Choosing an accountant: tips to find the right firm for your business.

A LONG CAREER ALLOWS reflection on trends. In his 32 years as a CPA, the biggest change for Terry McMahon, president of Terry McMahon & Co. in Munster, has been the ever-expanding range of services offered by accounting firms. "We've gone from number-crunchers to interpreters and a part of the team."

Client surveys show that businesses often prefer the simplicity of hiring one firm that wears many hats, observes Sue Back, managing director of R.J. Pile in Indianapolis. "Sometimes they want to deal with just one professional," she says, and firms are always looking for ways "to be that group or consultant who can help them manage their outside consultants."

McMahon recommends three things when choosing an accounting firm. "You always want to get a referral from a bank or someone who has use for a CPA." Then, have a good list prepared of the services you need to discuss with the CPA, and ask about prices. Next, use your intuition about how good the communication is going to be. You need to feel comfortable discussing issues, he says, in much the same way as you would want to interact with your doctor.

Larry Greenwalt, managing partner at Greenwalt Sponsel & Co. in Indianapolis, agrees that chemistry is an important factor in choosing an accountant. "You need to find out who's really going to do the work." If you make your decision based on an interview, but someone else will actually do the work, there could be relationship problems down the road.

The case for a CPA.

It's no surprise that Gary Bolinger urges companies to hire a CPA, not .just an accountant--he's president and CEO of the 8,000-member Indiana CPA Society. CPAs in Indiana must meet stringent licensing requirements, completing at least 150 hours of education from an accredited college program, passing the rigorous CPA exam, then acquiring two years of experience. To maintain the license, they must complete 120 hours of continuing professional education every three years. CPAs also must adhere to a professional code of conduct, says Bolinger, not required of other accountants. A CPA is licensed to perform audits of financial statements for public companies, and perform reviews and compilations of financial statements.

Once you've decided a CPA is right for you, then what? Beyond the importance of getting references, Bolinger suggests you consider the size of the firm to match your size and needs.

Firms typically can be segmented into one of three main categories--Big Four accounting, regional middle-market firms and local office firms--says Joe Scheidler, executive in the commercial services group of Crowe Chizek in Indianapolis. Crowe Chizek falls in the middle-market category, with 20 offices in eight states, serving primarily closely held companies with .$25 million to $500 million in revenue.

The varying firm sizes yield both advantages and disadvantages, Back says. Small firms, she says, might offer more personal attention and lower fees, but lack the depth required by some, but not all, clients. "Larger firms are going to be more expensive, but they have a lot of resources behind them."

The larger the firm, the greater the resources, agrees partner Jeff Taylor of Katz Sapper & Miller, a 170-employee firm in Indianapolis. "If I run into a specific problem, I can go down the hall to a tax expert, retirement-planning expert, estate-planning expert."

Different accounting firms exhibit different personalities, Back observes. Financial or regulatory matters may seem black-and-white, but firms approach them with varying attitudes. "If you're an aggressive or conservative person, you need to know that the firm shares the same philosophy."

Industry specialization is also important, says Bolinger, and professional organizations help keep their members up-to-date on the latest regulations and trends. Ask if a prospective CPA is involved in professional organizations related to their specialty areas, such as internal auditing, health care, tax and construction finance. "There are 20 to 30 professional accounting organizations based on specialties and expertise."

Membership in professional organizations is critical in serving clients well, says Greenwalt. His involvement in CPA Associates International allows him to compare notes with CPAs from around the country, then share best practices with his clients. In addition, he says it's important to ask prospective CPAs if they've pursued credentials in specialty areas, such as business valuation (ABV, CVA), fraud (CFE), financial planning (CFP) and manufacturing (CPIM).

Perusing the menu. Clients should educate themselves about what an accounting firm can do for them, says Greenwalt. Do they want tax returns or financial statements that a bank may require? Help in improving profitability? Advice in setting up the best business organization to suit their needs? This last one is particularly important, he says, because the decision to go with an LLC, S corporation or C corporation structure will have major financial consequences.

Greenwalt's firm is a medium-sized local firm, specializing in small entrepreneurial and family-owned businesses with between $1 million and $100 million in sales. Failure to have a succession plan in place is the biggest problem most small businesses face today, he says. "Some people work until the end and say, 'I don't want to do this anymore.' With proper planning, you can develop a buyer from within."

BKD is a regional firm serving the middle market, with 27 offices in 11 states and 350 employees and five offices in Indiana. Clients fall in the $5 million to $1 billion in sales range. Frequently, when choosing a firm of this size, potential clients will interview multiple firms to find the best fit, says Ted Dickman, partner in charge in Indianapolis. Some will narrow it down by sending out a formal request for proposal.

"One of the mistakes I see companies make from time to time is to talk to too many people," he says. "If they start with eight to 10 firms, at the end of the process, they regret it." He recommends talking to similar companies, trade associations and bankers to narrow the initial list to two to four firms. Expect a formal selection process to take about 60 days.

Although Fort Wayne-based Baden Gage & Schroeder gets 80 percent of its clients from referrals, it's proactive in its approach to serving them, says managing partner Ron Baden. "We walk through the business, then come back with a proposal of services." Key selling points for the 25-year-old, 151-employee company is its continuity of staff, full range of services--from tax returns to estate planning to pension plans to business valuation--and industry specialization in real estate, manufacturing, construction, medical practice and not-for-profits.

About a third of Baden's business is consulting, much of it in automotive manufacturing. "The small supplier has to be as efficient as possible and be able to buy material at the lowest cost possible to maintain a relationship with GM or Ford," says Baden. Clients need help reviewing internal costs and overhead, and identifying when they're paying too much, including in direct labor.

"Our niche would primarily be general accounting practice," says William McKinney, partner at Kemper CPA Group, headquartered in Vincennes. "We're the lifeline or the heart of small business," he continues, performing accounting and payroll functions and giving insurance advice, "kind of like another employee."

Kemper has 27 offices in five states, serving clients from $50,000 gross revenues to $40 million to 50 million. "Tax is still our No. 1 service," says McKinney, followed by bookkeeping and payroll services, auditing and management consulting.

When selecting a firm, consider their size and yours, says McKinney, and the kinds of specialized services you'll need. Get references and ask about how the professionals keep current in their field. In the end, the choice of firm can be highly personal, says Back of R.J. Pile. "Most people are going to assume that their CPA knows how to do a tax return," she says. "They're really looking for the personal side of it, that they're going to feel comfortable working with a person or group of people."