People outgrow their professional service providers, especially CPAs. After a few years of growth as a business owner, it is common to realize your current CPA isn’t the right person for you. They may not share the same passion you have for minimizing your tax bill. They might not be proactive and think into the future enough for your liking. And often times, they may just lack the communication touch points you are looking for.
However, it is still hard for folks to rip off the band-aid and terminate their CPA. Many times, they have a good professional relationship or might even be friends. Maybe it’s a friend of a friend and you don’t want to hurt anyone’s feelings, or deal with the awkward situation. Sometimes the hassle of switching CPAs is an overwhelming thought. Some clients are just happy that they’ve never been audited and attribute that to their current CPA.
Just as an FYI – the IRS wants to audit every business at least once. Consider it your right of passage. The most important things to note are to document everything thoroughly, file your taxes on time and correctly, and make sure your firm will back you up against the IRS.
A few points to consider before you learn how to break up with your CPA:
- Just because someone is a CPA doesn’t mean they keep up with current trends, are a lifelong learner, and are passionate about saving you money on taxes. Similar to everything else, some CPAs are outstanding, some are mediocre, and some aren’t very good. Even though you aren’t a tax expert, it is your job to figure out the difference and find someone amazing. An ‘A Player’ CPA can often generate hundreds of thousands to millions for you over a lifetime. That isn’t an exaggerated statement, either. Think about a business owner who has owned a business for 10 years. If the ‘A Player” CPA generates an extra $20,000 a year in savings, that’s $240,000 in a single decade. I have personally developed strategies that save clients several hundreds of thousands of dollars per year. It can and should be done, so make the effort to find your ‘A Player’.
- Most CPAs are trained to make sure the right numbers get in the right boxes on a tax return, to minimize audit risk. This is where the stigma of “number crunchers” or “bean counters” comes into play. CPAs are not business owners who think about strategy and are often conservative by nature. This is even more true when it comes to their clients. Ask them a few questions about taxes to get an understanding on how their brain works. “Would it be better to pay $500k in taxes or $5m?” The answer is $5m, it means you are making more money. Paying taxes isn’t a bad thing folks; the more you pay, the more you’re making. You just want to minimize those taxes as much as possible. To really understand your CPA, ask for “3 great strategies they’ve put into place that benefited a client.”
- Let’s really dig into that “bean counter” or “conservative CPA stigma”. The job of a CPA is to minimize your taxes. They need to do this morally, legally, and ethically. They need to know advanced strategies like Enterprise Risk Management Systems, CRTs, and advanced entity structuring. They also need to figure out how you are currently spending your money and if there is a strategy that can be developed to write off those expenses. A CPA also needs to be aligned with you. Are taxes going up or down in the future? In case anyone forgot, the US just printed trillions of dollars during COVID, and we are experiencing historical tax lows. Our firm has our opinion on where taxes will go in the future. If a CPA is always pushing tax deferred strategies (saving tax now but paying tax later), make sure that aligns with your investor profile. Is that actually what you want to be doing? Many CPAs just look in the rear-view mirror, and only consider short-term tax-savings in order to win now, which can often be to your long-term detriment. The financial game is complicated and making hasty decisions can cost you a small fortune.
Let’s transition back to the breakup. First off, give the person some respect and don’t send an email. Have a conversation with them. Recently, I saw a client switch over to our firm and basically said to their CPA of over 5 years “We are moving to a new firm next year. Please provide whatever is needed to their team”. And that was it!
Give your CPA the respect of a phone call. Perhaps you can work out your differences and save the relationship. After all, they were on your financial team for a number of years. Give them some acknowledgement for the good things they’ve done for you. Why did you like them? Start the conversation with some positivity.
Are you the perfect client? If not, talk about that and possible gaps in the operating process. Recognize, and even apologize for areas where you may have caused a less than ideal result.
Address the main issue with your CPA. What would’ve you liked to adjust or correct?
Replacing service providers happens a lot in life, especially as client’s grow. This isn’t the first time your CPA has been fired and it won’t be the last. Communicate what you would like fixed. Don’t be scared to ask questions like “How would you handle this, if you were me dealing with these issues?”.
Your CPA might provide an adequate response and path to move forward together. If so, great, you just saved yourself from having to switch. Many times, though, people aren’t going to adjust their behavior, and that’s simply the nature of how they work.
If that is the case don’t be scared to make the change. Do it swiftly and professionally, then move on. Communicate with your CPA that you will be switching, set expectations and discuss how the transition looks.