Thursday, November 19, 2009

How do I determine a quality accountant?

Recently I was involved in a web chat concerning the question "How do I determine a quality accountant?" At first it seemed like a straight forward question, but the responses brought out many important issues that surround this very basic question.

The first question is how do you define an accountant? Are you looking for basic bookkeeping, tax accounting, audit services or financial planning? All CPA's are accountants, but not all accountants are CPA's. For example, in the state of Texas you have to be a CPA to call yourself an accountant. The state board of public accountancy regulates, and punishes the improper use of either title. Other state may not be as strict. If what you're looking for is basic transactional processing, a bookkeeper may do fine. Bookkeepers sometime refer to themselves as accountants especially if they have an accounting degree. You don't have to have an accounting degree to be a bookkeeper.

So when you're looking for a quality accountant, what do you really want? As bookkeepers, accountants and CPA's chimed in a trend became evident. First of all let me say that no matter what I say at this point one side or the other will take issue. I am not a bookkeeper, accountant or CPA. I have a formal education and experience in Financial Analysis. So here is a rough summary of what I believe to be true and the dialog seemed to support.

Bookkeepers are extremely good and cost effective at transactional processing. They understand debit and credits. They understand amortization and depreciation. They can create the information required to develop a Profit and Loss Statement or Balance Sheet. A bookkeeper with a degree in accounting is better than one without. Four years of setting in a class room, not to mention the dedication to spend four years learning before you make a dime, says something. That is not to say a bookkeeper without a degree cannot be extremely affective.

CPA's in most cases would prefer not to do transactional processing. They can, they prefer not to and you'll pay a lot more for a CPA than a bookkeeper. Their higher level value is making sure that the accounting books truly reflect the condition on the company. Are funds applied in a consistent manner that can be used one year, two years or more out in the future to make sound management decisions? For example: Is the labor associated with a software engineer development, support or cost of sales? If not applied appropriately the business might determine that their development costs are too high when in fact it either has too many support issues or is too difficult to explain to prospects. Are sales taxes over stated? Can a cost of repair be capitalized as opposed to expensed? These are management decisions. How I go about fixing something might be partially determine by the way it is accounted.

My conclusion is that degreed bookkeepers are good for day-to-day transactional processing, but everything should be reviewed by a CPA before month-end close. If you just wait for tax time to roll around you may not retain the institutional knowledge required to give accurate guidance to your CPA. Once you know what you are looking for you can start to determine the attributes of a good one. We'll discuss that next.

Tuesday, November 17, 2009

Motivation to Work

One of the challenges I face in my business, and I see in almost every business I work with, is that I spent too much time doing things that I am 1) not good at, 2)takes me away from my passion, and 3) sucks me dry of my enthusiasm. This in turn makes me dread my job, which I normally love, on the days I have to do these important but in my opinion counter-productive tasks. I love meeting with people. I love listening to complex problems. I love finding eloquent yet simplistic solutions. I am far less enthusiastic about documenting my findings. I dread the repetitive, mundane task of transactional processing. I love to analyze financial data. I hate to do the underlying accounting.

Hertzberg in his book "Motivation to Work" published in 1959 he explains a lot of this to me. He talks about two sets of somewhat unrelated dynamics that affect the way we look at and perform our jobs. One factor is the things that drive dissatisfaction. These are known as hygiene factors. The other is the things that drive satisfaction. They are considered motivators. Interestingly the removal of something that drives dissatisfaction does not necessarily motivate.

For example: removing a negative administrative task will remove a source of dissatisfaction, but won't necessarily motive a worker to work harder. Meeting a difficult goal or overcoming an obstacle will improve job satisfaction, but not achieving it will not necessarily make the employee dissatisfied with their work.

So back to my original problem: many of us do things that are required but distasteful. Maybe we are an exceptional administrator but hate making sales calls. The opposite is generally more true within entrepreneurs, talking to people about our work is exciting, doing paperwork isn't. If we are not experiencing the passion we once had in our jobs we need to look at two things. First we have to remove that which is contributing to our dissatisfaction. The second is we have to engage more in what motivates us. If I remove the repetitive mundane (to some) task of financial compliance, i.e. accounting, I have removed a source of dissatisfaction. But I am not more motivated. I'm just less unhappy. Now if I take the time allocated to accounting and engage in activities I love, I've completed the circle.

I have removed a dissatisfier and engaged a satisfier. If I only had to spend more time on what I love, my life would be better. But I have to assume that I am already doing as much as I can. So I must first remove a negative hygiene factor to free time. Play to your strengths. Outsource that which takes you away from that which truly drives you. Then apply the new free time to pursue your passion.