We have a saying in our family, “stay in your lane.” All people have their strengths and each person will spend a lifetime figuring out their own strength. For instance, my wife is an incredible cook at our house and as much as I try to make some old college day dishes either I make a mess or she will take over to bail me out.

Business owners should recognize their strengths and stay in their lane when it comes to business. One area that typically an owner spends excessive time is in the accounting and taxation area. This article will focus on three ways to effectively interact with your accountant that will allow you to focus on operations.

First, in today’s environment of specialization, accounting Firms are moving towards niche markets such as Restaurants. A Firm’s mission is to become the niche leader and grow a reputation in serving clients within that niche in a full service capacity. Thus, a business owner should consider the following ways to ensure they are connected to a Firm that can provide strategic industry advice versus generic business.

Accounting
The core assistance a Firm can provide you as a business owner is a chart of accounts that represents income and expense line items that interpret accurately and consistently the operations of your business.

For example, each business is unique within the restaurant industry SIC (standard industry classification) code. The National Restaurant Association annually issues a guide as to types of expenses that are combined to create accounts which would comprise Prime Costs that are used for analysis nationwide by the NRA. Thus, certain expenses are classified in Cost of Sales such as direct labor, food and beverage costs, and other direct items related to Sales. Your accountant should be familiar with these guidelines so an annual comparison can be used with the NRA to determine how you stack up nationally.

Additionally, if you are a Franchise your chart of accounts should reflect the Franchisor’s guidelines for reporting monthly accounting information. Sometimes being out of compliance with Franchisor guidelines can create an unnecessary review by the Franchisor and disrupt operations.

Recommendation
Seek out an accountant that:
1. Has restaurant industry experience and is familiar with the NRA
2. Will take the time to advise on a chart of accounts to ensure compliance

Taxation
Since the Accounting Firm engaged will normally prepare your business taxes make sure the two functions talk to each other. Many times the accountant who prepares monthly reports is not the individual who prepares the Company’s business tax returns. For example, in a recent court case, the taxpayer had filed as a Sole Proprietorship. (By the way, 1 in 12 Schedule C-Sole Proprietorship returns are audited by the IRS.) Taxpayer used the business SIC code that signified he had a computer and software store that was incorrect. The accountant should ensure the proper SIC code is being used for tax reporting purposes.

The IRS audited the taxpayer. This was likely because he did not have the expenses and inventory line items that were normal for that type of business SIC code. (Misclassification of SIC codes is one of the top three things that will cause an IRS audit.)

The IRS found that the taxpayer had no proof of the expenses or the business purpose for travel. As a result, the deductions were disallowed. He had tax due, PLUS penalties, because he had no records.

Sphere of Influence
Your accountant should be more than a number cruncher. The following questions could be asked from your accountant:
1. List of referrals for you to contact as references
2. List of trade associations involved with such as the NRA
3. Firm privacy policies
4. Other industry service providers with specific restaurant industry experience to add value to your business.
5. List of continuing education/trade show attendance within current year specific to Restaurants to keep current on accounting/tax trends and leading edge solutions.



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