Choosing the Right Accounting Firm: Good Questions to Ask
Outsourcing has become a common practice for many businesses, especially when it comes to accounting services. However, not all outsourcing companies are created equal, and selecting the right one requires careful consideration and scrutiny. While longevity and social proof may initially seem reassuring, they don’t always provide a clear picture of a company’s current management practices or customer satisfaction. Here are some crucial questions to ask and red flags to watch out for when choosing an outsourcing company for your accounting needs.
If you’re not familiar with my background regarding outsourced accounting firms and why I can provide a unique lens into the best questions to ask when selecting an accounting provider, please read why I started WorkPaper.
Vital Questions to Ask
- Recent Client Churn:
- Don’t be swayed by the number of active customers a company boasts. Instead, ask how many clients have left in the last 12 months and the reasons behind their departure.
- A vague or uncertain response indicates either a lack of attention to customer needs or something worse. This should be received as a serious red flag for an accounting firm.
- If a company in the accounting space is unwilling to acknowledge customer attrition and the reason behind customers leaving, I strongly recommend searching elsewhere.
- References from Departed Clients:
- Request references from customers who have left the company within the last year.
- If the company hesitates or refuses to provide this information, it suggests a lack of transparency and accountability.
- Any organization in the outsourced accounting space should be forthcoming about the top reasons customers are choosing to leave. When asking these questions, I suggest you pay close attention to the firm’s posturing. No business owner should ever be offended by these very fair questions; if their response feels off or they’re offended by you asking the question, I’d suggest leaving that firm off your shortlist.
- Detailed Quotes:
- Ask for detailed quotes, especially if the company charges by the hour.
- Inquire about the checks and balances in place to ensure accurate billing, including time tracking software and monthly reports.
- A reluctance to share this information or provide detailed breakdowns could indicate potential billing discrepancies.
- If they’re quoting you 20 hours per month to provide accounting services, ask them to break out each hour. How did they arrive at the 20 hours? I’d then identfy the per activity charge. For instance, if they’re quoting you 5 hours per month for AP/AR work. Have them tell you how they arrived at that figure. From there – identify the charge per transaction.
- Pricing Adjustments:
- Be wary if the company quickly adjusts its pricing to match a lower offer from a competitor.
- Significant price reductions may indicate inflated profit margins or lower wages for employees, compromising service quality.
- In my experience, if companies are quick to match pricing but it reflects a 25% or more reduction in their published pricing it potentially suggests they’re not running a business to scale like you are, they’re running a lifestyle company (on your dime of course).
- Employee Attrition and Compensation:
- It’s great to have hundreds of employees, but again – that doesn’t necessarily paint a picture of how your company will be serviced.
- Inquire about employee attrition rates and compensation practices.
- Lack of clarity or evasion regarding employee turnover and compensation may indicate either that firm is lacking in the integrity department or they’re a little detached from daily operations. Of course, they’re not obligated to tell you specifics, but it’s absolutely fair to ask about wages in terms of context. “Where does your wages fall relative to others in your space – in the same region of the world?”
- This area of questioning is focused on those outsourced accounting firms that charge a premium, but justify it in part by communicating the higher charge reflects a higher wage to their offshore team members. If this is communicated to you: challenge that assertion. There are many firms who talk the talk but in my experience, they’re not walking the walk.
- Value Proposition:
- Look for tangible benefits such as superior service quality, experienced team members, or enhanced security measures.
- This gets back to the above a bit. If they’re charging a premium, make sure you understand what that premium is about. Ask them what their standard pricing is for different business verticals. If there’s a difference in their pricing based on the vertical, ask them if their cost to serve those clients is cheaper.
- GlassDoor Reviews:
- Great news – the accounting firms tells you they have hundreds of employees. Awesome! Now ask them about their team.
- Read reviews on platforms like GlassDoor to gain insights into employee experiences and company culture.
- Discrepancies between company claims and employee feedback, particularly regarding wages and company committment to the team -> big red flag in my opinion.
Always Vet and Verify
While company longevity and a broad client base can be positive indicators, they don’t necessarily reflect the current state of the company or the quality of its services. Always ask probing questions, request detailed information, and conduct independent verifications when possible. Remember, it’s not just about finding an outsourcing company; it’s about identifying a firm that will treat you as a valued customer, not just a number.
Concluding Advice
Always secure a second quote. This not only provides you with a benchmark but also gives you leverage in negotiations and a clearer perspective on the market. The choice of an outsourcing company should never be rushed. Taking the time to thoroughly vet potential providers can save you from significant headaches and financial loss in the long run. Your business deserves a partner that not only understands your needs but is also genuinely invested in your success.
