What to look for in a CPA firm

By David A. Anderson, CPA

Although several of the largest CPA firms have experienced a loss of public trust as a result of the Enron and WorldCom-type debacles, CPAs still remain among the most trusted advisors to businesses. If you are looking for a CPA firm for the first time, seeking to change CPA firms or looking for additional expertise that is beyond the services offered by your present CPA firm, then this article can aid you in your search.

Physicians use CPA firms for a variety of services. These include the more traditional attestation (audits, reviews and compilations) and tax (return preparation, planning and representation before taxing authorities) services as well as a wide range of other business advisory and consulting services. These other business advisory and consulting services include:

• Financial management and advisory services including personal financial planning, retirement planning, estate planning, banking relations, capital formation and financing.

• Business strategy and planning including development and implementation of business strategy, business plans, budgeting and mergers and acquisitions.

• Technology consulting including system design and implementation, hardware and software selection, system security, E-business, local and wide area networking, disaster recovery planning and telecommunications services.

• Business intelligence consulting including customer relationship management, forecasting, supply chain management, activity-based costing and management, profitability and performance improvement and business process improvement.

• Other consulting services including organizational services, human resources services, project management, distribution logistics, marketing consulting services.

Start by making a list of the services you want from the CPA firm. Then, prioritize those services from most critical (and absolutely required) to least critical (and optionally required).

There are several sources where you can find candidate CPA firms for consideration. The Philadelphia Business Journal publishes an annual list of the top local CPA firms based on number of employees. The Pennsylvania Institute of CPAs has a CPA Locator on its website (www.picpa.org) that can help you identify CPA firms by location, size, geographic service area, industry and type of services provided. You can also check with your industry trade association, the Chamber of Commerce, your banker, your attorney, insurance companies and practices in the area.

Once you have compiled a list of potential candidate CPA firms, you need to pre-screen them to determine which are worthy of further consideration. Prepare a list of questions for the screening process. These questions should include the CPA firm’s experience with companies of your size, specific services offered, geographic range (if you have operations outside the immediate area that must also be serviced), references concerning the firm’s reputation, etc. This process should allow you to narrow the field to two or three firms.

Next, invite each of the CPA firms to give a short presentation about their firm to you and your key managers. Ask that their presentation include identification of ways that they can deliver value to your company. Ask that they identify and bring to the meeting all of the key members of the team which will handle your company’s needs (this is particularly critical because you want to feel comfortable with each key team member and because your primary contact might not always be available or be the right person to handle a particular service). Also, ask whether the key team members are hands-on service providers or if they rely upon others to perform these services (again, you need to know who you will be working with on a regular basis and be comfortable with these people since they will have the most direct contact with you). Inquire as to stability of staff and turnover at the firm, since you want to have essentially the same people servicing you each year, not a constantly changing set of team members.

Following these presentations, ask each firm to submit to you a written proposal for their services. Insist that each firm commit in writing to the specific key members of the team servicing you (if you made your decision based on one person and that person isn’t an active member of the team, you will be disappointed). Ask for references from clients who have the same specialty as you and are similar in size. If you are a large cardiology practice, a reference of a one-physician dental practice is not particularly useful. Make sure the references include clients who have received the same types of services that you are seeking. If you are seeking assistance with selecting a new medical management and billing system, then a tax planning reference is of little value. Make sure that you check the references carefully. Ask tough questions: What do they like best about the firm and the services provided? What do they like least?

Based on your assessment of the CPA firms’ presentations, their proposals and a check of their references, you should have a pretty good feel for which CPA firm best meets your needs. However, don’t let cost be the primary factor for your decision. Remember, you get what you pay for. If you go with lowest cost proposal, two things could happen: the CPA firm could try to make up the difference by charging more for additional services or in subsequent years, or the CPA firm could give you lower level staff or a lower level of service. You should expect to pay more for certain highly qualified, desired people.

Once you have selected the successful CPA firm, they will ask you to sign an engagement letter. Do sign the letter, but don’t commit to a long-term relationship until you feel comfortable with the firm. You should commit to using them for no more than two to three years to start. Once you have become more comfortable with them, you can make a longer-term commitment.

If a second CPA firm is chosen to provide services different from those of your present CPA firm, let both firms know about the services being provided by the other firm in order to avoid potential conflicts and hard feelings. You may also want to advise both firms that your current intent is not to drop their present services. However, keep an open mind about this because you may change your thoughts about this in the future if one firm is able to meet your full service needs or clearly performs its services better than the other firm.

Despite current publicity, CPA firms continue to serve as trusted business advisors to many physicians, providing them and their practices with a variety of useful services. As a trusted business advisor, your CPA firm can help your practice become or remain successful, help you attain your financial goals and increase the value of your business.

David A. Anderson, CPA is Director of Management, Strategy & Technology Services at Margolis & Company.