A Contractor’s Guide to Hiring an Accountant
4 questions to establish better relationships & improve business health
If you are a general contractor, the odds are you will require the services of an outside accountant from time to time.
At first glance, it can be difficult to tell the difference between the certified public accountants (CPAs) out there. They list the same services, have the same credentials and they all claim to work with companies like yours. But do they all deliver the same value? Is one CPA as good as the next? How can you tell if you are truly getting the best value from your service provider?
Delivering value to a general contractor requires more than just technical expertise, understanding percentage-of-completion accounting and tax codes. Delivering value requires someone who takes the time to understand the complete picture of a business, its financial situation and the challenges it faces each day. Just as vital as the relationship between general contractors and subcontractors, a strong relationship with your CPA is the foundation of a valuable relationship.
1. What should general contractors expect from an accountant?
First and foremost, a contractor should expect an accountant to look out for their best interests. That means proactively identifying opportunities and avoiding potential issues. An accountant that looks only as far as the services requested is not doing clients any favors. A trusted advisor is not an order taker. The right advisor will listen to what clients say, what the industry is saying and offer solutions that are creative and proactive.
An accountant should understand the business inside and out and be forward thinking in identifying exposure to risks or implications of key business decisions. These decisions could have ripple effects outside the business as well, affecting personal or family finances, so it’s important for clients to be well informed of the situation.
Clients should expect their accountant to have construction industry expertise. There are many nuances specific to the industry and missing out on significant tax incentives and keen financial reporting could disadvantage a client in the marketplace. An accountant with true construction-specific knowledge will know what lenders and bonding companies look for and will advise accordingly.
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This becomes especially important as accounting standards change, such as with the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers.” While the general method of recognizing revenue over the life of a contract will not change under this new standard, there are other considerations and measurements involving judgment that a client must consider. There are also expanded footnote disclosure requirements that should be noted.
ASU 2016-02, “Leases,” is another upcoming accounting standard update that will have a significant impact on many construction contractors. For privately held companies, these updates become effective for fiscal years 2019 and 2020. A trusted advisor will have the knowledge and foresight to properly prepare their clients for the changes ahead.
With changing rules and standards, having a forward-thinking accountant is critical. Construction contractors should understand their clients and plan ahead for significant changes on the horizon. They should always be proactive—never stuck looking in the rearview mirror when updates become effective at the end of the year.
2. What does it mean to be a trusted advisor?
A trusted advisor will talk about more than just numbers and compliance. Conversations should be far reaching and include company operations, work-in-process, insurance and bonding, tax planning for the business and the owner and succession planning.
Further, a good advisor must be willing to disagree with a client. Many business owners lack peers within their organization, and being a trusted advisor sometimes means challenging a business owner’s perspective. A good accountant anticipates that a client is about to make a mistake and understands the importance of speaking up.
3. What is the key to getting value from a relationship with an accountant?
Open communication is the most important factor for ensuring a successful relationship. The more open the communication, the better the service. It’s important for clients to see their accountant as a member of their team and not merely a service provider.
When a client feels comfortable calling their accountant at any time, that’s a tell-tale sign of a good relationship. Clients should feel confident that their accountant is available to discuss whatever issues they’re facing at any given moment. In order for that to happen, clients must know that they won’t be charged every time a call is made.
It is important that the accountant build a relationship, or at least have an open line of communication, with the contractor’s lender or bonding agent. A good accountant can speak their language and collaborate to find the most valuable solution that meets everyone’s objectives. Additionally, when accounting standards change, such as the upcoming revenue and lease standards, they can help stakeholders understand the impact to a client’s financial position and key performance indicators.
4. How can contractors assess relationships with advisors?
Finding the right advisor is about fit and commitment. While construction contractors need a firm that has the right expertise and resources, it’s just as important to find an advisor who places high value on the relationship. Having an accountant with a high level of expertise doesn’t mean much if he or she doesn’t understand the client. While industry knowledge is important, it takes more than technical skills to create a relationship and provide value beyond what’s expected. It takes commitment and the willingness to invest the time to build understanding and trust.
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