Asking the Right Questions

QUESTION:

Is it appropriate to ask my accountant why the numbers don’t feel right?

ANSWER:

Absolutely! Some of my best discussions with clients begin when they simply ask, “Why?”

Keep in mind that any unaudited financial statements that your bookkeeper or accountant provides to you on a monthly basis have not been verified against outside sources. If you rent your property, for example, it’s possible that, once per year, your landlord will generate an adjustment for CAM (common area maintenance) costs and bill you at a time when cash flow is tight. But if you don’t pay immediately, you could be evicted or incur penalties for late payment. When you see a bill from your landlord that is higher than normal, you have every reason to ask for an explanation and a fuller account of the charges.

In another example, you may use an outside service or accountant to process your payroll, so you assume that all your payroll taxes are being remitted in a timely manner. But one day you receive a notice of unpaid taxes, and the IRS investigation begins. You should immediately contact your payroll processor and ask for an explanation: How did that happen, and how can you prevent this problem in the future?

As your accountant attempts to puzzle together financial information and paint a picture of your operations from day to day and month to month, you need to understand his decisions and agree with them. For instance, the chart of accounts contains expense categories for all costs that your operation may incur. From the start, you need to identify all vendors and suppliers that will provide services and products to your restaurant. The accountant then has a responsibility to categorize all costs into these agreed-upon expense accounts so that you can monitor the percentages on a month-to-month basis. You should always review your financial statement for a given period and, if the numbers appear to be off, you need to ask for a detailed explanation.

Be curious and inquire about any discrepancy that affects your money flow. Why is your insurance so costly? What are your alternatives? Why are your food costs so high relative to net sales? Are there industry averages to which you can compare your results? What can be done to lower your tax burden? Is there any way to automate your systems to lower your accounting fees and reduce paperwork?

Do other restaurant owners include comps in their net sales? Why do you always have an over/short cash balance?

A word of caution: Don’t get carried away with this approach if your accountant or advisor charges by the hour, or you may get billed for his time to research your questions. One solution is to find out when your accountant travels and ask him to call you from the road so you can ask these questions during his normal downtime. But never be afraid to ask, “Why?”

Michael J Rasmussen is the owner of Rasmussen Tax Group in Conway, Arkansas. Visit rasmussentaxgroup.com for additional insight into restaurant-specific tax strategies and technology programs.