The main types of accountants that are most relevant to law firms are billing clerks, bookkeepers, tax preparers/advisors and chief financial officers (CFOs). Each type serves a unique purpose, and since we are on the topic of accounting, I should also note that there is a different price tag for each type of service as well. In general, here are some guidelines for what to expect from each type of accountant.
- Billing Clerks specialize in helping the law firm correctly bill clients and follow up with clients with unpaid invoices.
- Bookkeepers are great for organizing and categorizing your bank activity, reconciling your operating and trust accounts, and producing regular financial statement reports.
- Tax preparers and advisors are focused on supporting your tax matters, such as filing necessary tax documents with the federal, state, and local authorities, while also giving you proactive advice on tax strategies that work for you and your firm.
- Chief financial officers will focus on analyzing your financial records and combining those insights with your business strategy and industry data. By combining all these factors, the CFO can give you strategic guidance on ways to increase profitability, manage cashflow, forecast and plan for the future, and in some cases strategize for a profitable acquisition or exit of your firm.
Now that you understand the different types of accountants, a great question to ask yourself is: Have I been paying for the right type of accountant? Depending on the needs of your firm, you may find that you should be hiring multiple types of accountants or an accountant that can cover more than one of these roles.
The next factor that often contributes to the “necessary evil” reputation is that accountants are typically not all that proactive about getting feedback from clients. Your accountants should be asking for a regular meeting to make sure they are getting your feedback about the good and bad aspects of their performance. In the past two years, I have interviewed over 60 law firms on my podcast, and more than 75% of them tell me that they hardly ever talk to their accountant. If the lines of communication are not open with your accountant, that should be a red flag or a yellow warning sign at the least.
To help you get the most value out of your relationship with your accountant, I recommend that you ask the accountant how often they plan to connect with you to provide the following:
- A list of the key responsibilities that the accountant will support for your firm.
- A list of open items that need to be resolved to produce reliable financial statements.
- A scheduled timeline and due date that you can expect the financial reporting to be complete,
- A pre-planned performance review meeting where you provide your likes and dislikes about the accounting services.
- A contact number or email for a person who can support and help you address urgent accounting matters that come up outside of the normal schedule.
Establishing this type of tone at the onset will go a long way in helping ensure that you don’t end up paying for a service that you are not happy with. It also allows you to do two things:
- Assess whether the person(s) or firm that you are speaking with is the right type of accountant for what your firm needs.
- Help you set the standard for why you should fire the accountant if they do not live up to the expectations.
Knowing exactly when to fire an accountant and move on can be complex, but here are some general rules:
- If you find out that the accountant is not willing or isn’t able to explain accounting and financial information in a way that helps you make informed financial decisions.
- If you give the accountant feedback about significant deficiencies in their services and they don’t show improvement within three months.
- If you find out that the accountant has significantly misrepresented the level of services that they can provide, I would consider an immediate separation or an immediate supplement to their services.
If you decide it is time to move on to a new accountant, you should consider a few important factors to make the transition to your new accountant smoother:
- Understand who owns your historical accounting data. Very often bookkeepers set up your accounting system in their firm’s name to either earn a small commission from the software provider or to pass on a discount to you. Before you leave an accounting firm, you should ask the accountant to make sure your firm is the owner of the accounting system so you don’t lose your data.
- Ask the old accountant to complete whatever accounting work that they are in the middle of doing. If it is not feasible for the old accountant to finish their work, you should inform the new accountant so they are prepared to take on any unfinished work.
- Remember to turn off all access rights of the prior accounting firm to your systems and financial information.
I hope that you found this advice useful for you and your firm. Law firms that embrace these tips and this perspective tend to have a much more pleasurable, productive, and profitable relationship with their accountants.