There's a dirty little secret in the accounting industry: Our small business and nonprofit clients' books are a mess, but they won't pay their CPA to clean them up just to keep the Internal revenue Service and banks happy.

So, what's causing this dirty little secret? The answer lies in understanding that most small-business owners see accounting as a distraction from their core competency. While products such as QuickBooks have certainly made it easier for small businesses to manage their own books, the reality is that it's also just as easy to mess them up if they're not trained in accounting. For instance, data input errors in QuickBooks will have a snowball effect, creating inaccuracies in corporate tax returns and countless external financial reports.

So why don't small businesses see the importance of having a clean set of books?

The truth of the matter is, small-business owners are focused on cash flow, sales and serving clients, not keeping up their accounting records.

Most are not trying to cheat the IRS - they are just afraid that the cost of cleaning up their books will be more than the risk of any potential tax penalties, so there's little benefit to them.

In addition, the person responsible for maintaining QuickBooks is usually a bookkeeper, not an accountant. They too are focused on managing cash via billing customers, paying invoices and reconciling the bank account. When tax time approaches, the owner sends the QuickBooks file to the CPA, who is forced to muddle through the mess to get the numbers in order for a tax return or an audit.

So, how do we as CPAs solve this recurring problem? How do we ensure clean, reliable numbers that we can count on? The solution starts with a question, "Why should a client do accounting in the first place?" The answer shouldn't be to keep the IRS at bay or get through the audit, but rather to have a better understanding of the economic health of the organization.

Small businesses may not see the value in paying for a CPA to clean up their accounting mess to complete a tax return, but once leaders are shown how accounting and access to the right financial management information can help them make better business decisions, they'll open up their wallets.

As CPAs, we must position our services differently. We can't just offer "financial" accounting services, which clients see as a necessary evil to stay in compliance, but instead promote our "management" accounting services, which help business owners improve their business operations.

The management information that business owners and managers really crave are answers to questions such as:

  • Am I pricing my jobs right?
  • Who are my most profitable clients?
  • Do I have enough cash to make payroll?
  • Should I hire more employees? If so, how much can I afford to pay them?
  • Where should I invest my limited marketing dollars?


Business owners will see the value of accounting if they can obtain information that will help them grow their businesses. Their current combination of an in-house bookkeeper and an outside CPA is missing a step in the accounting value chain: the day-to-day controller function.

Historically, only midsized and large companies could justify the cost of a controller to make sure the books are closed and the financial statements are correct -- an expense that was out of reach for small businesses and nonprofit organizations.

However, with current Web tools, CPAs can provide affordable outsourced controller services that give the business owner and board members of nonprofit organizations the financial information they need to make sound business decisions.

Very small businesses and nonprofits are obvious beneficiaries of the affordability of these new services, but they are not the only business category experiencing a paradigm shift by utilizing management accounting. Service businesses, in particular, have a lot to gain by employing management accounting intelligence tools.

Since payroll typically encompasses 70 percent of a service company's expenses, QuickBooks can be set up to allocate labor costs by customer, job, service team and employee. With this information, management can receive reports highlighting their most productive employees and gain the ability to tie performance results to incentive compensation.

Today's Web-based software makes it easier for CPAs to provide clients with a service and technology bundle. Your clients can use off-the-shelf technology and build a customized "smart back office" to run their businesses.

Cloud technology makes possible the integration of software like Web-based time tracking, bill payment, job costing, billing and collections. Most of the leading software packages are already integrated with QuickBooks. With automation and integration, you get data input into the general ledger more quickly and more cheaply than when it is done manually.

And even if you decide that an outsourced client accounting services department does not fit your firm's strategy, you can still partner with an outsourced accounting service to help your clients get financial intelligence accounting to make better business decisions. In turn, the service will help you produce more accurate and profitable tax returns and audit-ready work papers by providing clean books.

As accounting professionals, our responsibility is to ensure accurate financial statements; however, we must realize that clients do not necessarily have the same priority. Ironically, when a client agrees to automate their outsourced accounting function so they can get their hands on management accounting information, their books are cleaned up in the process. If management is reviewing their numbers in real-time, then mistakes can get cleaned up in real-time as well.

Not only will the client be able to make more informed decisions, but your tax returns and audits will be lower-risk and more profitable as well.

In today's business environment, we must be aware of what business owners really want from their CPAs: financial intelligence, operational efficiency and peace of mind. We must help clients see how accounting helps them grow their businesses and not just view accounting as a necessary evil. Otherwise, we will still have to deal with this dirty little secret.

Stephen King, CPA, is president and CEO of GrowthForce, one of the largest outsourced bookkeeping and controller services in the country.

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