urgent matter. But there’s no guarantee of
their availability, as some periods of the year
are busier than others. “Rush jobs can also
mean higher rates than normal to compensate
for pushing off scheduled work,” Flowers says.
Smaller businesses often retain a CPA
for year-end accounting and reconciliation,
which gives them the benefit of knowing
their needs are being handled by a certified
professional. For these companies, it can be
helpful to have an outside CPA ensuring their
financial statements are accurate or advising
them periodically as matters arise.
It’s entirely feasible to use contracted
accounting services for ongoing, emergency,
or periodic needs. The “nuts and bolts of
accounting” is transactional, so it’s fairly easy
for an outside provider to step in and provide
assistance, Ward says. “If you know the [client’s]
software, it’s pretty easy to jump in,” she says.
However, with spontaneous requests,
clients should enter the engagement with
tempered expectations, Savery says. “If the
urgency is due to years’ worth of compiled
issues, a company should not assume that a
contract accountant can address those issues
in a short period of time. It is always a priority to assist clients quickly—but more importantly, efficiently and accurately.” R
Tracy Barbour has been an Alaska
Business contributor since 1999. As a
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She also advocates checking in regularly with
the contract accounting firm to see how things
are going. “I recommend a follow up once a
week to begin with,” she says. “Once the firm is
more familiar with your company, it can be less
often. The more communication you have up
front and the more prompt you are to follow up,
the more accurate everything will be.”
Baird says the needs of the client should drive
the hiring decision for a contract accountant.
Education, credentials, and specialization are
all crucial requirements, but capacity, account-
ability, and reliability are also important. “Are
they going to meet your deadlines,” he says.
It’s essential to define expectations to ensure
the client and contract accountant are on the
same page about the scope of work and everyone’s responsibilities. But at the end of the day,
Baird says, the business owner and manager are
ultimately responsible for financial reporting.
Engagement Letters and Contracts
It’s always good to have a written agreement or
engagement letter to outline the scope of the
work being contracted, Baird says. This can
help avoid surprises and ensure everyone’s
expectations are met. Engagement letters,
however, can be general or specific in nature,
depending on the client’s needs.
Engagement letters are generally created
annually, with accounting firms often billing
for work as it is completed. Billing for ongoing
services is typically done monthly or quarterly
and usually coincides with a deliverable. Sometimes accounting firms require a retainer for
certain requested services.
BDO requires yearly engagement letters
for its clients. These cover the year following
the date of the engagement letter. However,
as different needs for the client arise, the firm
can change the services they are providing
the client within the year. “We can bill by the
hour or by the project at a set fee, and we send
out invoices on a monthly basis,” Flowers says.
“All fees are agreed to up front and contained
in our engagement letters.”
Contracts are also useful instruments to have
in place when dealing with outside accountants.
Most contracts will run annually, though it’s
not unusual to have three-year contracts, Ward
says. A lot of businesses are moving to value bill-
ing for services, instead of using an hourly rate.
“I think those are a great option, then you really
have the full understanding of the engagement,”
Value billing allows clients to have a better
understanding of their costs and avoid surprises.
It also lets them avoid the tedium of tracking
their hourly costs in the traditional six-minute
increments. Ultimately, clients are better able to
budget for the work that’s being done.
Contract types tend to vary based on the
size of the contractor and even the discretion
of the contracted firm, Savery says. Sole proprietors will typically charge hourly, while larger
firms will contract for monthly or quarterly
engagements. “Most of the clients our firm
engages with, however, are billed on an hourly
basis, so those clients are only paying for the
actual time worked,” she says.
Some companies may need to hire outside
accountants on short notice to address an