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Published:4/1/2008

Tax season is officially over (or at least pretty close to it), but our relationship with our accountant continues. Of all the wasteful things in business, our accountant relationship is probably one of the most wasteful. The problem is our attitude toward our accountant’s services and fees coupled with our inability to extract from the financial information we receive, are usually priceless insights that could improve our cash and profit positions.

The most common question CPAs hear from small business owners is, “What do you charge?” Complaints about the cost of mandatory tax filings create a wall between clients and professional accountants. As a result, most CPAs tend not to suggest additional fees, even for work that could pay you huge dividends. After all, who knows your business better than you and your accountant? Most of us are too busy on a day-to-day basis to carefully analyze our financial statements, yet locked within those pages is information that could reshape our business, providing huge returns. It’s hidden because our accountant is too shell-shocked from our cost complaints to suggest any additional work.

A tip of the gardener’s cap to Al Lang (Greenleaf Landscapes, Marietta, Ohio) who realizes his personal skill set doesn’t include being an accounting wiz. Monthly, usually between the 8th and 10th, Al has his CPA spend a day at Greenleaf. When the accountant leaves, the books for the prior month are finished and Al has a list of the top five or six things to investigate, areas the accountant identified that could pay dividends.

There are numerous lessons here. Knowing by the 10th of the month where he stands for the prior month’s operation greatly enhances Al’s ability to keep control over expenses. Sure, not every invoice has been received, but the accountant can make close estimates of those missing invoices so the month’s results are very accurate. (An accountant would call the results “materially correct.” A layman says they are “close enough.”) It’s better that information is close-but-timely rather than precise-but-dated.

The accountant seeks trends—increases in costs or drops in revenue—either from the preceding month or from the same month in prior years. If items like wages or cost of goods are out of balance for the month, immediate action should be taken. You can’t afford to wait.

Competent eyes looking over your financial statements can find inventory building up or accounts receivable slowing down. More than most others, these factors can impact your immediate cash flow—and cash flow determines if you stay in business. No cash and you’re toast!

Most accountants can (and should) provide a Statement of Cash Flow along with your Income Statement (Profit and Loss) and Balance Sheet. Small business people tend to disregard or ignore the Cash Flow report. Ignore it at your peril! Your accountant can help you understand how this report shows the health of your business, along with insights as to where the cash is coming from and where it went.

We usually talk about how inventory build-up is a bad thing because many garden centers get in trouble with excess inventory that sucks up their cash. Your accountant can help you determine the best inventory level from a cash-flow perspective. This can also help you see where you may be under inventory. We’ve all heard, “You can’t sell from an empty wagon.” With the exception of landscaping jobs, it’s impossible for a garden center to effectively take significant orders and buy products for later pick up. Retail customers want to see it and then buy it. Being under-inventory can be devastating in a different way from over-inventory.

If your accountant is unable to give you this type of information, perhaps it’s time to change accountants. You need the ability to share your frustrations, concerns and goals. Without mutual trust and respect, your accountant has minimal value to your company.

If it sounds as if the accountant is a magician able to see things in your financial statement that non-professionals can’t see, that’s accurate. However, you are running the business. Your accountant may say your inventory is too high and, from an accounting perspective, that may be correct. But you know your market and your customer and may have solid business/marketing reasons to keep your inventory at that level. That’s why you need an open and candid relationship with your accountant so you can debate these issues in a respectful way. There are no absolute rules dictating exact inventory or payroll levels, debt or any other aspect of our business, but with competent, consistent and timely advice you’ll craft strategies that will compound your profits.

Bill would love to hear from you with questions, comments or ideas for future columns. Please contact him at wmccurry@mccurryassoc.com or (877) McCurry.