Are you struggling to find the right tax advisor? You’ve worked with different accounting and tax advisors, you’ve outsourced this task to bring it back in-house again after being let down by different tax professionals and agencies and now you feel disappointed, disillusioned and clueless where to start looking for the ‘perfect’ fit.
If you’ve been in business for a few years, you know this is one of the most common problems small business owners face. If you’re just starting out, fasten your seat belt and make sure you take some notes.
Not so long ago I wrote an article about the importance of having written contracts in place. Today I’d like to focus on another major hurdle for a lot of small business owners: accounting and taxes. More specifically, it’s about finding the right tax advisor.
You see, working with the wrong tax advisor will not only cost you tons of money and energy but on top of everything, it can lead to long-term damages that are directly correlated with negatively affecting your reputation and brand.
On the other hand, you can have the world’s best tax advisor on your team but if that person goes into the financial playing game as an individual, not as a team AKA isn’t willing to work hand-in-hand with your legal counsel (attorney) and the other players on the team, you won’t succeed.
Remember, business is a team sports. Indeed, putting together an amazing team is challenging but you need to strive for it, if you’re playing to win.
Common Mistakes When Hiring a Tax Advisor and How to Avoid Them
Honestly, I could write an entire book about mistakes I made when hiring and working with accounting and tax advisors.
During my corporate career I had the opportunity to work with one of the ‘Big Four’ accounting companies. Big 4 refers to the four largest accounting and auditing firms in the world. These are Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG. These guys know the ins and outs of the game as they created the loops and holes in the system. This is one of the major reasons why corporations and enterprises prefer to work almost exclusively with one or more of the Big 4.
Therefore, if you have the necessary cash, you might want to pick one of the above-mentioned accounting firms from the beginning and avoid all the trouble that comes from working with smaller and less sophisticated entities.
Below is a small sample of mistakes you might encounter along with some practical advice from the trenches:
1. MISTAKES: Tax advisor doesn’t understand your business; he/she applies single rules or a small set of rules instead of the entire tax law to reduce your taxes; he/she cares more about his/her paycheck than yours; hiring tax professionals who aren’t willing to teach you the tax rules.
PRACTICAL ADVICE: Clarify priorities. Make sure he/she knows your specific situation and is fully educated and committed to saving you the most taxes in accordance with the tax law. This implies that your tax advisor invests time into getting to know and understand your business while using creative strategies in applying the entire law, not just a single rule of law in your favor.
2. MISTAKES: Hiring tax professionals based on a handshake; hiring without proper understanding of how tax advisors will charge you for their services; hiring based on recommendations without doing your own due diligence.
PRACTICAL ADVICE: Only written contracts. Do yourself a huge favor and forget trust and verbal agreements when it comes to taxes. Only operate based on legally binding contracts to avoid damaging consequences for you and your company’s reputation. Get a written offer before you proceed. You don’t want any surprises at the end of the term when your tax advisor sends the bill to you for delivering his/her services.
3. MISTAKES: Not knowing and understanding your numbers; assuming that your tax professionals know what you want; lack of proper communication.
PRACTICAL ADVICE: Don’t assume. Know your numbers so that you can reverse-engineer them. Go through the numbers. Verify all documents you receive from your tax advisor. Communicate your goals and priorities very clearly. Keep your eyes on the ball. Build and maintain your competitive edge.
Choose Your Tax Advisor Very Carefully
Let’s get one thing straight: you’re the only one who can reduce your taxes.
Your tax advisor can teach you the rules and how the tax law applies, but ultimately, you’re the one in charge.
The right tax advisor will help you navigate the waters and reduce your chances of being audited, and therefore it’s crucial to hire the tax and accounting player that is a perfect fit for your team.
The next time you hire a tax advisor, prepare yourself to ask the hard questions. Don’t wing it. Your company and reputation are at stake. Choose wisely to avoid the pain and headaches of damaged relationships.
Originally published on my blog at StrengthInBusiness.com.