Expectations Of My Accountant


#1

Friends -

I’ve noticed my accountant (their bookkeeper, really) has been missing about 3% - 5% of the expenses I submit. For instance, they did not enter into QuickBooks any of the expense receipts I incurred in a foreign currency while traveling abroad - and did not tell me about it. I’ve also noticed they missed some regular US expenses for a few meals and miscellaneous lock smithing and other charges. Their response was “well, a few hundred dollars here or there is too small to cause an audit so don’t worry about it.”

This concerns me, because next time it could be a $10,000 expense in my expense report they miss - and that’ll cost me real money and higher taxes!

Am I being unreasonable in expecting 100% accuracy (or at least five nines reliability) from my accountant/bookkeeper? Any thoughts on how to better outsource my accounting/bookkeeping and still sleep at night knowing all my expenses are being expensed through the business by my bookkeeper?

Thanks,

-jl-


#2

Personally I would take bookkeeping matters into my own hands unless you have a huge operation.

There are a few really good products with prebuilt Quickbooks categories for the real estate investor that could easily be ported to mobile home use. John Hyre and George Yeiter come to mind and they have through explanations for how and when to use the categories.

Then it is just a matter of educating the accountant of how you setup your books when you give them the file.


#3

A sloppy accountant? I would run away, especially with his flippant attitude.

If you do stay, take that 3-5% of your expenses that you’re losing and deduct it from his fees. I’ll bet he gets more conscientious.

Accountants, attorneys, and dentists MUST be accurate.

That’s my piece and I said it,

James (Ala.)


#4

Hello Jefferson,

For my other business, we’ve worked with Quickbooks for over 12 years. I would encourage you to take the accounting over as it really is not a big job. In our current business we handle well over 50 clients with over 20 projects a piece average. And it still takes about 1 day a week to do all the bill paying and invoicing.

I’m anticipating that the mobile home park will be substantially less work. It will be a matter of a couple of hours a week on Friday’s for Julie. She’ll pile up all the bills in the “In” bin, then all the receipts in another, then work through it in a couple of hours. I can’t see it taking longer than that. Even entering the credit card charges and petty cash is a pretty straight forward process.

I think that QuickBooks can appear quite intimidating to the uninitiated. The best thing to do is get one of those pre-built templates that Dave is suggesting, then hire a local accountant to go through it, account by account and category by category so that you feel comfortable with it. Then it will simply be a matter of inputting the proper income and expense in the right category (it helps to have a chart of accounts printed on the wall next to your computer).

At the end of the tax year it’s pretty easy to print out the reports for your tax purposes.

Hope this helps. If you need any help just know that you can call me and I’ll be happy to walk you through it.

Take care,

Post Edited (08-18-08 15:19)


#5

Do it yourself. It will help you to operate your business well more than you can imagine.


#6

Couple of thoughts on expectations of accountant:

First, perfection costs money. Getting a 1% detail right can, in certain cases, cost much more than the other 99%. This is especially the case when a client hands you raw data with little order to it - we can get the details right, but it means going through EVERYTHING, ONE piece at a time AND triple checking to ensure NOTHING was missed. For example, let’s assume a client has heavy meals out, with some being personal, and some being business. We can track those meals by going through EVERY receipt, matching EACH one and making multiple phone calls to the client to clarify what was what, because receipts and bank accounts together often do not convey all of the necessary information. As you can imagine, this type of sorting runs up the billable hours in a serious way. Now multiply that ONE issue by…some larger number. Bottom line: a perfect set of books can become VERY expensive, especially if the underlying data are imperfect. And with entrepreneurs (go do a deal NOW, backroom work can wait, and wait…and wait!), the underlying data are almost always imperfect. Do not underestimate the cost of perfection, especially that 5% or so increment between “perfect” and “very good”. That last 5% can cost as much as the 95% that preceded it - which is where we get the saying “the perfect is the enemy of the good”…meaning a quest for perfection can become too expensive, or takes enough time and resources to keep other big things hanging.

Second, depends strongly on the client. There are several types:

We have clients who apply the Pareto Principle to the nth degree. For those of you who are unfamiliar with that principle, it means that the first 80% of the result comes from 20% of the work, and the remaining 20% of the result would require 80% of the work (i.e. diminishing returns). These sorts of clients will absolutely NOT pay for perfection. They are willing to pay $100 for 95% (good), but not $200 for 100% perfect. In fact, such clients often need to be pushed by us to the 95% line, because they will be happy with 80%, while we are not willing to sign an 80% return or prepare 80% books. This describes most of our client base - they will do the minimum possible to get to 95%, and they absolutely will not pay to get from 95% to 100%. Such clients are entrepreneurs to the core, maximize results, minimize cost, and seek perfection only when it is efficient for it to happen. These types of clients love us, because all too many accountants demand perfection AND not coincidentally, dramatically run up the cost of services with such a demand.

Some of our clients are consistently detail-oriented (which is much better than inconsistently so). They want 100% perfection, know what 100% perfection costs and are willing to pay for it. Typically, but not always, such clients also assemble very useable raw data (meaning that they are consistently detail oriented), which helps reduce the cost of getting from 95% to 100%. These clients are fairly rare in REI or small business, and almost always come from an engineering or software background. As long as they recognize and pay the cost of perfection, they work out fine.

The worst category are the GOTCHA clients - the ones who want perfection, but will not pay for it ("a set of books should cost “this much” even though the client took tons of time on the most excruciatingly detailed or subjective [that should be a repair, not a utility!] items). This is the sort of client who will DEMAND a detailed legal explanation if they disagree with a return item (with a cut and paste of the statutes, rulings and cases in question) and then be upset when billed for the time it took to show or argue the law (though I will not bill for the time if the client has a better interpretation


#7

We have fairly few bookkeeping clients, with the bulk of the practice being returns and consulting. Most of the bookkeeping clients we get tend to have large amounts of transactions that have been neglected for a long time and need done quickly (e.g. IRS audit). Doing books for the first time (like doing returns for the first time) tends to be harder & costlier, because we do not know the client or their issues. Once a pattern is set, things become easier & cheaper all around. Most bookkeeping clients tend to delegate to local (cheaper) people once we fix the books with they/us/both looking over the locals shoulder once a quarter or so. With that said, we do have some regular bookkeeping clients who simply do not want the hassle of doing it themselves or managing a local, cheaper (and usually less knowledgeable) bookkeeper.