effectively, and see ways to improve your cash flows, revenue, and overall financial performance. Tax expert CPAs can also help with tax readiness, advising on information and documentation that needs to be collected throughout the year.

Stay Involved. Staying involved is the easiest way to prevent fraud. If you hand your books over to someone and never think about them again, internal controls are lacking, and the conditions for fraud are created. Give your accountants the right access, but never 100% control, and always review and understand your financial statements.

Plan Ahead. Communication with your CPA could prevent many unintended consequences before a decision is made. Have these conversations before, not after you’ve signed on the dotted line. These include:

  • Leasing vs. buying equipment. What is an ASC 842, and what do you mean all leases, including operating leases, now must all be presented on the balance sheet, meaning leasing equipment won’t “hide the debt”? Financing leases often come with hefty hidden interest rates, sometimes twice the rate to get a loan to buy equipment. And why am I being asked to guarantee the loans personally?
  • Stock, stock option, stock compensation, and ownership. What is a potential investor asking when she says she needs an accurate, up to date capitalization table? This document has some foreign language like guaranteed dividends, voting rights, subordinate debt, downrounds, or clawbacks?  I think I just gave away more of your company than intended. I really have to record an expense for stock options, cash was never even touched? And what is a downround anyway? That sounds like something you’re not supposed to do on a golf course.
  • Debt agreements. What do you mean my debt agreement has hidden clauses such as equity conversion features, warrants, call options, balloon payments, interest rate increases, or early payment penalties? This can happen in an original debt agreement or during a refinance of debt or line of credit?
  • Taxes. Do I have the right entity structure now and for the future? What if I international operations, somebody said something about transfer pricing?
  • Change in accounting principals or methods. My auditor is scaring me with some threat or restating prior years, was this really worth it?
  • Prepare for a sale, purchase, or other business transaction. Why is it that what I see isn’t what I get? For example, why does inventory not go on the books at the sellers purchase price, it goes on at the expected sales price, meaning I have a 0% margin shown on the sale of that inventory? That earnout was so easy to put in the contract but now I have to hire a valuation specialist, which can be very expensive? How many years before I’m ready to sell my company should I hire a Transaction Advisory specialists to ensure U get top dollar for my company? Can someone please explain do I combine, consolidate, use the equity or cash method?
  • Discontinued Operations. If I’m covering my variable costs should I continue operations? Would you end up in worse position? When is the right time? What would the accounting look like?
  • Terminating or ModifyingLleases. Seems simple right? I just told landlord I wanted out and they actually agreed, but now I have to consider a huge gain or loss on the books and the timing may not be what it seems?
  • New lines of revenue, business, or operations. What will the books look like? What will happen if I trigger having to estimate a deposit over the entire estimated life of my client? What is the life of my client anyway? We never said ‘til death do we part.
  • Inventory methodology. FIFO, LIFO, weighted average, what is best and when?
  • Manufacturing Accounting. Are you using the correct method of managerial accounting? How is an overhead rate?
  • Construction Accounting. What do all these numbers on my job cost schedule mean? Why is my cash flow and revenue so different? Am I making money with every phase and project? And I need an overhead rate for this too?
  • Nonprofit Accounting Contribution vs. a Pledge Receivable. Is it better to get more cash now, or more in the future? How will it affect my income, cash flow, and balance sheet? And now my auditor is saying I need to discount it and consider collectability?

Outsourcing your accounting allows you to focus on elevating your business. Your time will no longer be spent managing your books. Timely communication relating to accounting questions and promptly providing the appropriate documentation improves the turnaround on your financials. You can also enjoy the benefits of an experienced accountant’s insight. It can allow for CFO all the way to staff accountant at just the right number of hours and skill level.