According to 2018 statistics from the U.S. Bureau of Labor, there are 1,424,000 accountants in the United States. While there’s no lack of options if you want to hire an accountant, not all accountants are good accountants. Not knowing the signs of a bad accountant can lead to lost money, negative press coverage, and a host of other problems for you and your staff.
Unfortunately, most accountants seem nice, friendly, and knowledgeable when you’re interviewing them. This is another reason why it’s essential to know the signs of a bad accountant.
Why It’s Important To Know The Signs Of A Bad Accountant
Here are some examples of accountants who may have seemed nice in as they interviewed for an accountant position:
- An accountant who stole more than $109, 000 from a church in Wakefield, Nebraska.
- A bookkeeper in Bedford, VA, who was hired to handle some accounting duties, but stole more than $26,000 from two companies in Roanoke, VA.
- A former accountant-turned-author, Martyn Arthur, who wrote The Taxpayer Strikes Back in 2009 but was recently convicted of tax fraud just this month.
- An accountant who pleaded guilty to running a Pennsylvania-based Ponzi scheme worth approximately $60 million.
So, how can you spot a bad accountant before hiring them and putting your business at risk?
Fortunately, some warning signs of a bad accountant can help you avoid hiring someone who’ll steal from your business or give you bad or incorrect business advice.
4 Warning Signs Of A Bad Accountant To Notice Before You Hire Them
As I said before, an interview can be misleading regarding whether someone will be a bad accountant or not. After all, job applicants who are interested in filling an accounting position will do their best to impress you. The latter may subscribe to the idea that professional knowledge comes with the title of an accountant.
1. They Aren’t Discreet About Their Other Clients
One of the first warning signs that you should not trust an accountant is a lack of discretion over other clients’ business and financial statements. Although it’s perfectly understandable and acceptable for accountants to use client stories to demonstrate their experience, mentioning the names or financial details of their other clients indicates your financial matters won’t remain secret for long.
2. They Suggest Dishonest Practices To Save Money Or Qualify For Loans
Saving money is always a good thing – unless it’s done dishonestly. While there’s certainly nothing wrong with being a bit more aggressive in saving on taxes or exploring whether you qualify for loans, a good accountant will understand how to maximize tax deductions and tax credits without submitting misleading tax returns or falsifying loan applications. Instead, they’ll explore legitimate ways your business can qualify for tax credits, increase tax deductions, or qualify for business loans.
3. They Dodge Questions Or Give Incomplete Answers
The role of an accountant is critical to your success as a business owner. An effective accountant helps you stay on top of tax codes, maintain regulatory compliance with the IRS and local tax authorities, and otherwise manage your business’ accounting duties. Qualified accountants who have experience and up-to-date knowledge will be able to answer your questions with straightforward answers and provide supporting examples of their experience with client testimonials or professional education achievements.
4. They Make Big Promises Before They’ve Seen Your Financial Statements
Cheaper fees. Better tax savings. Friendlier service. When you’re interviewing applicants for your company’s accountant position, you’re sure to hear at least one of these or something similar. Now, any worthwhile accountant will be able to confidently explain why they are the best person for the job, but you should be wary of exaggerated promises or guarantees. Just like you wouldn’t trust a doctor who prescribes you without seeing or examining you, you shouldn’t trust an accountant who makes claims without reviewing your financial statements. A good accountant will make you tax-efficient the legal way, which is better for your business in the long run.
Now that you know how to spot a bad accountant in an interview, let’s look at some red flags for knowing if you’ve already hired a bad accountant.
3 Red Flags That Tell You You’ve Hired A Bad Accountant
Recent studies show that approximately 86% of business owners trust their accountants. This is only natural, since accountants are responsible for helping you interpret financial statements within the context of your business goals and key performance metrics. But, it’s easy to be blindsided by a bad accountant when you’ve already hired them. Here are some red flags you should be aware of so you can change from a bad accountant as early on as possible.
1. They Don’t Understand Your Business Or Industry
As a business advisor, your accountant should have a clear understanding of your business and industry – particularly from the perspective of financing, taxes, or possible business opportunities. For example, your accountant should be able to advise you on how to remain compliant with the tax laws that apply to your industry. They should also be proactive and prudent when it comes to spotting a potential opportunity for maximizing tax credits and tax deductions or lessening your tax burden.
2. They Don’t Communicate Well
One of the most important skills an accountant should have is good communication. This includes responding promptly to your phone calls, emails, or text messages at most within a couple of days. Although they might be busy, they should prioritize your needs and questions enough to make time to address them or, at the very least, acknowledge them. When you’re trying to reach your accountant, it’s absolutely critical that they are available to help you.
3. They Don’t Explain Things So You Can Understand
Whether you know a lot or a little about accounting, you’re bound to have questions for your accountant. If your accountant doesn’t answer your questions or provides muddled explanations that confuse you more than they help you, you’ve got a bad accountant. Any good accountant will take time to explain your financial statements or the reasoning behind a particular piece of advice in a way that you can understand.
As a CPA myself, I think it’s horrible when others in my profession act in a way that throws doubt, suspicion, and mistrust on an accountant’s title. If you’ve read these 7 signs of a bad accountant and noticed many similarities to your existing accountant, it’s time to change accountants. After all, retaining a bad accountant is much too expensive for your business.