How to Evaluate Accounting Firms

May 21, 2021


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How to Evaluate Accounting Firms

Accounting firms are essential support for modern businesses. While some companies have in-house accounting departments, many businesses outsource their accounting functions to a separate firm. Outsourcing allows companies to lower costs while having their accounting functions completed by experts working in their best interest. However, not all outside firms are created equal.

To understand whether an accounting firm is the right one for the job, it is essential to properly evaluate the capabilities and limitations of different firms. Accounting firms vary by the scale of companies they work with, the verticals they serve, and the level of service they provide, so picking a firm is not a one size fits all solution. Recognizing these differences can help businesses choose the correct accounting firm from the outset, saving them the pain of trial-and-error. 

What are the Responsibilities of an Accounting Firm?

An accounting firm covers many essential functions including bookkeeping and payroll, tax planning and preparation, and business valuation and development. Depending on a business’s needs, an accounting firm takes on a myriad of responsibilities. But there are a few key services that an accounting firm will provide that an internal accountant may not have the skills for. 

Bookkeeping and Payroll

While many small business owners are highly skilled in business operations and management, they may struggle with the more complicated financial aspects of running a business. Amidst the extensive tax codes and complicated financial processes, some small business owners might feel as though they are in over their heads. 

Accounting firms can assist with these problems and help bring stability to small businesses. These firms can keep records of a business’s deposits and withdrawals, create profit and loss statements for accurate financial planning, and help business owners intelligently allocate funds. Accounting firms can also ensure that a company has enough money available to pay their staff while navigating other pressing expenses. Overall, accounting firms give corporate staff the information they need to make financially healthy decisions for their business.

Tax Planning and Preparation

The process of handling a business’s taxes can be a complicated and confusing process. Businesses have countless ways they can file taxes, and the best ways to file often require detailed knowledge about how the tax system works. Gaining this insight can be time-consuming, and your company’s time is likely best used elsewhere. 

Fortunately, accounting firms can help businesses file taxes efficiently, and can provide an in-depth understanding of relevant tax breaks. They help an organization to come out on top during tax season, and can eliminate much of the hassle of the filing process. The best accounting firms know how to make taxes as beneficial as possible for a business, no matter what the nature of the company is. 

If taxes are prepared incorrectly, heavy fines and expenses can be incurred, even errors are unintentional. An accounting firm will ensure that the company’s taxes are filed correctly, and make sure that the extra expenses that come from accidents don’t happen.  If your company goes through an audit, it’s invaluable to have an accountant on hand to help you through the process.

Business Valuation

Because accountants have holistic insight into the financial health of a company, they are in a position to help create financial goals as the company grows. Having an outside accounting firm take a deep dive into financial statements, invoices, and more, is extremely beneficial to a company’s ability to scale.

Accounting firms can look at the entire financial history of a company and assess how past financial processes will affect future operations. This information is incredibly useful to companies courting potential investors. Attracting investors is difficult when they aren’t provided transparent financial information.

What are the Different Types of Accounting Firms?

Accounting firms come in all shapes and sizes. Determining what kind of accounting firm best fits a company’s business goals requires understanding the short- and long-term needs of your business, and doing some research into firms that can meet those needs.  There are several types of accounting firms you might encounter:

Public Accounting Firms

Public accounting firms handle a large amount of operational financial tasks and ensure a company is growing effectively by complying with proper legal requirements, reviewing the financial statements of a company, and recommending different ways to cut costs and increase profits. 

Forensic Accounting Firms

Forensic accounting firms specialize in the detection of illegal practices within a business. By analyzing expenses and expenditures, these firms can determine whether a business is following the letter of the law. If a business owner suspects malpractice within their company, forensic accounting firms can find the source of the illegal activity and help develop a plan to eliminate the problem.

Tax Accounting Firms

These firms work with businesses on tax preparation and planning. Tax accounting firms help complete all income and tax reporting in a timely manner, and they ensure that a business is aware of any relevant tax breaks before filing. 

Bookkeeping Service Firms

These firms help businesses of various sizes in handling daily operational finances. They ensure that many daily operations happen without a hitch, such as payroll, credit reconciliation, and financial statement preparation. 

How to Evaluate Accounting Firms

The most important part about finding the right accounting firm is understanding the needs of a business. Different accounting firms are best with different duties, and have strengths and work experiences. Finding an accounting firm that has experience in the required field is something that is essential. 

To evaluate which accounting firm is best for a company’s specific financial and operational needs, ask yourself the following questions:

  • Does this firm have experience in my industry?  Have they dealt with similar concerns that my business has?

  • Do they have experience with businesses the same size of my company / at the same stage of growth?  An accounting firm that only deals with large multinational corporations wouldn’t be the best fit for an early stage startup.  For example, if you're raising equity capital, it’s helpful to work with an accounting partner who has experience with the requirements for financial due diligence for investors.

  • Do they come well recommended?  It's good practice to do due diligence on an accountant just as you would with any other service provider.  As you narrow down your options, speak with some of the firm’s clients about their experience.
  • What will the relationship look like?  Will I have a dedicated account manager or a team of people?  Some firms may be a better fit based on the preference of the business owner who is hiring them.

It’s very important to find an accounting firm that has the right combination of features that works best for the specific company. These factors can include cost, business experience, and how much time they’ve spent working with similar businesses. Make sure that the firm is transparent about their operations, and is willing to be open about their past. 

Working with Settle

Founders who still act as their own CPAs take on a lot of responsibility for the financial health of the business, and they need the right tools to do so effectively and accurately.

That’s why Settle exists—to make managing cash flow easier for companies, no matter their size. Settle has company-level pricing, meaning there’s no additional cost to adding more users—like accountants. Settle works with both payers and vendors to ensure an invoicing process that is as simple and efficient as possible.

Schedule a demo with Settle today to learn more. 

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*The information in this article is for informational purposes only and should not be construed as legal, financial, or professional advice. Settle makes no representation or warranties, expressed or implied, and in no event shall Settle or its affiliates, agents, or employees be liable to you or anyone else for any decision made or action taken in reliance on the information contained herein.