87 | The 5 Questions You MUST Ask a CPA Before Hiring Them

Confused as to what questions to ask when looking for a CPA?  This person plays a crucial role in your financial future, tax planning, and business strategy. So how do you know if you're hiring the right one?  In this episode, I’m sharing the five essential questions to ask before choosing a CPA so you can make an informed and confident decision.

 In This Episode, You'll Learn:
✔️ Why having a CPA can be an investment, not just an expense 
✔️ The key differences between tax filing and tax planning 
✔️ How to ensure your CPA understands your industry and business needs 
✔️ The importance of clear communication and pricing transparency 
✔️ How to find a CPA who aligns with your financial goals and values 

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From my soul to yours,

Erin

Transcript

Erin Gray: 0:00

Hiring a CPA is a big decision. This is the person that is going to be working with you to understand and handle your finances, your business tax strategy, tax planning, forward thinking and possibly even shaping your business's financial future. And I think that one needs to be somebody that you enjoy working with, because you're going to be with this person for quite some time. So how do you know if you're actually hiring the right one? In today's episode, I'm sharing the top five questions that I believe that you must ask before choosing a CPA, so that you can feel confident in your decision and find the right one that fits the way you operate, your business understands your business understands how you want to run your business and supports you. Do you want to create a system to stop avoiding your money? Maybe you're feeling guilt and shame when it comes to finances.

Erin Gray: 1:02

Welcome to your Money, your Rules. I'm Erin, a former certified financial planner and CFO, and yet I used to avoid my money and had fear, no matter how much we had. I can't wait to teach you how I overcame my money avoidance and started consistently managing my finances in a really simple way. It's time to get comfortable with money Before we dive in. If you're ready to take control of your finances and work with someone who helps you feel empowered around your money, I would love to support you. There's no reason why you need to continue to feel shame and guilt when you look at your money. Let's create a plan that actually works for you. You can book a call with me by going to generatealifewelllivedcom on my website, clicking the tab work with me and then support and mentoring, and you can schedule a call. Let's make your financial journey one that you actually feel excited about, versus one that you avoid. I'm super excited about today's episode because I really think that a lot of the lessons that I've learned. You hope that I can save you time and money with this episode.

Erin Gray: 2:13

So let's talk about the five essential questions that you need to be asking a CPA before you hire them. First and foremost, I want to say that most of the things that you actually do in your business don't actually require a CPA to do them. Like you could do your own tax return, you can do internal financials, like looking at your monthly reports, like your P&L and your balance sheet, and even just accounting in general. So the question then becomes why do you actually want a CPA? And although you don't, you know are required to. You know, have someone do your tax return. I do think paying for advice, paying for advisors that do this all day, every day, I do believe there is value in that. So CPAs can represent you in court with IRS auditing, which a lot of what I've heard from women like we're terrified of this.

Erin Gray: 3:13

I think that that is a societal conditioning of the financial industry of really infusing a lot of fear in you know, like doing things like, oh my goodness, you don't want to get an audit, so make sure you do X, y, z, versus coming from a more expansive place Like, oh, I would want a CPA because they know the tax law, they understand tax strategy and they can help me save on taxes or plan the next one five years and forward thinking like that's very different energy than, oh my gosh, I'm so afraid of getting audited. So when you grow your business, you're, if you're wanting to do depending on what type of business you have, you know, if you're wanting a business loan there the auditing that that the CPA or the CPA firm can do for you. Most banks require some type of external audit by, like a CPA or CPA firm, but for small businesses. You know, probably for you and me, technically you don't need a CPA, but as we get to a certain point you would want to find someone and, like I mentioned, I really think there is value in having someone that can guide me through things that I am not as well versed in. Like I've always said, I want to be the dumbest person in the room, right, I want everyone that is surrounded with me to be smarter than me, because I want to be able to be learning and growing and these people add value to your business. It is an investment. I don't look at it as a cost or an expense. I really look at there is so much that I learned by working closely with CPAs in my family's construction business. I mean, I taught myself franchise tax but I had the guidance of an amazing CPA that looked over that stuff for me and I learned the ins and outs and I was able to save the company thousands, like probably 50 plus thousand dollars, probably more than that, because I started to understand how taxes work and I think that there's value in paying and investing in advice and mentorship and mentorship.

Erin Gray: 5:51

So CPAs typically are required to have about 2000 hours per year. You know, working in a firm, you're required just like I was to sit for my CFP certified financial planner. Cpas are bound by similar requirements, right? They have to have certain education to sit for the CPA and then they also require a certain amount of CE every year to maintain their CPA. So when you hire a CPA, theoretically it should guarantee at some level of experience. And I always say do your homework. Right, just because someone has taken the test, working the amount of hours doing the CE, doesn't mean that they care about your books, they care about their job, they care about what they do.

Erin Gray: 6:36

Some of them have gotten in that position because they're just good at it and they are kind of biding their time, and some actually truly love it. Like I have stopped working with some CPAs because it wasn't fun. It felt like a very much transaction-based relationship, one that they felt like okay, it's time for tax season versus a more proactive and fun, enjoyable relationship between me and the CPA. So first question that I would ask is what experience do you have working with clients with me? And this is really important. I mean, a lot of my clients are typically consultants or coaches, but if you have a brick and mortar business. Or let's take, you know, my family's construction business, for example. I wanted to work with someone who knew construction, because that is very different tax planning understanding of how those taxes are versus someone who could help with, now, my online business.

Erin Gray: 7:36

Not all CPAs specialize in the same area, right? Some focus on just actual, like personal finance, just like you know your normal 1040, and some focus on small businesses. And then the range, right, they could be between you know zero to a million in revenue that they're in. Some CPAs go to you know 50 to 100 to way more than that, right? So it really depends on what are they specialized in. And think of it like you know how a doctor is either a general practitioner or you go to the cardiologist. That's similar to a CPA.

Erin Gray: 8:19

So think about and ask what industries do they serve and how many tax returns are they doing a year for that specific industry? So if you are an online business, how well versed are they in online business taxes versus some type of franchise tax? And the reason why this matters is you want someone who understands your specific financial situation and challenges and obstacles, and I've had to push back before on some CPAs because there's a difference between evading and avoiding the tax law and why this matters is you want someone who understands your specific financial situation and challenges and obstacles that you're experiencing. Someone who has an online business is going to have very different expenses than someone who might have a brick and mortar or a franchise or a construction business, and you want someone who is well-versed in that and knows that. So a question you could ask is can you share an example of a client you've helped in my similar situation?

Erin Gray: 9:31

The second question you wanna ask is how do you approach tax strategy and tax planning? A great CPA doesn't just do file taxes, which there are a lot of CPAs out there. It's a numbers game for them. They just massively, you know, have so many clients around tax time and they file the taxes and then they're done right. That is very different than tax planning where they help you proactively plan to minimize tax liability, to understand your specific business, where you're going, how you're growing right, and forward thinking and forward planning. And why this matters is if they're only focusing on compliance, like just filing the taxes, like checking the boxes sometimes what it feels like instead of actually doing strategy, like how to reduce taxes, how to help you grow and looking at where you are now, where you're going to be a year from now or three years from now, and really getting a game plan for you so you can start thinking about that and growing into that. You might be missing out on savings because you're just more so working with somebody that is I call it checking a box right, like okay, numbers in numbers. Call it checking a box right, like okay, numbers in numbers. Out here it is right Versus, just like financial planning, just like a state planning, just like a business coach, like you're looking forward, thinking versus what did you do in the past. So a follow-up question that you can ask is what strategies do you typically recommend for someone in my industry or my financial situation? And I recommend, because you have a business, to also have them do your personal tax return as well, because then they have the whole it's the holistic planning right. They see what's happening in your business, they see what's happening in your personal taxes and then they can really help you from that holistic view versus just doing a tax return. Your business, that's it.

Erin Gray: 11:43

The third question is you know what is your fee structure and how do you bill clients? So some CPAs will charge hourly. Others will have like a fixed fee because they know how much it costs to do your tax return or your tax planning and some might bundle services into packages or they might have like a monthly. Because you're doing planning with them. They might charge on a monthly basis. They break that down and they do a monthly and it might, you know, allow you to have, you know, so many calls a quarter with them and ask your questions and plan.

Erin Gray: 12:22

And I say be bold, right, ask for a price range and get specifics. You don't want you know, like the way attorneys, most attorneys work, is when you pick up the phone, that's when the timer starts right, that's when the clock starts ticking, that's when money starts being charged. You don't want surprise fees or unclear pricing. So if they are hourly, ask them like what does a typical return like mine take? Obviously, you know if it's a first year you're, you're working with someone on the first year they're probably going to take more hours because of their learning curve, getting to understand you and your business and most CPAs. What I've recognized and realized is they will discount that rate because they know of the long-term relationship like they're going to make it up on the backend and they're building a relationship Like they'll eat some of those upfront costs to go through and ask kind of dig into your situation, because they know that long-term they're going to. Number one, it helps them understand your situation better and two, in the long run, if they get all of the data and the digging deep in the beginning, they won't have to do that long term and it won't take them as long.

Erin Gray: 13:36

I would for sure get a lot of times. What they will do is they will have you sign an agreement with them and they will either tell you you know, we charge an hourly rate or, based on your business size, what is required. This is the drive out price for your tax planning, tax return and like, really get specific. And what does that actually entail? Does that entail just my business return? Does that entail my personal return? You know, if you are not well-versed in 1099s, what charge are they going to charge for that? Are there any extra additional costs for the tax planning or the bookkeeping? What I've recognized is a lot of CPAs don't necessarily do bookkeeping, but sometimes they might have bookkeeping services in with their tax planning. So you just want to get very specific and very clear when you're asking these questions.

Erin Gray: 14:35

The other thing that I had to learn the hard way was recognizing that just because you meet with the CPA doesn't mean that's the CPA that's actually going to be doing your taxes. So a lot of times you might meet with the owner of the firm. Now, if it's a one person one man show, one woman show obviously they're going to be doing it. But in those bigger firms you might be meeting with the owner but they're not going to be the ones doing your taxes. So asking them are you going to be the one doing my taxes or is a newer person, newer CPA going to be doing my return? It's fine if the newer person is, because some you know that's where they can cut costs, but you want to know what that, what that relationship is going to be like, and you also want to know so what is the price?

Erin Gray: 15:28

Because one of the things I had to learn is I, we were paying, you know, owner pricing when the new CPA was doing the work and I was teaching her which. That was a conversation that I ended up having to have with the owner of the CPA firm, like, listen, I'm all for teaching and helping your new CPAs because they got to learn somehow. Right, they're going to learn on clients, but I'm not going to pay your rate of 25 years of CPA experience when I'm teaching her. So that was a conversation that I had to have with the owner and say, listen, I'm not going to pay that. So, really asking, understanding, what are their rates? And some CPAs might have a rate per role, right? So if the newer CPA that's going to be at a lower rate than the person that's been doing it for 10, 15, 20 years, and if the CPA is really good, they will know their numbers and they'll be able to break down how much is like a staff rate, right, of that newer CPA and then how many hours will it take? And then what is the CPA rate? They should be able to tell you that and if they don't, then that just might be some information for you to be like is this the right um CPA firm for me? Okay?

Erin Gray: 16:46

Number four asking them how do you communicate with clients and how often, right, do they prefer emails, phone calls? A lot of stuff nowadays is done, you know, online it's not necessarily in person, you know. Do they have a safe portal when I say safe, I'm insecure portal that they use Most of them do but you want to make sure that they have a secure portal that you can upload all of your documents to. You know if I've worked with one uh, I think he was an enrolled agent, but he wanted me to drop off the forms. I'm like I'm not dropping off the forms. You're going to need to, like, we're going to have to figure this out.

Erin Gray: 17:23

So, just recognizing, like and asking how do they like to communicate? Because if you're wanting ongoing financial guidance and you want a CPA who's accessible beyond tax season which that goes back to probably looking for more holistic planning, versus just someone that does your taxes for you, you want to know that. Because if you're expecting to talk to your CPA three, four, six times a year and they're expecting to talk to you one time a year, are they going to charge you for those extra times? Like, what is that going to look like? So, just being very clear on what is their expectation and also what is your expectation, and it's okay if they don't match right, but at least you know before you get into the relationship Also, what is your expectation, and it's okay if they don't match right, but at least you know before you get into the relationship. Also, what I think is so important is how does your CPA talk to you, right? How do they just the vibe of your meeting? When you go speak with a CPA, how do you feel in your body? Are you feeling like you know, first and foremost, leaving your money stories at the door, if you can? But if there's someone who is like checking the clock and you're you know, hey, we're up already, your waist, you know. You feel like that they're checking the box with you, right, then that is how they're gone they're going to be when they work with you, and I say that they work for you, not the other way around.

Erin Gray: 18:53

So I have decided to part ways with, I think, two CPAs because, like I said before, it felt very transactional. I didn't ever have anyone talk down to me, but I have had clients that have said that their CPAs do that, and that is something we do not have to tolerate. There are plenty of CPAs and I know people will say, oh well, as you know, a good CPA is hard to find. That's fine, that may be true, and also I'm going to find a CPA that is, you know, willing to treat me well, well, value me as a client and have a good synergistic relationship. I mean, I will shout it from the rooftop ladies, we do not have to tolerate anybody speaking down to us, so asking them questions like if I have a financial question mid year, how quickly can I expect a response? Obviously, you know I don't think they live by their computer, nor should you, but if you email and it's been four days and you haven't gotten a response, is that actually a standard that you are okay with, or do you want more customer service than that? And then the fifth question that I would ask is what other financial services do you offer?

Erin Gray: 20:10

Some CPAs might provide additional services like bookkeeping or payroll, and if they do offer this, I would be really diving into that as well, because not all bookkeepers are the same, not all payroll people are the same either. And so really asking and getting clear what are those other services and why this matters is, if you are a business owner and need more financial support than just someone tax planning for you, right, if you're to the point where you're having needing payroll done, having someone that can provide support and be a long term valuable partner to you in your business I think is worth their weight in gold. And if they don't provide these services, do you work with or recommend other professionals? You know, I think a lot of times cpas undervalue their network. They know so many different people. They know business owners, they know other people in their network and I think of them like a spider web. They're such a valuable asset to have. So asking them who could you introduce me to in your network that they might be able to connect you to to help you and support you? Right know, because they probably either worked with them themselves or they have clients and they have feedback already. So asking them you know who are some bookkeepers, who are payroll people. If you're looking for a financial planner, like really using them as a resource for you, not just someone that does your taxes, okay, so I hope you found this helpful.

Erin Gray: 22:09

To recap the five questions I would ask Number one what experience do you have working with clients like me, like my business not just, you know, in business in general, with my type of business? Also, how many clients do they have? That will also tell you the, the work and the caseload that they have. Two, how do you approach tax strategy and tax planning right? Are they more of a check the box just do your taxes at the end of the year and there's no tax planning or do they really take a more holistic, forward approach to tax planning and they're really going to be a partner for you?

Erin Gray: 22:47

Number three what is your fee structure? How do you bill clients? Number four how do you communicate with clients and how often? Right, if you are someone who wants to have a phone conversation and they're like we just strictly do you know emails or you talk to my assistant, is that an okay relationship that you want to have? And then, number five what other financial services do they offer and or people that they can connect you with so that they can support you with, whether it be bookkeeping or payroll or financial planning?

Erin Gray: 23:24

I really truly believe you know, hiring the correct CPA that works with you and is a partner with you can make all the difference in your business and financial success. And if you're looking for more clarity, strategy and support in managing your finances, I would love to support you. You can schedule a call with me at generatealifewelllivecom, click on the work with me link and click on support and mentoring, and really let's build a financial plan that really truly supports you. Okay, I'll see you in the next episode. Did you learn something today? Do you know another female entrepreneur who might be avoiding her money today? Do you know another female entrepreneur who might be avoiding her money? Will you send this episode over to her for me and, if you have it in you, please leave me a review for this podcast? It helps the show grow and I love hearing from you. See you next week.