Keeping Your Tax Practice Compliant
Every tax practice owner and manager recognizes the key importance of compliance and its necessity to the success of the firm. However, like the proverbial cobbler who neglects their shoes, it's easy to put your client's needs ahead of your own when it comes to keeping them compliant and neglecting your own house. This benign neglect can lead to costly mistakes that affect your firm's financial health and reputation.
One common mistake is mixing personal and professional transactions. Keeping these separate is crucial to avoid legal implications and challenges when substantiating legitimate business deductions. We should know this as tax practitioners, and yet owners of especially smaller firms still part take in this practice. Another error is failing to track expenses in real-time, which hinders your ability to make informed operational decisions and optimize costs. When was the last time you created and reviewed your own CFO dashboard consistently?
I don’t need to tell you that neglecting to reconcile bank and credit card statements can result in discrepancies between your books and actual account balances, increasing the risk of missing potential fraud and unauthorized activities. As small firms grow and new hands have to be accountable for the administration of the practice, you need to take the time to ensure you have processes in place for your checks and balances. Keeping up with our own books can be easy to put on the back burner, but we know better than everyone what it can cost a business when timely financial information isn’t available.
The impact of potential errors extends beyond financial stability. Non-compliance can result in penalties, fines, and even legal consequences like lawsuits. Employee morale can suffer, especially when payroll compliance issues arise, leading to decreased productivity and a negative work environment. Operational efficiency is also compromised when outdated practices waste time and resources and missed tax incentives can cause financial struggles.
Firms cannot ignore the technological changes that are happening. Leveraging technology is critical, especially for smaller firms, to benefit from automation to help ensure internal compliance as well as compliance for clients. Investing in ongoing training for your team to stay updated on the latest regulations and compliance requirements is also critical. Firms should consider conducting regular internal assessments or external audits to identify gaps and encourage careful conduct. This is especially important even if you are relying on technology to ensure data safety at all times.
Attending conferences and joining social media groups to learn from others in the industry can help to build a supportive network. Industry conferences will not only bring solutions to the forefront for client use, but often thought leaders will be sharing tools and techniques that have benefited their firms. We also should not be afraid to outsource our work. If the stress of the busy season, or a constant flow of work is preventing you from performing internal compliance audits or tending to your financials, it’s time to review options for outsourcing some of the work.
Eliminating all errors is likely impossible but firms need to have procedures in place that will help to reduce them. Compliance isn’t just something we offer our clients by way of secure file sharing or an accurately prepared tax return. By prioritizing accurate financial reporting, compliance, and fraud prevention, you can protect your own firm's viability and reputation. Remember, as a tax practice owner, your financial well-being is just as important as that of your clients.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.