And There Are More
What should you expect from your CPA? What in-grained traits do you want them to have? You expect them to be honest, of course. That’s critically important. But what else? Do you want your accountant to be an air traffic controller watching and safeguarding your business assets and transactions? Many company controllers take that role. In this article, we drill down to the core to see what makes a good accountant tick. And from that, we identified the following five traits your CPA should possess.
Organization and Concise Clarity. Organization is the defining attribute of an accountant. It’s the cornerstone. Without organization, there is chaos. You should expect your accountant to be able to take an overwhelming amount of disjointed and seeming unrelated information and sift it down to concise clarity. He or she should be able to explain to you what it means. That’s what a business needs. Too much information is, well, just that – too much information. Management cannot reach meaningful decisions without concise clarity. And clarity cannot be achieved without organization. What does this pile of numbers mean? That’s the question your CPA should be able to answer.
I recall an anecdotal story about President Reagan. A member of his staff presented him with a behemoth report. In his non-threatening manner, the President requested the aide to summarize it to about one or two pages. One or two pages, sir, the aide asked? To which Reagan replied… you’re right, make it one page.
Even the most complicated areas of physics, when properly understood, can be expressed in a very concise way. Albert Einstein synthesized his special theory of relativity’s complexities to the now-famous equation of E = mc 2. And James Maxwell described the non-intuitive interrelation of electric and magnetic fields with only four equations. It’s called organization and concise clarity.
Communication. Communication doesn’t have to dazzle. But to be authentic, communication must be understood.
CPAs, as a group, are not exactly known for their communication skills. Think Louis Tully (played by Rick Moranis) in Ghostbusters. Or the accountant joke, What do you call an accountant that speaks to one person a day? Popular.”
I recall a time several decades ago when, as a young CPA, I attended a local country club’s annual membership meeting. Of course, a fine meal was included. My firm performed the yearly audit. That evening, my job was to hand-deliver the audit report to the club’s treasurer (a partner for a then Big-Eight accounting firm) and brief him in private before he made the presentation to the membership group. As it turned out, when the treasurer stood before the large group to deliver the report, he mentioned that I was there and turned the presentation over to me. That fine steak I was enjoying suddenly turned sour in my stomach. The presentation did not go well. However, I think the membership group had a very good time. One thing for sure, though, it did impress upon me the importance of communication.
Communication is an essential skill for a CPA. And your CPA should have the ability to communicate with clarity. When there is a need to renegotiate the company’s bank line of credit, the CPA will be involved. If it’s discussions with the company’s surety regarding a problematic project, the accountant will be front and center. Conversations with project managers regarding project evaluations will need input from the company’s CPA. And, discussions of quarterly financial results with the ownership group or the company’s board of directors require a combination of the communicative and diplomatic skills of the CPA. It’s called communication.
Analytical. Being analytical for an accountant is somewhat akin to critical thinking. It’s objectively reasoning through a complicated situation to come to a (hopefully correct) judgment.
My observation is that many, if not most, students attracted to the accounting profession are drawn to it because they are analytical by nature. They enjoy and are successful at working through puzzles. They find that this attribute is helpful in many of the accounting courses they take in college.
Solutions to accounting issues are not always apparent. Accordingly, your company’s CPA should be well-versed in the use of research tools. Research is critical in tax planning. Research is essential to financial reporting. The answer to most difficult questions is “maybe yes and maybe no, it ain’t necessarily so.” Analytically reasoned judgment is required.
Most of accounting is not black and white. For example, the area of accounting estimates is problematic. They can make a significant difference in the company’s financial statements and taxable income. Areas affected by accounting estimates include the determination of contract gross profit, depreciation, and warranty reserves. An analytical approach is beneficial in arriving at an appropriate range of values for estimates.
Your accountant should be analytical. An analytical mind can unravel a thorny problem and come to reasonable conclusions. But beware. It can also drive you up a wall. What may seem clear to you may not strike your CPA the same way. They want to explore a few more avenues. Turn over more stones. Be professionally skeptical. But, on the whole, you should expect your CPA to possess this characteristic. It’s called analytical.
Accurate. Your CPA should be accurate. Precise information is necessary when drafting your company’s ongoing business strategy, determining bonuses, and developing tax projections. Much of that information comes from your accountant. To be a trusted business advisor, your accountant should provide reliable data.
But just how precise should you expect your CPA to be? After all, accountants deal in numbers, and since numbers are pretty exact, there is only one correct answer, right? Well, not really. As described above, accounting estimates are just that — estimates. There may be a range of acceptable values. Any value within that range will be considered accurate, even if later, it’s found not to be very close.
Furthermore, for financial statement reporting, the concept of accuracy is intertwined with the concept of materiality. Misstatements are considered material if there is a substantial likelihood they would influence the judgment made by a reasonable user based on the financial statements.
If the financial statements are somewhat inaccurate, but those inaccuracies do not mislead a “reasonable user,” then the financial statements are not materially misstated. In other words, even though the financial statements are not precisely accurate, they are accurate enough if the end-user would otherwise come to the same conclusion.
So, yes. You should expect your accountant to be accurate. But you don’t want him or her chasing every penny. The particular accounting area and the task drive the degree of accuracy expected. For example, you should expect a much higher degree of accuracy in the area of cash than you do in the area of prepaid insurance. It’s a matter of professional judgment. It’s called accurate.
Business Savvy. You want an accountant that has an interest in your industry. A CPA that likes what you do. Someone fascinated with your work will naturally learn more and understand more about your business sector because they have that interest.
I know CPAs who practice in the construction industry. They are very good at what they do. They frequent heavy equipment auctions during their off-hours because they enjoy it. They like the smell of asphalt and are fascinated by the engineering that goes into highway construction. They know the names of your subcontractors. They understand the types of contracts you enter into. They follow the bid tabs. They are good at what they do because they know the business itself. They understand where profit leaks can develop. They know the soft areas susceptible to fraud. They have an antenna up for the business risks and are familiar with ways to minimize those risks.
You should expect this in your CPA. It’s called business savvy.