Accountants are not the same as any other service provider that a small business owner needs to hire. Of course, anyone can add numbers and follow regulations but there is something more valuable – experience in a given industry. An accountant who has worked for many restaurants understands the depreciation schedule of kitchen appliances or how seasonal cash flow impacts a July 4th picnic venue.
An accountant who only has restaurant clients doesn’t get those nuanced experiences. Therefore, when something worthwhile is based on having knowledge of an industry, you’d want an accountant to have it.
Why Experience Counts
What’s the worst that could happen? An accountant unfamiliar with your industry understands your business like any other business. That means that it uses blanket solutions and approaches intended for a completely different company type. A construction firm requires a far different inventory turnover than a software startup. A freelance consultant has different tax requirements than a small manufacturing setup.
At first, an accountant unfamiliar with the industry reveals itself through certain questions and commentaries. They ask you to explain certain functions that someone who has extensive experience in the field would already know. They take longer to compile taxes because they’re learning as they go. When it comes to planning taxes, they forget deductions that are common in certain fields because they’re not always in the loop.
But the cost, arguably, is more insidious. An accountant who knows your industry prevents problems before they arise. They gauge financial ratios significant to your business type. They realize what the norm looks like for a healthy company from within your field and can ascertain if you’re under-charging or over-spending against similar organizations.
What Knowledge Looks Like
Many business owners prefer working with small business accountants who have gained experience within their own industry. Hospitality businesses make sense here, for example, where accountants who understand restaurant operations comprehend tipped payroll requirements, food costs from 28-35% of sales, and the accounting of delivery platforms, out-of-pocket costs for many professionals, a glitch to an accountant who only works with year-round businesses and does not understand seasonal aspects.
Consider professional services, too. An accounting who understands consulting understands retainer-based payment systems, work-in-progress insights, project profitability analysis, and that while your biggest asset leaves every night at 5PM, they need to comprehend business valuation/succession planning depths.
The same goes for businesses within certain industries. E-commerce needs to account for marketplace fees, return processing, and nexus issues for sales tax. Medical practices need someone who specializes in insurance payment cycles and medical billing codes. Manufacturing accountants can handle goods along the supply chain.
What Questions Expose Real Experience
Certain questions give away whether or not an accountant has worked with similar types of business like yours during initial conversations. Suggest they tell you the percentage of clients who operate in your field. If they’re vague or hesitant, that’s a red flag. Tell them you want to know specific experiences where they’ve helped guide businesses like yours to success, a real-life experience because someone who’ve worked with them will know.
Get them talking about common accounting mistakes, that’s a clear marker of experience because an accountant familiar with your field will outline three or four flaws they typically find with field regulations. They will know of certain regulations that fluster business owners. They will understand common patterns and issues limiting growth potential.
Get them to talk about programs and systems. Certain businesses rely on certain programs; someone with experience should know what’s best for an industry like yours.
The Connectivity Factor
With any experienced accountant comes more than just their professional know-how with clients from similar fields, their network abounds. They know which attorneys are proficient in your kinds of contracts. They know which insurance brokers comprehend the nuances of your risk factors. They know business lenders who extend capital to those like you and what they look for.
The more somebody has worked with similar types of businesses, the longer they’ve been in a network themselves means they’ve seen what works and doesn’t across time. They’ve seen companies reach successful scaling and they’ve seen companies falter quickly. They know expansion plans that work and ones that typically require too much time and fail.
Red Flags Not to Ignore
Certain cautionary factors tell you to turn away from an accountant before getting too invested. If an accountant tells you they can service any industry equally well, they’re either misinformed or lying. There are strengths and weaknesses to all accountants; it’s common sense. Anyone who cannot name regulations or tax considerations relative to your industry makes up things.
In addition, beware of accountants dismissive of what’s normally expected out of businesses within the field, perhaps they don’t think the way everyone else does in the field is efficient but really, it’s just that they don’t understand why it’s done that way. More often than not, industries establish specific patterns relative to frequent problems for good reason.
When It Doesn’t Make Sense to Have One
Not every organization needs someone with this sort of insight and guidance. If your business is fairly straightforward with simple books, this is natural and understandable. If an accountant is competent enough to guide such action without knowledge that’s okay.
However, once businesses become complex or involved, it makes sense to have experience aplenty a must from an accounting professional’s perspective.
This is especially true of businesses with inventory, there are appropriate inventory valuation methods depending on what product type you’re selling yourself short without appropriate guidance if you source from somewhere else, or multiple revenue streams; there are overlaps relative to similar businesses that would make this easier if someone knew them too.
There are also significant regulations per industry that should make an accountant aware of them since it’s their job to know what’s best to promote growth opportunities.
Finally, businesses that are cyclical in nature benefit from accountants familiar with such trends, in other words, if you’re busiest during one season over others, someone accustomed to your industry will best help facilitate a plan so it’s easier to balance the slower months accordingly.
Making The Decision
Ultimately, it’s a compromise of many factors including critical thinking and soft skills the best fit an accountant for your business level secondary to soft skills like interpersonal communication, approachability, availability and substance when explaining what makes the most sense for a niche business situation based on where they’ve had success before.
You don’t want this choice made lightly; they will become a valuable advisor for essential financial planning decisions, and what you’ve taken time to find makes them most valuable when their similar experience provides solutions without surprises or suggestions that go against common sense for a niche operation essentially showing that they understand how other operations have seen success financially in myriad ways.
