Whether you are building a new electrical contracting business or have an established company, you must depend on financial professionals to help you make money. Do you have the right professional relationships to maximize the return on your investment in your business, ensure a successful transition plan and help you secure a comfortable retirement?
Selecting accountants, financial planners and brokers is much easier when you understand the skills required for each function. This month, I discuss accountants and financial advisers, finishing next month with the investment broker relationship.
Although computer software enables you to perform much of the standard bookkeeping and accounting in-house, you still need a certified public accountant (CPA) to provide a buffer between your company and the outside world. Your accountant offers an independent auditor perspective and some degree of legal protection if you are subjected to client or government audits. Accountants know what to say and when to keep quiet in delicate situations and often protect business owners from shooting themselves in the foot. I know this from personal experience.
The right firm will be construction- savvy; if you have to explain terms such as “cost in excess billings” or “retainage” to your CPA, change firms immediately. A professional accountant not only prepares appropriate financial documents for stakeholders, such as lenders, bonding companies and customers, but he or she assists you with the delicate balance between earning maximum profits and paying minimal taxes. Be careful not to become too complacent in the relationship, and always verify invoices are accurate and reasonable. I learned a valuable lesson when I asked my accounting firm to research a tax question and casually mentioned the same issue to my attorney, who promptly found the answer in a quarter of the time billed by the accountant. You don’t want to pay to educate your accountant if you can find someone who is already knowledgeable about your issues.
Highly visible cases of fraud and abuse have brought government regulatory pressure to bear on the entire financial industry. While your accountant helps you manage and present your records, the financial planner will be trusted to manage your financial security, so don’t simply hire a financial adviser or investment adviser. Look for the letters behind the name, indicating that the adviser has passed a grueling professional exam and is committed to continuing education to stay abreast of trends and regulations. Require a certified financial planner (CFP), chartered financial analyst (CFA) or certified investment management analyst (CIMA) credential.
Also, the selection process should be a two-way interview. Your adviser should ask about your degree of risk tolerance, financial goals, background and attitude toward money, and how you want to live out your retirement. Your adviser should also gather data on your current financial status. He or she must understand how your business and personal goals are aligned and should be able to show you a solid track record with references from clients with similar situations, similar to the real estate practice of finding “comps,” or properties comparable to those you are buying or selling.
You also will want to ask the adviser how he or she would handle possible scenarios. How did his/her customers fare during the recent financial upheavals? How would the adviser help you recover severe portfolio losses if retirement was imminent? How would clients describe the relationship with this adviser? Ask for data on results for at least a decade, if not two. Again, you don’t want to be a training ground for an inexperienced hotshot.
Financial advisers and accountants must create an atmosphere of trust, operating ethically and ensuring clients can rely on the security of their confidential information. Rely on your intuition to guide you in this judgment. Remember that professionals advise you, but you are always responsible for the final decisions on financial matters. Ensure you fully understand the options presented to you. Also, beware of financial advisers or accountants who attempt to meddle in legal matters such as trusts. Pay your attorney to consult on any issues related to such documents, or your heirs may find themselves losing your fortune in probate court. Even attorneys often fail to properly write complex trust documents that ensure the precise transfer of wealth according to the wishes of the grantor.
Trusting your financial matters to others is always stressful. Most business owners have a limited knowledge of regulations, taxation, investment strategies and the skills required to make sophisticated decisions. If you choose your financial advisers carefully and build relationships of mutual trust with an open exchange of information, you will have done all you can to secure your earnings and provide for your future.
Next month, learn to select investment brokers and protect yourself from the crooks among them.
NORBERG-JOHNSON is a former subcontractor and past president of two national construction associations. She may be reached at firstname.lastname@example.org.