SPECIALIZED ACCOUNTING SERVICES FOR PROFESSIONAL SERVICES
Professional services companies continue to face more complex issues with never-ending developments in technology, social media, and the regulatory environment. Business owners may fail to capitalise on specialised outside services that can not only enhance their operations and improve decision-making capabilities, but also identify, and avoid any pitfalls that may be discovered arising from a detailed financial examination.
Ultimately, owners of professional services companies such as management consulting firms and temporary staffing agencies, will need to know the financial implications of their actions and decisions for their specialised industry. Specialised accounting services can provide many of these services, usually at a fraction of a cost of what it would take if these were undertaken by the businesses themselves.
Design and installation of accounting and financial reporting systems
Many professional services companies usually start very small, with one person providing the service to clients. In due time, an expanding professional services company will grow beyond a single staff member, and the company grows without a clear plan on how to measure operating results or determine their financial condition. Records will usually be in disarray, paperwork related to unrecorded transactions will be everywhere, bank accounts will be left unreconciled, or crucial information or documents may lost.
A competent service can help identify the proper accounting and financial reporting system that will fit the needs of a professional services company, which can include the selection of the proper software, documentation, and reporting structure of the business’ accounting and reporting function. Because this endeavour entails a significant review of current operations, it is also an opportunity for management to be able to identify any weaknesses, or areas for improvement. Canned software such as Quickbooks and Peachtree have off the shelf software designed specifically for professional services companies.
A fully-developed accounting system will include the design or selection of accounting forms and documents, financial statements, and even the creation of an accounting organisation chart, together with an accounting systems policies and procedures manual.
Payroll and human resources
A professional services company, more than most types of companies, depends on accurate and timely timekeeping. While it can be made part of an overall accounting system as described above, a professional services company may need to procure a payroll subsystem to free up valuable resources. Payroll processing for a professional services company can be a tedious and time-consuming process, since daily time records need to be summarised to calculate salaries, wages, and benefits. The company will also have to deal with quarterly and annual payroll reports, which can take up a lot of time, especially because of the time-sensitive nature of these reports.
As an allied service, a payroll accounting system can be dovetailed to other human resource-specific application, such as performance review, benefits administration, and retirement planning systems.
Internal control evaluation
Accounting and financial reporting systems can accurately report numbers that reflect the financial outcomes of a professional services company, but they may not be able to uncover or detect any irregularities, fraud, or errors and omissions that may negatively impact a business operation.
An internal control review will help management in identifying areas where proper and adequate monitoring of transactional and accounting activity are required. This will include determining whether there is an adequate segregation of duties, and that there is adequate oversight and review procedures by senior management. The internal control system will mandate timely completion of transactions, and reconciliation of important accounts.
Smaller professional services companies may not be able to hire accounting staff to perform the required bookkeeping starting from summarising time records, all the way to finalising the general ledger and associated journals. In this service, the company can either allow an outside accounting company to access their records, or deliver the documents and records to the accounting firm for recording and summarizing.
Tax planning and preparation
Proper preparation of taxes is crucial for a professional services company, especially given the very fluid nature of tax legislation, the differences in tax regulations between states, and in some businesses, between countries. Business owners who usually do not have enough time to devote to day-to-day operations, may not have both the time and inclination to work through often-complex tax forms, wade through regulations, and plan for future and prospective tax scenarios.
Because professional services business’ expenses are generally salaries and consulting fees to individuals, there are significant tax implications, as well as social security and Medicare issues.
Tax planning and preparation usually include three separate, but ultimately, interconnected areas.
First, an accounting service will help in tax planning by reviewing the financial results of a business even before a tax year ends, and make a preliminary assessment of the business’ tax liability. Some recommendations can then be made on how to minimise this tax liability, or to maximise a potential credit or refund.
Second, the service will actually process, complete, and even file the tax return. A competent service company will usually use proprietary tax preparation software to help minimise mistakes and oversights. This software usually incorporates the results of new tax rules and legislation, which may easily be missed if the business uses its own internal tax preparation resources.
Third, a business may need to have its past returns reviewed to assess if any tax strategies may have been missed or misapplied that would have reduced the business’ tax liability. This can also be in conjunction with providing support if a business is being audited by tax authorities.
In all aspects of tax services, future tax liabilities will also be assessed, and advice for future tax periods may be given as a matter of course.
Some professional services companies may be able to capture their transactions, but may need specific expertise in reviewing, and even ssummarisingthese transactions. In some cases, a business may ask an accounting service to perform a review without necessarily issuing an opinion on the business’ financial statement. Another accounting service available is where the financial statements are generated by the third party service from the information provided by management. This service is called a “compilation,” which essentially generates financial statements from the basic records of the company.