Current and future tax law changes will make the role of your construction company’s CPA more important – not less.
This weeks Freebie Friday is an article from the Construction Financial Management Association (CFMA) about what your construction company should look for in a CPA.
Download the article by clicking here.
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Many companies fail to set up their charts of accounts correctly in QuickBooks. Over the years I have seen charts of accountants that look like a collage of accounts in helter skelter format without any logical order, containing duplicate if not triplicate accounts, inconsistent protocols, and even inappropriate, if not undecipherable, names.
At tax time, when their CPA receives either a backup or Accountants copy of the file like OR reports that have been created from the file, it becomes an even bigger mess. The trial balance that must be created by the tax preparer requires countless hours of reclassifications and groupings to mesh and coordinate the amounts within the file to the classifications required on tax returns and financial statements. Business owners then bear the costs of needless and expensive clean ups, often tacking on an additional $500 to $1000 per year to their annual accounting bills.
There is no excuse for not having a QuickBooks chart of accounts set up in a format compatible with what is reported on a company’s tax return as well as their financial statement. Once set up, a simple click in QuickBooks prints a readable and well-organized financial report for internal management, bankers, other creditors, bonding companies, shareholders, etc. In addition, with some mapping to an Intuit tax software program, the client’s trial balance amounts can be exported to the company’s tax return by the tax preparer with another click of the mouse.
In order to minimize the costs associated with having their tax returns prepared, as well as interim and year-end financial reports, businesses owners would be well advised to adopt account names, groupings, and an overall format required by their tax returns. A good chart of accounts can accommodate the requirements of both internal and external financial reporting, since subaccounts would provide any necessary detail required by management and interested outside parties – while a simple click of the Modify Report button in QuickBooks re-arranges the expense accounts in alphabetical order – often the desired presentation for banks.
Many Certified Public Accountants (CPA’s) and Certified Public Bookkeepers (CPB) prefer to have their clients set up the chart of accounts using account numbers. Many clients do not want to use numbers because they find them cumbersome.
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A compromise is to turn on the “Use account numbers” preference (Edit menu -> Preferences -> Accounting -> Company Preferences tab -> Use Account Numbers) when setting up the chart of accounts. Then, turn off the account numbers preference. When the preference is off, account numbers are not eliminated, simply hidden from view. At the end of the year, the CPA can turn the preference back on and add account numbers to any accounts created by the client during the year.
When the “Use account numbers” and “Reports-Show accounts by Name only” preferences (Edit menu -> Preferences -> Reports & Graphs -> Company Preferences tab -> Reports – Show Accounts by: Name Only option) are activated, account numbers appear next to the account name in QuickBooks financial reports.
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Many users prefer not to have account numbers display on financial reports. If, instead, the preference “Reports-Show accounts by Description only” is activated, the account description entered when the account was setup is used. Therefore, when using account numbers, enter an account description. (This description can be identical to the account name.)
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