Hughey's Debits & Credits: Bookkeeping. Payroll. Taxes.

Did you hire Chicken Little? 3 Things to look for in an outsourced accountant

Chicken LittleIn smaller nonprofit organizations, outsourced accounting functions are normal because of fund restrictions. Did you hire Chicken Little as your accountant? Keep reading to find out if you did.

A nonprofit organization decided it was time to outsource their accounting and fiscal duties. Once they chose their accountant, a system was created. The director, John, would deliver the organization’s documents monthly to the accountant’s office and in return the accountant would prepare financial statements. One day, John received a letter from the Internal Revenue Service (IRS) stating that the nonprofit had not paid payroll taxes in several quarters. John contacted his accountant immediately to ask about the letter. The accountant said not to worry about it and that he would take care of it. Soon after, an IRS agent arrived to the nonprofit organization’s office asking why the payroll taxes had not been paid. Again, John called the accountant. Once the accountant heard John say that the IRS was at the agency, the accountant became Chicken Little and declined to speak to the IRS on behalf of John’s organization. John later found out that the accountant had not looked at the agency’s documents in months! The documents were in boxes in a corner! Sadly, the organization had been paying the accountant for over 2 years for a job that was not being performed which cost them thousands of dollars in penalties and interest!

Here are 3 things to look for when hiring an outsourced accountant:

  1. Personality – Does their personality fit your organization? This is highly important because this person will be working closely with Executive Director as well as presenting information to your board. Make sure their personality fits your organization style.
  2. Reputation – When searching for an accountant, search their reviews. Check their professional social media pages such as LinkedIn to ensure that they have a good reputation. Ask for referrals and actually check them! Another good source is to see if they are registered with the Better Business Bureau.
  3. Expertise – Finding an accountant that specializes in your industry reduces the chances of hiring Chicken Little. If you mention Policy 03 reporting during your initial consultation and the accountant does not know what that is, chances are your organization should not hire that accountant for your nonprofit organization.

We sympathize with directors like John because we know that in small organizations, you are so focused on helping the community that the accounting portions tend to get pushed to the side. Daily, we help nonprofits in financial distress due to reasons like not hiring the right accountant. Don’t wait until the IRS shows up to call. Call us today so you can continue to help the community.

*This story is a true story but the names have been changed in order to protect the privacy of the real people.