Minding Your Business: Your Very Own Number Cruncher

Business is more than selling, servicing and billing.

A paper trail follows every job, employee, equipment purchase – every aspect of a company’s daily operations, practically. Truth be told, most landscape contractors admit they never studied accounting.

Hiring a financial watchdog like a certified public accountant (CPA) from the start can keep companies growing rather than groaning over confusing tax documents and complicated financial jargon. “We landscape, we don’t account,” remarked Chip McClintock, president, Green & White Outdoors, Kent, Ohio. “Without an accountant, you can start off on the wrong foot and get into a jam.”

THE TIME IS NOW. Pieter Rossi, president, B.P. Landscapes, Grass Valley, Calif., waited a couple years before hiring an accountant – a couple years too long, he said. In the beginning, his company was small enough that he and his partner could handle both operations and administrative responsibilities.

But soon, business picked up and Rossi realized his time was better spent in his profession: landscape services, not number crunching. “It gets more complicated as you grow,” he explained. “Tax returns get thicker and thicker, there are more schedules and forms, and the more assets you own, then you have to figure their depreciations. And when you throw some real estate in there it gets even more complicated.

“There were questions we couldn’t figure out and we were no longer able to spend the time to try to figure them out,” he continued. “Our time was better spent building the company and making money the way we knew how.”

While Rossi still oversees the books, he passes payroll reports, quarterly payroll filing, tax deposits and estimates for state, federal and corporate tax filings to his accountant, who he keeps on retainer. He meets with the accountant once every quarter, but e-mails, faxes and calls her weekly with questions. This daily contact, along with help from his office manager and pension administrator, keeps him on track.

In fact, owners should initiate this communication before completing a business plan, pointed out Mike Perry, chief financial officer, ProGreen Lawn Care, Austell, Ga. “If you are a new business and you don’t have personnel with financial experience and qualifications, then the time to get an accountant is Day One minus whatever the period of time that you put together the business plan,” he stressed. “You need an accountant before you even start your business.”

Besides offering financial expertise, accountants provide an outside perspective, Perry added. “They remind you of the things you might have forgotten,” he said. “It’s the same with anything – if you suddenly have a difficulty with a litigation, do you handle it yourself or go to an attorney?”

Depending on the company’s maturity and growth plans, one company might choose to keep an accountant on a monthly retainer while another might opt to hire one specifically for tax purposes. For example, McClintock is now wrestling with growth issues that require more financial help than tracking numbers, and he is considering switching to an accountant who also offers more in-depth financial advice to take his business “to the next level.” “It’s one thing to say I’m going to St. Louis, but if you don’t know what roads to take, instead of following a compass sometimes you need a map,” he related. “I’m in my 10th year and I need long-range plans, and that’s where this next level of an accountant comes in.”

Now, he meets with his accountant once every month “sparingly” – more intensely around tax time. With an accountant who plays more of a financial advisor role – suggesting consolidated loans, offering equipment purchase advice regarding cash flow and easing bookkeeping – he expects to triple his cost with a $300 to $400 monthly retainer fee.

However, he rationalizes that he will get three times the service. “I’ll have a player for all four quarters of the game instead of just one,” he compared. “We tell our clients that we will be their landscape police – their eyeballs. If we see a tree that is starting to get weak and needs food, we’ll feed it. And that’s the kind of accounting I need at this juncture. Not just year-end plugging in numbers.”

On the other hand, for owners with a business knack, touching base with a CPA periodically might suffice, Rossi said. “If you’re small enough, you might just have an accountant to check your taxes and payroll when you need to. If you have someone you trust, you could do quarterly payroll accounting, check in with the accountant and only spend a couple thousand a year with tax returns and everything.”

Whether a full-time employee, regular consultant or quarterly service, an accountant is well worth the investment, McClintock noted. “Guys in our industry are not afraid to spend $30,000 on a truck, but when it comes to dropping three grand a year for something that keeps your operation together [they might hesitate],” he said. “Don’t be afraid to spend the money as long as you know what you’re getting.”

WHO FITS THE BILL? Exactly what qualities should owners seek in an accountant? In McClintock’s case, he wants someone to do more than tax time computations. And just as he offers his landscape customers a list of his company’s available services, his accountant presented him with the financial benefits of his firm. First, the professional will monitor cash flow and oversee long-term assets and long-term debt.

In other words, when McClintock makes an equipment purchase, the accountant might advise whether to use a line of credit or cash, depending on the company’s cash flow at that time. Bookkeeping duties will also be double-checked, as well as operating expenses and loans, and the accountant also can provide information on bank interest rates and lines of credit. “They are on top of all that pertains to the day-to-day operating expenses, which is crucial because we’re not always paying attention to that because we are too busy going yard to yard,” McClintock admitted.

Perry added that job costing and estimating is a common pitfall for businesses and asking accountants to audit costing systems can reduce crunches for cash down the road. This detail work is where some mistakes slip though the cracks, he noted. Also, accountants can find tax breaks for owners, who generally do not keep up with the multitude of tax amendments each year, Rossi said. “Tax laws take a lot of reading,” he asserted, noting that owners should ask potential accountants if they attend seminars to refresh their knowledge. “There are so many things that change to your advantage, and an accountant needs to know these.”

Rossi’s accountant files state and federal employee reports each quarter and helps him depreciate asset accounts. Most of all, the CPA serves as a watchdog for paperwork mistakes. “There is something to be said for having a professional firm that what they do for a living is accounting,” he emphasized. “They are willing to stick their profession on the paperwork and they sign it. That means something to the government, and it’s a good idea for any company to not just keep their own set of books at the office, but to have someone preparing returns.”

Someone – but not just anyone. Rossi suggested acquiring references – both professional and personal – and checking credentials and resumes. Also, find out if they are too busy to take on another client. “Look for someone who is not too busy to spend the time with you to educate you and look into your business deeply to see where things might need changed, but someone who can also stay up on annual tax laws,” he advised.

Also, choose an accountant you trust – someone you can confide in, Perry suggested. Honesty is crucial. “You have to let him know about you, your background, your goals and how you are going to structure your business” he detailed. “You have to feed him the 100-percent truth so you can get a 100-percent answer. There is nothing wrong with saying, ‘I don’t have a lot of money and I need to borrow.’ They can tell you how and where to go. They know what the average guy doesn’t.” – Kristen Hampshire

The author is Managing Editor – Special Projects for Lawn & Landscape magazine and can be reached at khampshire@lawnandlandscape.com.